The BDO GovCon Week Ahead - February 2022

February 2022

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February 28, 2022

To Boldly Go Where No Contractor Has Gone Before: The U.S. Space Force has launched the Space Systems Command (SSC) front door, in an effort to expand its reach to more potential vendors and to invite companies to bring their ideas and technologies to Space Force. SSC front door will assign Space Force representatives to geographic areas across the country that contain large concentrations of space industry companies, such as Houston, Colorado Springs, Kirtland, N.M., and potentially Washington, D.C.
 
SSC, which was established in August 2021, has an annual budget of $11 million and has set a goal to have new networks of satellites in orbit by 2026. The rationale is that networks deployed in higher and lower orbits will be much more difficult for enemies to take down than the current architecture of large satellites in geostationary Earth orbit.
 
While SSC front door likely won’t make SSC as accessible as the crew of the Enterprise riding public transportation and saving whales in Star Trek IV, the SSC chief is structuring the organization to break the logjam caused by decades-old, traditional processes. Further, SSC understands its front door initiative is untenable if small businesses and nontraditional government contractors can’t find the correct entrance and fit their ideas through the door. That is why the agency is working to keep pace with the commercial space sector and limit administrative barriers to entry.

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Federal Contractor $15 Hourly Minimum Wage Faces New Challenges: In December 2021, Arkansas Valley Adventures and the Colorado River Outfitters Associations filed a lawsuit seeking to invalidate Executive Order (EO) 14026, which increased the minimum wage for employees of federal contractors to $15 per hour (effective Jan. 30). As covered in previous publications, several states have filed suit against the federal agencies and employees responsible for implementing and enforcing the increase. Further, on Feb. 17, a federal court ruled that the government cannot enforce the EO for outdoor recreational groups that have contracts with the U.S. Government or operate on federal land.
 
The court ruled that these companies would likely “suffer irreparable harm in the absence of preliminary relief” and that the plaintiffs were “likely to succeed on the merits” of the case.  This ruling will provide temporary relief to over 40,000 companies that provide seasonal recreational activities and services. One of the main arguments from the plaintiffs was that they were not in fact contractors since their only ties to the government came from permits to use federal lands. This makes it unlikely that this court ruling will have a direct effect on the lawsuits filed by Arizona, Idaho, Indiana, Louisiana, Mississippi, Nebraska, South Carolina and Texas, earlier this month, but it is worth noting as, yet another lawsuit filed with the intent of undoing the requirements set forth in EO 14026.
 
Stay tuned to the GovCon Week Ahead for further news and developments on the federal contractor minimum wage increase and how it may impact you and your employees.

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Defense Industrial Base Contractors: Competition and How to Fix It: The Department of Defense (DoD) continues to try to improve competition under procurement contracts, while maintaining that national defense is the primary end goal. The Pentagon recently released a report providing several recommendations to increase competition. However, experts feel the issues identified, and associated recommendations largely miss the mark and that the DoD’s concerns are unwarranted and based on a “skewed view of limited data.” Experts feel that there is already robust competition with real national security benefits.
 
DoD’s recommendations to help improve competition are: 

  1. Strengthening merger oversight
  2. Addressing Intellectual property (IP) limitations
  3. Implementing sector-specific supply chain resiliency plans
  4. Acknowledging that DoD is the market
  5. Reinforcing real competition
  6. Encouraging innovation through improved risk-return ratios
  7. Focusing on results, not input

The DoD is concerned over the effect of mergers and acquisitions on hypersonic weapons and has discouraged merger deals in the past among the biggest prime contractors. It has also emphasized the importance of small suppliers of feeder technologies, as demand grows, and pressure rises from Russia and China to produce hypersonic weapons. The DoD’s report stemmed from President Biden’s July 9 executive order “aimed at increasing competition and raising wages, which in turn called on the Pentagon to recommend ways to improve its pool of suppliers.”
 
The exact method to address these recommendations is unclear; however, the Pentagon will continue to focus on creating new avenues for smaller, nontraditional suppliers. Other problems remain, such as improvement of the contracting workforce and acceleration of award schedules, but one thing for certain is that the government will continue to scrutinize large contract mergers and acquisitions increasingly over the next decade. At the end of the day, America’s worldwide national security interests will be the No. 1 goal, and the DoD plans to increase regulation so not to jeopardize it.

