Alerts

Review of Select Biden Administration Actions Impacting Federal Contractors

Alerts / February 17, 2021

With the passage of the first few weeks of the Biden Administration, and beyond the frenzy of its first few days, government contractors can take stock of the numerous significant changes that are occurring and that are expected to occur in the new Administration. For example, during his first few days in office, President Biden signed numerous executive orders kick-starting the implementation of key features of his campaign platform, and federal contractors may feel overwhelmed by this flurry of haphazard and rushed publications issued by Biden’s Administration. This alert takes a more detailed look at these publications and discusses select policy changes, initiatives and goals set forth by the Administration and their potential impact.

More specifically, this alert addresses select policy changes and initiatives in the areas of (i) the use of the Defense Production Act, (ii) requirements under the Buy American Act (BAA) regulations, (iii) employment and labor law compliance, (iv) actions related to certain social policy initiatives, (v) environmental and climate change policies, and (vi) requirements related to the involvement of small and disadvantaged businesses in federal government procurements. Each of these issues are addressed below.

Use of the Defense Production Act

President Biden signaled that he will fully use the Defense Production Act (DPA) to support a variety of initiatives, including to enforce Buy American rules and repair the COVID-19 supply chain. On Jan. 21, President Biden signed the Executive Order on a Sustainable Public Health Supply Chain, which instructs the heads of appropriate executive departments and agencies, in coordination with the COVID-19 response coordinator, to “review the availability of critical materials, treatments, and supplies needed to combat COVID-19.” The executive order also authorizes agencies to “take appropriate action using all available legal authorities, including the Defense Production Act, to fill those shortfalls as soon as practicable by acquiring additional stockpiles, improving distribution systems, building market capacity, or expanding the industrial base.” Federal contractors should expect priority-rated orders associated with COVID-19-related products, such as masks, face shields and other personal protective equipment (PPE). Contractors that do not participate in the COVID-19 supply chain may also see an increase in priority-rated orders in association with President Biden’s promise to use the DPA to support his Buy American goals. Contractors should familiarize themselves with the obligations associated with rated orders and be ready to comply with the requirements of such orders.

Changes to the Buy American Act Rules

On Jan. 25, President Biden signed the Executive Order on Ensuring the Future Is Made in All of America by All of America’s Workers. This executive order begins implementation of President Biden’s campaign promise to Buy American and includes potential changes to the Buy American rules’ “component test” and waiver rules. The executive order also establishes a new “Made in America Office” within the Office of Management and Budget (OMB). BakerHostetler has published a client alert discussing this executive order in more detail.

It is unclear whether this new executive order will result in more stringent Buy American rules than those issued by the FAR Council on Jan. 19 in accordance with President Trump’s Executive Order 13881, Maximizing Use of American-Made Goods, Products, and Materials. The final rule applies to solicitations issued on or after Feb. 22. This final rule makes several changes to the Buy American rules, including:

  • Increasing the domestic content requirement for end products (other than iron or steel) from 50 percent to 55 percent
  • Specifying that iron or steel products must now contain at least 95 percent U.S. content to qualify as domestic
  • Increasing the price evaluation preference for offerors of domestic end products from 6 percent to 20 percent (other-than-small businesses) and 30 percent (small businesses)

While it remains unknown how this executive order will amend these recently changed requirements, it appears that President Biden’s agenda will continue to advance and strengthen domestic preference requirements. Federal contractors who are subject to the BAA should monitor these potential changes to ensure that they are meeting the new domestic content requirements.

Employment and Labor

Federal government contractors may face new challenges related to employment and labor laws and regulations, including changes to the federal minimum wage and increased enforcement actions under the new administration’s Department of Labor (DOL).

  • Increased Minimum Wage: President Biden has signaled his commitment to increasing the federal minimum wage for the federal workforce to $15. On Jan. 22, he initiated this process by signing the Executive Order on Protecting the Federal Workforce, which instructs the director of the Office of Personnel Management to provide a report to the president with recommendations to promote a $15 minimum wage for federal employees. President Biden is likely to direct federal agencies to begin preparing rules for contractors to ensure their workers are not paid less than the $15 minimum wage. These changes could energize the DOL’s enforcement of the Service Contract Act, after the more measured enforcement during the Trump administration. Federal contractors should closely monitor the status of the anticipated executive actions and any resulting rules to ensure they comply with any new wage requirements.
  • Office of Federal Contract Compliance Programs: In addition, the new director of the DOL’s Office of Federal Contract Compliance Programs (OFCCP), Jenny Yang, will likely bring a renewed energy to the OFCCP’s efforts to enforce compensation and other discrimination elements of the DOL’s enforcement arsenal. Agency audits may once again become more complicated.
  • “Backlisting” Mandate: Federal government contractors may face a “backlisting” mandate in which their employment law compliance is judged in connection with their overall responsibility as a labor source. Such a rule could mandate disclosure by a contractor of its previous violations of a number of employment laws, including the Fair Labor Standards Act, the National Labor Relations Act and Title VII of the Civil Rights Act of 1964, and those acts’ state and local counterparts. Such violations could then become a material factor in a contracting agency’s analysis of the eligibility and suitability of a contractor to receive government contract awards. This sort of requirement could complicate the litigation and resolution of employment law issues.
Social Policy Initiatives

