Morrison Foerster’s Government Contracts Insights provides our in-depth analysis of developments and trends impacting government contracting. Through Insights, our attorneys offer a real-time assessment of the statutory, regulatory, legal, and business-related developments and trends that are shaping the industry. We also examine a full array of non-U.S. public procurement issues, mindful that our clients compete in a global marketplace.Morrison Foerster’s nationally recognized Government Contracts and Public Procurement practice represents the world’s leading companies in the aerospace and defense, intelligence, cybersecurity, information technology, financial and professional services, education, healthcare, infrastructure, and logistics support sectors. We are enlisted to address our clients’ most complex and important legal issues. Our work includes contract and subcontract negotiation and other transactional matters, business and regulatory compliance counseling, internal investigations, bid protests, and a wide array of enforcement and litigation matters. Our clients range from Fortune 50 companies to small and medium-sized companies just entering the public sector. We advise both U.S. and non-U.S. companies involved in municipal, state, federal, and non-U.S. procurement matters.<h2>ABOUT MORRISON FOERSTER</h2>Morrison Foerster is a leading global law firm that transforms complexity into advantage for its clients. Our clients include some of the largest financial institutions, banks, consulting and accounting firms, and Fortune 100, technology, and life sciences companies. Highlighting the firm’s commitment to client service, leadership in market-changing deals and impact litigation, and values-based culture, Morrison Foerster has been repeatedly recognized as one of the top 10 firms on The American Lawyer’s A-List. Year after year, the firm receives significant recognition from Chambers and The Legal 500 across their various guides, including Global, USA, Asia‑Pacific, Europe, UK, Latin America, and FinTech Legal. Our lawyers passionately care about delivering legal excellence while living our values. Morrison Foerster has a long-standing commitment to creating a culture that respects and celebrates differences, while providing an inclusive environment. The firm has achieved Mansfield Certification Plus since 2018 as a result of successfully reaching at least 30 percent women, communities of color, and LGBTQ+ lawyer representation in a notable number of current leadership roles and committees. The firm also has a long history of commitment to the community and society through providing pro bono legal services, including litigating for civil rights and civil liberties, improving public education and fostering the wellbeing of children, advocating for veterans, promoting international human rights, enforcing the right to asylum, and safeguarding the environment.

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Tina is Co-chair of Morrison Foerster’s Government Contracts & Public Procurement practice. She represents a wide variety of government contractors including information technology, defense, biotechnology, and pharmaceutical companies, with a focus on general contract counseling and compliance, particularly concerning intellectual property, and cybersecurity matters and federal grant funding.Tina counsels contractors on compliance with federal, state and local acquisition and ethics regulations and with the evolving myriad of requirements pertaining to data security and cybersecurity. She has been involved with numerous internal investigations and compliance reviews, and with mandatory and voluntary disclosures to agencies, and litigation of False Claims Act matters.Tina routinely advises clients concerning:<ul><li>Prime-subcontractor relationships</li><li>Sources of supply and country of origin requirements</li><li>Price reductions and price reporting issues</li><li>Organizational conflicts of interest</li><li>Safeguarding of intellectual property and other proprietary interests</li><li>Licensing and data rights issues</li><li>Handling of classified materials and controlled unclassified information</li><li>Agency suspension and debarment proceedings</li></ul>She also assists clients with due diligence and other activities related to the acquisition of government contracting concerns, and with the drafting and negotiation of teaming agreements, subcontracts, licensing agreements, and cooperative research and development agreements. She also assists clients applying for federal grants (including SBIR and STTR agreements), and those who seek to obtain other transactional authority agreements, as well as those competing for state and local government work.Tina’s litigation experience includes government contracts claims litigation in federal courts and before boards of contract appeals, bid protests before the Government Accountability Office and the Court of Federal Claims, and complex disputes in federal courts, including civil fraud and False Claims Act litigation and reverse Freedom of Information Act litigation.Prior to joining Morrison Foerster, Tina worked at another large national firm and as a trial attorney in the Office of the General Counsel of the Navy, Navy Litigation Office.<h4>Representative Experience</h4><ul><li>Negotiation of largest CHIPS Act federal funding agreement between multinational semiconductor corporation and U.S. Department of Commerce.</li><li>Negotiated prime contract and major subcontracts related to the Department of Energy’s next generation supercomputer program, including extensive IP rights negotiations and negotiation of associated patent rights waivers.</li><li>Negotiated series of other transaction authority agreements with DARPA and associated subcontracts with more than a dozen research universities on behalf of a firm biotech client, including complex IP rights allocations and material transfer agreements.</li><li>Assist clients with FedRAMP authorization process and with development of license agreements for software products sold to federal, state and local government agencies.</li><li>Cyber incident response counseling to some of the largest companies and organizations impacted by security incidents.</li><li>Advises clients on Bayh-Dole reporting of inventions and IP strategies for contracts and grants.</li><li>Conducts due diligence for major government contract mergers and acquisitions.</li></ul>

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Tina is co-chair of Morrison Foerster’s Government Contracts & Public Procurement practice. She counsels a wide variety of government contractors on compliance with federal acquisition and ethics regulations. She drafts and negotiates contracts on their behalf and has been involved with numerous internal investigations and compliance reviews, and with bid protest, contract claims, and False Claims Act litigation. She also advises on M&A transactions involving government contractors.