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February 21, 2022

A Modern Take on the Historic Struggles of Small Businesses: The government made its commitment to small businesses clear when it passed the Small Business Act in 1953, which established the Small Business Administration (SBA). The SBA and its mission to “aid, counsel, assist and protect, insofar as is possible, the interests of small business concerns,” and also ensure that small businesses receive a “fair proportion” of government contracts has largely remained unchanged, almost 70 years later. The SBA has also been promoted through the formation of committees across government agencies and the passage of numerous other legislative documents such as the Business Opportunity Development Reform Act of 1988, which required the establishment of government-wide goals for procurement contracts awarded to small businesses. However, the federal industry landscape continues to shift, and small businesses continue to face enduring challenges in their attempts to secure federal government awards.
 
Understanding the struggle small businesses face, Congress passed the Promoting Rigorous and Innovative Cost Efficiencies for Federal Procurement and Acquisitions (PRICE) Act on Feb. 7, 2022, bringing this piece of legislation, meant to expand opportunities for small business, one step closer to becoming law. The PRICE Act will require the publication of an annual “procurement innovation lab report,” which will summarize innovative techniques being used to improve or encourage better competition, reduce time to award, promote cost savings, produce better mission outcomes and make sure the goals of the Small Business Act and the Business Opportunity Development Reform Act of 1988 are being met. Once published, the government would make the results public through multiple federal websites and offer training to procurement employees across all federal agencies on the innovative techniques in the report to encourage their use. These efforts should help the government continue to meet its long-standing commitments more effectively.

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White House Announces Critical and Emerging Technology Areas of Interest: The White House issued a report containing an updated list of critical and emerging technologies (CET) that are potentially significant to U.S. national security. The report was developed by the National Science and Technology Council in coordination with the National Security Council and builds on the October 2020 initial list of high priority CETs.
 
The CETs selected have potential to further the 2021 Interim National Security Strategic Guidance’s three defined national security objectives: to protect the security of the American people, to expand economic prosperity and opportunity, and to realize and defend democratic values. The report states that “this updated document expands upon that original CET list by identifying subfields for each CET with a focus, where possible, on core technologies rather than on technology application areas or performance characteristics.” The list is not intended to be used as a priority list for policy development or funding, but, rather is intended to be used as a resource that will inform a forthcoming strategy on U.S. technological competitiveness and national security.
 
CET areas identified in the list include advanced computing, artificial intelligence, advanced manufacturing, biotechnologies, communication and networking technologies, directed energy, hypersonics, quantum information technologies, semiconductors and electronics, financial technologies, human-machine interfaces, and space technologies and systems. The report also includes a set of key subfields that describe the scope of each CTE in more detail. Contractors in the technology areas listed above can find the full subsets of each area in the report, linked below.

For more information, please click this link.

States Are Anything but United When It Comes to the $15 Per Hour Minimum Wage: In the past two weeks, eight states — Arizona, Idaho, Indiana, Louisiana, Mississippi, Nebraska, South Carolina and Texas — have filed lawsuits in U.S. district courts against the Department of Labor (DOL), DOL’s Wage and Hour Division (WHD), President Biden, Labor Secretary Marty Walsh and Acting WHD Administrator Jessica Looman over Executive Order (EO) 14026, “Executive Order on Increasing the Minimum Wage for Federal Contractors.” The plaintiffs contend the EO, which increases the minimum wage to $15 per hour and will eliminate the tipped minimum wage for federal contractors by 2024 nationwide, is an action that is outside the president’s purview, a violation of the Procurement Act and subversive of the congressional approval process.
 
The White House disagrees. A spokesperson stated the White House believes a more highly compensated workforce is directly correlated with a more skilled and productive workforce “by boosting workers’ health, morale and effort” and that President Biden was “well within his legal authority when he issued this executive order.” The plaintiffs’ suits cite the March 2021 Senate vote, where the $15 per hour minimum wage was rejected 42-58, as proof that Congress doesn’t support the increase, and contends that the “defendants have decided to coerce federal contractors into abiding by a policy that Congress does not endorse, potentially affecting hundreds of thousands of businesses that employ as much as one-fifth of the entire U.S. labor force.”
 
Stay tuned to GovCon Week Ahead for further news and developments on the minimum wage increase that took effect on Jan. 30 and how it may impact you and your employees.

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February 14, 2022

Defense Report Gives the Defense Industrial Base Its First Failing Grade: Earlier this month, the National Defense Industrial Association (NDIA) released its third annual Vital Signs report, which provides an analysis of the state and performance of America’s defense industrial base (DIB). The report looks at eight key factors that collectively shape the performance of defense contractors (Demand, Production Inputs, Innovation, Supply Chain, Competition, Industrial Security, Political & Regulatory, and Productive Capacity & Surge Readiness) and assigns each a score from 1-100. The scores are then averaged to grade the overall health and readiness of the of the DIB. For 2021, the composite score was a 69, a three-point drop from the 2019 and 2020 totals of 72.
 
