Government Contracting Using Emergency Acquisition Flexibilities
Date: March 27, 2020
On March 13, 2020, the president declared a national emergency in response to the COVID-19 pandemic. This declaration activated the authorities available to the president under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. §§ 5121-5207 (the “Stafford Act”) to provide federal assistance to state and local governments responding to the emergency, including financial assistance. Also, as a result of this declaration, the Federal Emergency Management Agency (“FEMA”) and other federal agencies will procure goods and services from contractors to support their assistance efforts.
The Federal Acquisition Regulation (“FAR”), its agency supplements, and other agency directives issued pursuant to these regulations or the Stafford Act provide significant acquisition flexibilities to agencies when contracting for emergency acquisitions. Although this alert discusses several of these flexibilities in federal government contracting in the context of the COVID-19 pandemic, much of the guidance in this alert will be equally applicable in other national emergency and natural disaster situations like hurricanes and other severe weather events.
FAR Part 18, Emergency Acquisitions
Contracting officers have an array of emergency acquisition flexibilities available for their use to expedite the delivery of critical goods and services. FAR Part 18, Emergency Acquisitions, is substantially a result of the 2005 Atlantic hurricane season and Hurricane Katrina, in particular, and is applicable to all federal agencies.
FAR Subpart 18.1 summarizes several acquisition flexibilities that are available to contracting officers when certain conditions are met, even when no emergency declaration has been made. For example, FAR 18.104 states that agencies may limit the number of sources and full and open competition need not be provided for contracting actions involving urgent requirements, under the conditions outlined in FAR 6.302-2.
Other provisions in FAR Subpart 18.1 address the use of other flexibilities such as oral requests for proposals, letter contracts, and rent-free use of government property. And FAR supplements, such as DFARS Subpart 218.1 (applicable to defense agencies), list and describe additional acquisition flexibilities available to their specific agencies.
The second group of emergency acquisition flexibilities, found in FAR Subpart 18.2, includes additional flexibilities that may be used only after an official emergency declaration or major disaster declaration has been made. And, like FAR Subpart 18.1, FAR supplements such as DFARS Subpart 218.2 list and describe additional acquisition flexibilities available to their specific agencies.
The Stafford Act
As mentioned above, in addition to providing federal assistance to state and local governments responding to an emergency, the Stafford Act also impacts contracts between federal agencies and private firms for certain services related to disaster assistance. Specifically, the Stafford Act authorizes federal contracts for “debris clearance, distribution of supplies, reconstruction, and other major disaster or emergency assistance activities.” 42 U.S.C. § 5150(a). The Stafford Act also encourages, but does not require, federal agencies to (1) contract with local contractors, and (2) transition existing federal contracts to local contractors to the extent possible. 42 U.S.C. § 5150(b).
FAR Subpart 26.2 implements the Stafford Act by authorizing local area preferences, in the form of set-asides and evaluation preferences, for local companies and individuals when contracting for major disaster or emergency assistance activities. In the case of the COVID-19 national emergency, because the pandemic is not localized to a specific geographic region or area, it is unlikely that solicitations for federal contracts will contain local area preferences. However, state and local governments may employ similar preferences when using federal funding to obtain goods and services that address specific local needs.
Exemptions, Waivers and Other Deviations from FAR Requirements That Are Specific to the COVID-19 Pandemic
As a result of the president’s national emergency declaration relating to the COVID-19 pandemic, a number of exemptions, waivers and other deviations from FAR requirements have already been issued by various federal agencies. Those summarized below are not all-inclusive, and because the situation changes almost daily, more can be expected in the near future. Additionally, these exemptions, waivers and deviations are only applicable to the COVID-19 pandemic and may differ substantially from those relating to other major disasters or emergencies.
Affirmative Action and Other Labor-Related Obligations
The Department of Labor’s Office of Federal Contract Compliance Programs has granted limited exemptions and waivers from compliance with otherwise mandatory affirmative action and other labor related clauses (specifically, FAR 52.222-26, 52.222-35, and 52.222-36) when procuring for relief efforts for the Coronavirus during the period March 17, 2020, to June 17, 2020. See https://www.dol.gov/sites/dolgov/files/OFCCP/National-Interest-Exemption-Memo-Coronavirus-Relief-Efforts.pdf.
Micro-Purchase, Simplified Acquisition and Other Threshold Increases
Pursuant to Class Deviation 2018-OO018, the Department of Defense has recently increased the micro-purchase threshold, the simplified acquisition threshold, and the threshold for the acquisition of commercial items for DoD agencies acquiring supplies or services funded by DoD appropriations that the Head of the Contracting Activity determines are to be used to support COVID-19 emergency assistance activities. See https://www.acq.osd.mil/dpap/pacc/cc/COVID-19.html.
- For any contract to be awarded and performed, or purchase to be made, inside the United States, the "micro-purchase threshold" is $20,000, and the "simplified acquisition threshold" is $750,000;
- For any contract to be awarded and performed, or purchase to be made, outside the United States, the "micro-purchase threshold" is $30,000, and the "simplified acquisition threshold" is $1,500,000; and
- For the acquisition of commercial items, the threshold for use of simplified acquisition procedures for certain commercial items is $13M.
Other federal agencies have also changed these thresholds for their contracts. For example, the Department of Veterans Affairs has adopted the same increases but requires purchases outside of the U.S. to be approved on a case-by-case basis, and the increases are in effect only until June 30, 2020. See http://thecgp.org/images/SPE-Memo-HCA-Emergency-Acquisition-Flexibilities-ab-03152020.pdf.
Progress Payment Rates
Pursuant to Class Deviation 2020-O0010, the DoD has increased the progress payment rates in DFARS 232.501-1 to 90 percent for large business concerns, and 95 percent for small business concerns. Although this Class Deviation was issued in response to the COVID-19 national emergency, the increased rates apply to all DoD contracts, and not just those awarded for national emergency-related needs and has no definite end date.
Federal Procurement Data System (FPDS) Reporting
A new National Interest Action (NIA) Code has been established. The NIA Code will be used strictly for tracking acquisition costs for COVID-19 related assistance activities and involve the exercise of the emergency authorities identified in FAR Subpart 18.2. The FPDS System details for COVID-19 is “COVID-19 2020” and is to be used from March 13, 2020 to July 1, 2020.
Federal agencies have increased flexibility when procuring goods and services in response to national emergencies and major disasters. In addition to the many exceptions and waivers contained in the FAR and agency FAR supplements, Class Deviations and other agency memos issued during a national emergency provide specific relief and guidance tailored to the specific situation and may vary over time or from emergency to emergency. For questions and detailed guidance, please consult one of the Thompson Hine attorneys in our Government Contracts practice group, who can advise you on the latest developments.
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