Tina D. Reynolds

Jim Tucker is of counsel in Morrison Foerster’s Government Contracts and Public Procurement Practice Group and is based in the firm’s Washington, D.C. office.Jim’s practice runs the gamut of litigation and counseling in federal procurement matters, with an emphasis on bid protests, Cost Accounting Standards disputes, and small business matters. He has represented both protesters and awardees in scores of protests before the Government Accountability Office, the Court of Federal Claims, and procuring agencies, in acquisitions ranging from small business procurements to multibillion-dollar contracts of global significance. His representative protest matters span the aerospace sector, the Intelligence Community, base operations and logistics, healthcare, nuclear and environmental work, and information technology and software acquisitions. His protests have included both classified and unclassified programs. In addition to prevailing in published decisions, Jim has also secured favorable corrective action on behalf of clients in a wide variety of protests that were resolved without a published decision.Jim’s work also focuses on disputes over cost allowability and compliance with the Cost Accounting Standards, and he has appeared before the Armed Services and Civilian Boards of Contract Appeals, in size and status protests before Small Business Administration (SBA) area offices, and appeals before the SBA Office of Hearings and Appeals. Jim regularly counsels clients on contract interpretation, organizational conflicts of interest, and small business compliance.Jim graduated with high honors from the George Washington University Law School, where he focused his studies on federal procurement law, was a member of the Law Review, and interned with the General Services Administration’s suspension and debarment office. Jim also holds a degree in theology magna cum laude from the Pontifical Gregorian University in Rome and a bachelor’s degree in classical languages and literature summa cum laude from the University of Kentucky, where he graduated Phi Beta Kappa.

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Jim maintains an active practice in bid protests before the Government Accountability Office and contracting agencies and counsels clients in contract disputes and compliance obligations.

Jim Tucker is of counsel in Morrison Foerster’s Government Contracts and Public Procurement Practice Group and is based in the firm’s Washington, D.C. office. Jim’s practice runs the gamut of litigation and counseling in federal procurement matters, with an emphasis on bid protests, Cost Accounting Standards disputes, and small business matters.

James Tucker

<div style="margin-bottom: 15px;" class="videoWrapper"><iframe class="sticky-video" title="Meet Alex Ward, Government Contracts Practice Co-Chair" src="https://www.youtube-nocookie.com/embed/TkliwdSlTaQ?rel=0" frameborder="0" allow="autoplay; encrypted-media" allowfullscreen="1" title="iframe"></iframe></div>J. Alex Ward is co-chair of Morrison Foerster’s Government Contracts and Public Procurement group. His practice covers a full range of government contracts matters, including investigations, bid protests, claims, general litigation, corporate transactions, and counseling. Alex strives in all matters is to provide his clients the highest level of efficient and effective representation.Alex represents contractors in internal and external investigations, disclosures to the government, and qui tam litigation, with great success in reducing or eliminating his clients’ exposure through active engagement with the government. His work in this area includes obtaining numerous declinations and dismissals of False Claims Act cases in their earliest stages, sparing his clients the cost, risk, and exposure of litigation.He has also served as lead counsel in dozens of bid protests involving military and civilian agency procurements of a wide range of products and services, including all manner of pre- and post-award protests in the GAO, the U.S. Court of Federal Claims, and state tribunals, as well as appeals to the U.S. Court of Appeals for the Federal Circuit and size protest appeals before the SBA’s Office of Hearings and Appeals.Alex handles all aspects of the claims process, from the initial assessment and drafting of requests for equitable adjustment through litigation in the Boards of Contract Appeals and the Court of Federal Claims. Alex’s practice also covers the full gamut of other controversies confronting government contractors, including prime-sub, teaming partner, employer-employee, competitor, and indemnification disputes. His litigation work also includes a wide variety of pro bono engagements, in which he has represented both individual and institutional clients in matters ranging from immigration and criminal defense to sustainable procurement and protection of the environment.Prior to joining the firm, Alex served in the U.S. Army as a commissioned officer and an Assistant to the General Counsel of the Army responsible for civil works and international matters, and as a clerk for judges on the U.S. Courts of Appeals for the Armed Forces and the D.C. Circuit. He is a member of the Boards of the Morrison & Foerster Foundation and the Chesapeake Bay Foundation and of Law360’s Government Contracts Editorial Board.