Out of the eight categories, Demand (94), Competition (88), and Political & Regulatory (72) were the only three to receive a passing grade. The Demand score increased from 2020 (88) due to an 8% increase in Department of Defense contract obligations for defense goods and services. Competition had no change from its 2020 score due to several high-scoring factors, including the low level of market concentration and the low share of total contract awards received by foreign contractors. Although Demand and Competition were the only areas that received a significant passing grade, there is cause for optimism moving forward.
 
The five failing categories can be largely attributed to the COVID-19 pandemic, which had a great impact on individuals and businesses. This is seen significantly in Supply Chain (63) and Productive Capacity & Surge Readiness (52) scores, which dropped eight and 15 points respectively from their 2020 scores. The Vital Signs report highlights how COVID-19 led to a steep drop of output efficiency and an increase in the cash conversion cycle (the time it takes to convert inventory investments into cash flow). NDIA hopes that presenting these fact-based data points can help contribute to the critical debate(s) surrounding the nation’s defense acquisition strategy.

For more information, please click this link and this link.

How the Clean Energy Tech RFI Impacts Defense Contractors: On Dec. 8, 2021, Executive Order (EO) 14057 was signed, with a stated goal of achieving 100% carbon pollution-free electricity usage and purchases across all federal agencies by 2030. The EO further details seven “green” goals for federal agencies: 

  1. 100% carbon pollution-free electricity on a net annual basis by 2030, including 50% 24/7 carbon pollution-free electricity
  2. 100% zero-emission vehicle acquisitions by 2035, including 100% zero-emission light-duty vehicle acquisitions by 2027
  3. Net-zero emissions building portfolio by 2045, including a 50% emissions reduction by 2032
  4. 65% reduction in scope 1 and 2 greenhouse gas emissions from federal operations by 2030
  5. Net-zero emissions from federal procurement, including a Buy Clean policy to promote use of construction materials with lower embodied emissions
  6. Climate resilient infrastructure and operations
  7. Climate- and sustainability-focused federal workforce
Initially, it was noted that the Department of Defense (DoD) would be exempt from the requirements of this EO. However, in response to this exemption status, 28 members of the House of Representatives issued a letter, on Jan. 28, 2022, that cited the exemption would make achieving the United States’ carbon reduction goals more difficult since DoD produced the majority of government emissions at 56% (based on the December 2021 Federal Sustainability Plan). On Feb. 3, 2022, the DoD and the General Services Administration (GSA) issued requests for information (RFIs) to assist in determining available technology and associated costs to support the DoD’s environmental and sustainability initiatives. Ms. Kathleen Hicks, Deputy Secretary of Defense, believes the RFI release will serve as an “opportunity to lead the way in transitioning to carbon pollution-free electricity,” within the federal government. Michael McGhee, executive director for Climate Resilience in DoD’s acquisition and sustainment office, said the RFI release will encourage industry innovation to achieve its clean energy and sustainability goals. It will also allow the DoD to see how the private sector has approached clean power options at the levels of individual utilities, state regulatory commissions, private energy developers and larger energy consumers.

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Practice Makes Perfect for Cybersecurity: In the last year, federal agencies have been subject to many new cybersecurity requirements with the passing of the Executive Order on Improving the Nation’s Cybersecurity, the National Defense Authorization Act for Fiscal Year 2022, among other legislative publications. While many of these documents originally included requirements that would apply to private contractors, they ended up being removed as they worked through Congress for approvals. That doesn’t mean the private industry is safe from these implementations. Members of Congress are highly motivated to continue pushing cybersecurity requirements to be passed for private companies and as federal agencies begin to implement their new practices, they will be flowing down requirements to contractors and subcontractors to ensure they can comply with their own new policies and procedures.
 
Recently, the Department of Defense (DoD) acknowledged that private industry has temporarily evaded many cybersecurity requirements. As a result, the DoD decided to make its own effort to reach out to the community of private contractors they rely on, asking them to implement essential cybersecurity practices while the government is working through its lengthy bureaucratic process to get passed. Some of these practices include closely monitoring hardware and software inventory, consistently patching and configuring security settings on all devices and software, employing multi-factor authentication for access into government systems, encryption of sensitive data at rest and in transit, and training staff to recognize and respond to suspicious activity. These recommendations provide government contractors with steps to create the most basic cybersecurity foundation within their companies. Private companies should now be working these into their policies and procedures to be prepared for the inevitable passing of much more complex requirements, and to also support the nation’s mission to safeguard the country from increasingly sophisticated cyber-attacks from a growing number of malicious actors.