The Biden administration has signaled its commitment to promoting policies and regulatory changes related to social policy initiatives, such as those concerning race, gender identity and sexual orientation.

  • Executive Order on Advancing Racial Equity and Support for Underserved Communities Through the Federal Government: This executive order takes several steps to implement President Biden’s social policy platform.
    • The order rescinds President Trump’s Executive Order 13950 (Combating Race and Sex Stereotyping), which prohibited federal contractors from conducting certain types of training related to race and sex stereotyping and scapegoating.
    • The order also directs the head of each agency to “select certain of the agency’s programs and policies for a review that will assess whether underserved communities and their members face systemic barriers in accessing benefits and opportunities available pursuant to those policies and programs.” The agencies must provide a report to the assistant to the president for domestic policy reflecting their findings, which must include, among other things, an assessment of “[w]hether new policies, regulations, or guidance documents may be necessary to advance equity in agency actions and programs.” Although the implications of these assessments are still unknown, any new policies, regulations or guidance could result in additional requirements for contractors participating in federal programs or receiving agency funding.
    • The order establishes an Equitable Data Working Group to gather and analyze data to support and advance equity. The executive order directs the working group to provide recommendations to remedy any data collection deficiency. This requirement could result in the flow down of additional data requirements for federal contractors.
  • Executive Order on Preventing and Combating Discrimination on the Basis of Gender Identity or Sexual Orientation. This executive order requires agencies to review their existing policies and regulations to ensure that they prohibit sex discrimination and other sex-based stereotypes. Policy or rule actions pursuant to this order could result in additional requirements for federal contractors. For example, agencies could require their contractors to take proactive steps such as implementing diversity and inclusion or implicit
Environmental Policy and Climate Change

The Biden administration appears committed to making climate change a priority. President Biden rejoined the Paris Climate Agreement on his first day in office and also signed several executive orders related to climate change and environmental policy. Given the president’s campaign platform on climate change, we believe he will use federal procurement efforts to increase demand for American-made, American-sourced clean vehicles, and to accelerate research on battery technology and support the development of domestic production capabilities. Federal contractors may see an increase in funding related to environmentally conscious technology and products. Investments in environmental research and development through nonprocurement instruments may also increase. Note, however, that contractors may also see new or more stringent requirements related to environmental standards. These could include new procurement evaluation requirements and potential changes to the contracting regulations related to environmental compliance and responsibility.

Small and Disadvantaged Businesses

The Biden administration has signaled its commitment to supporting and increasing small and disadvantaged business subcontracting in federal government procurements.

  • Increase in Small Business Contracting: President Biden indicated his support for small business contracting by campaigning on a $400 billion procurement effort designed to support small businesses and tackle inequities in the federal contracting system. In addition to increasing opportunities for small-business contractors and prime contractors that utilize small businesses, the president’s efforts are likely to impose new or more stringent compliance requirements on prime contractors to develop and execute plans to increase subcontracting opportunities for small and disadvantaged businesses.
  • Final Rule on Lowest Price Technically Acceptable (LPTA) Source Selection Process: On Jan. 14, the FAR Council implemented a section of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 that applies criteria for and limitations on the use of the LPTA source selection criteria in solicitations. This new rule, which becomes effective on Feb. 16, narrows the definition of circumstances in which the LPTA source selection criteria may be used. There have been no indications that President Biden intends to repeal this final rule.

Under the Biden administration, federal government contractors should expect to see continued investment in federal procurement initiatives. Contractors should also remain vigilant in ensuring compliance with regulatory and policy changes such as the Buy American rules, likely changes to federal workforce minimum wage requirements, and potential changes to other federal labor and employment regulations.

For further information, contact Barron Avery at wavery@bakerlaw.com or 202.861.1705, Chelsea Clapp at cclapp@bakerlaw.com or 713.646.1374, or any member of BakerHostetler’s Government Contracts team.

Authorship Credit: Barron Avery and Chelsea Clapp

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