Government Contracts

As indicated in an earlier Miles & Stockbridge Government Contracts blog post, contractor reimbursement language in Section 3610 of the CARES Act raised numerous questions that contractors attempted to answer in the early weeks since the CARES Act’s enactment. Section 3610 permits agencies to provide many federal contractors struggling to stay afloat during the COVID-19 pandemic with financial relief by reimbursing certain paid leave costs, including sick leave. Since enactment, several individual agencies have taken steps to answer many of those questions and provide agency-specific guidance for contractors seeking reimbursement under Section 3610, including the Department of Defense and Department of Energy.

Most recently, the U.S. General Services Administration (GSA) followed suit by issuing “GSAR Class Deviation – CARES Act Section 3610 Implementation.” The Deviation provides guidance on steps that contracting officers (COs) must take when considering a contractor’s request for reimbursement—unless the requesting agency under assisted acquisitions has its own, specific policy. The Deviation also prescribes a contract clause that implements controls. COs must determine—using specified criteria—whether (1) the contractor is in fact eligible for reimbursable paid leave on a contract by contract basis, (2) it is in the Government’s best interest to keep the contractor in a ready state and (3) the requested reimbursable paid leave is appropriate. In addition to these three considerations, contractors should be aware that the Deviation emphasizes the “numerous aggressive measures” GSA has already taken to combat the effect of COVID-19, and that GSA continues to encourage COs to consider alternatives such as delivery schedule, option and contract extensions; use progress payments; and use accelerated payments. In this context, the Deviation states that “GSA, itself, does not expect significant use of the paid leave reimbursement authority.”

The Deviation also states that, for GSA Government-wide Indefinite Delivery Vehicles such as Federal Supply Schedules, GWACs and OASIS, Section 3610 authority applies at the order level. In addition, the Deviation provides brief explanations of reimbursement under different types of contract (e.g., fixed-price, T&M). Also, consistent with guidance from other agencies, the Deviation emphasizes that contractors must refund the Government if the contractor receives reimbursement under Section 3610 and also receives employment tax credits under Division G of the Families First Coronavirus Relief Act or elsewhere under the CARES Act.

Under the clause set forth as an attachment to the Deviation, the burden is on the contractor to represent that:

(A) the reimbursement request for paid leave is only for reimbursable leave for applicable work, at the applicable rate in accordance with clause 552.222-70;
(B) if the contractor receives covered credits, the contractor will timely notify the contracting officer of the circumstances of receiving the covered credits (e.g., dates and amounts); and
(C) all information submitted is true, accurate, complete and correct as of the date of its submission to the CO.

If the request is approved, then the relevant contract must be modified to incorporate the new clause. In addition to requiring that the contractor make the above-mentioned representations, contractors should note the obligations the clause imposes with respect to record-keeping. Contractors must provide documentation showing the total estimated amount it expects to request for reimbursement. Furthermore, contractors must maintain—for three years after final payment on the contract—records of the documentation supporting the request. The Deviation warns that the CO, or any authorized representative thereof, “shall have the right to examine and audit all the pertinent records and affected contractor employees.”

As individual agencies continue to issue guidance on implementing Section 3610, contractors must remain on the lookout for these types of Section 3610 memoranda, guidance and other materials—along with periodic updates—so that they can be prepared to follow the necessary steps to receive reimbursement and diminish risks associated with future audits.

This alert was written by Annie McGuire, a lawyer in the Government Contracts practice group at Miles & Stockbridge.

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