For more information, please click this link and this link.

February 7, 2022

The Federal Fight for $15 Is Here: The $15 hourly minimum wage for all employees of federal contractors officially took effect on Jan. 30, 2022. President Biden announced the change early in his term with the final regulation issued in November 2021.This final rule, which will be indexed for inflation, applies to new contracts and contract modifications executed on or after Jan. 30, 2022. This policy applies to contracts in all 50 U.S. states and U.S. territories. It also eliminates the tipped minimum wage for federal contractors by 2024, ensures that workers with disabilities don’t earn a sub-minimum wage, and protects outfitters and guides working on federal lands.
 
There has been litigation surrounding the rule, but the Department of Labor (DOL) is proceeding with the implementation of the new regulation. According to DOL spokesperson Edwin Nieves, “Contracting agencies will need to take appropriate implementing steps to ensure that covered contracts comply with the executive order’s requirements by, for example, incorporating the relevant contract clause into covered contracts.” To help contractors and contracting agencies prepare for implementation, DOL’s Wage and Hour Division hosted two virtual seminars, issued fact sheets, FAQ, a training video, and other materials. Additionally, training on the executive order will be included in the Wage and Hour Division’s prevailing wage seminars in the spring, as DOL estimates up to 327,300 individuals will be affected in the first year of implementation.
 
Contractors should be sure to get up to speed on each of the requirements included in the new rule and monitor their current and future contracts to ensure they are adequately prepared to comply.

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Like Sands Through the Hourglass, So Are the Vaccine Mandate Updates: In another update to the ever-changing vaccine mandate, the government asks the state of Georgia hypothetical questions, such as: What if federal contractors want to comply with the vaccine mandate? What if they want to flow the Federal Acquisition Regulation (FAR) and/or Department of Defense FAR Supplement clauses down to their subcontractors? We know that you had said no to requiring the vaccine, but what about masking and social distancing?
 
The District Court for the Southern District of Georgia declined to opine on whether federal contractors can ignore the injunction and voluntarily proceed with the requirements from the vaccine mandate clauses. While the court didn’t directly address the question around masking and social distancing, it did indirectly answer those questions by stating that the injunction only contains language around the vaccine itself, not the other precautions included in Executive Order (EO) 14042, intended to reduce the spread of COVID-19.
 
Further, the Safer Federal Workforce Task Force has issued updated guidance and FAQ describing how Federal agencies are strongly encouraged to request and review vaccination information to develop and implement effective safety protocols, based on employee vaccination status. Federal agencies have pressed pause on implementing the requirements of EO 14043, including adding disclaimers to websites with federal job postings (i.e., usajobs.gov) stating that the vaccine requirement does not currently apply and halting reasonable accommodation requests.
 
Tune in next week for the next installment of the GovCon Week Ahead for further development on the vaccine mandates and how it may impact you and your employees.

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Understanding the Impact of Zero Trust Security: The foundation of the zero trust security model is that every attempt made to access your organization’s network is a threat. Value will no longer be given to the origin of the user request, or to the fact that an employee is sitting in an office building or using the IP address tied to the individual’s home network. Zero trust assumes there is no traditionally accepted way to provide access to a system, inside or outside its perimeters, and ongoing verification is a necessity.
 
While many of us working in the government contracting space may have seen this term floating around the last few years, it is quickly becoming much more than just a buzzword. The Office of Management and Budget released a memorandum on Jan. 26, 2022, setting forth the zero trust architecture (ZTA) strategy for government agencies, requiring they fully implement the ZTA requirements by the end of government fiscal year 2024. While this requires a shift away from the use of “trusted networks,” it also lays out more stringent requirements surrounding verification of users’ identity. This includes tracking devices that are given authorization to their systems, encryption of traffic within their systems, granting access based on what users truly need to complete their activities, and tracking these actions so the system is actively monitoring all access to sensitive data. Agencies have 60 days to submit their implementation plans and move forward.
 
While this memorandum is currently aimed at federal agencies, organizations in the private sector need to be prepared to handle the more burdensome process to access government systems, as well as having similar requirements in future solicitations and awards.

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