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Alex is co-chair of Morrison Foerster’s Government Contracts and Public Procurement practice. His practice covers a full range of government contracts matters, including bid protests, claims, investigations, corporate transactions, and counseling.

J. Alex Ward

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Morrison Foerster’s Government Contracts Insights blog provides an in-depth analysis of news, developments, and trends impacting government contracting and procurement. Through Insights, attorneys from our nationally recognized Government Contracts and Public Procurement practice will offer a real-time assessment of the statutory, regulatory, legal, and business-related developments that are shaping the industry. This blog will also examine a full array of U.S. and non-U.S. public procurement issues, mindful that our clients compete in a global marketplace.Read about our <a href="http://govcon.mofo.com/editors/">Authors</a>.Never miss a post. Subscribe to get real-time updates.

Brad is a partner in Morrison Foerster’s Litigation Department, Managing Partner of the Austin office, and Chair of the firm’s Israel practice. He is the former Co-Chair of the firm’s Global Litigation Practice and the Government Contracts + Public Procurement Practice.

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The Tortured Regulations Department: SBA’s New Rule and Its Effect on Investments

Bid Protest Spotlight: Standing, Relationships, Responsibility

House’s Passage of the SAMOSA Act Signals Policy Shift Towards Government-Wide Enterprise Software Licensing

New DFARS Regulation on Small Business Affiliate Past Performance

Bid Protest Spotlight: Unclear Criteria, Data Rights, Conflicts

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Is it finally time to fix the outdated, incomplete, and often misunderstood novation regulations? Maybe. On April 5, 2024, the FAR Council released a Notice and Request for Comments requesting comments from federal contractors related to novation and change-of-name agreements under FAR 42.12. In particular, the FAR Council asks contractors to weigh in on whether the collection of contractors’ information under FAR 42.12 is necessary for the proper performance of the functions of federal government acquisitions. In addition, the FAR Council wishes to receive feedback on its estimated burden of this collection; ways to enhance the quality, utility, and clarity of the information to be collected; and ways to minimize the burden of the information collection on respondents. Comments are due by June 4, 2024. As anyone who has done a novation knows, practice has moved so far beyond these regulations that it is about time contractors shared their frustrations with this process. Of course, this may also open the door to new unnecessary requirements, so the overall process bears watching.Contractors find themselves engaged in the processes set out in FAR 42.12 for various mundane reasons, including rebranding, sale/acquisition of assets, corporate conversions, internal restructurings, and more.  Unfortunately, novation is rarely mundane, as written, unwritten, real, and imaginary rules are then applied over the course of the months before approval. Indeed, despite assisting with countless novation packages, we regularly are called upon by clients to assist with ongoing agency requests for new, additional information that has no basis for collection in the regulations.  Realistically, some government officials may only see a handful of novation packages over the course of their career, and others may (for good reason) have little background in the mechanics of mergers and acquisitions, often misunderstanding the triggering events for novations. This combination can often result in unnecessary complications, delays, uncertainty, and legal fees.By the book, for a name change, contractors are required to supply the government with three copies of a name change agreement and one copy of (i) the document effecting the name change, authenticated by a proper official of the state having jurisdiction; (ii) an opinion of the contractor’s legal counsel stating that the change of name was properly effected under applicable law and showing the effective date; and (iii) a list of all affected contracts and purchase orders remaining unsettled between the contractor and the government.  See FAR 42.1205. The regulations don’t say that the three copies of the name change agreement need to be wet signed, but many government officials nonetheless impose this unwritten rule.For a novation, contractors face an increased burden, being required to supply the government with three signed copies of the proposed novation agreement with one copy, as applicable, of (i) the document describing the proposed transaction (purchase/sale agreement); (ii) a list of all affected contracts between the transferor and the government; (iii) evidence of the transferee’s capability to perform; and (iv) any other relevant information requested by the responsible contracting officer.  FAR 42.1204(e). Further,  the contractor also must provide (i) an authenticated copy of the instrument effecting the transfer of assets; (ii) a certified copy of each resolution of the corporate parties’ boards of directors authorizing the transfer of assets; (iii) a certified copy of the minutes of each corporate party’s stockholder meeting necessary to approve the transfer of assets; (iv) an authenticated copy of the transferee’s certificate and articles of incorporation (if the entity was formed for the purpose of receiving the assets involved in performing the government contracts); (v) the opinion of legal counsel for the transferor and transferee stating that the transfer was properly effected under applicable law and the effective date of transfer; (vi) balance sheets of the transferor and transferee as of the dates immediately before and after the transfer of assets, audited by independent accountants; (vii) evidence that any security clearance requirements have been met; and (viii) the consent of the sureties on contracts in which bonds are required, or a statement from the transferor that none are required. FAR 42.1204(f). Here, too, the bureaucrats regularly reject novation packages for failing to comply with the non-existing requirement for wet signatures. And auditors are rightly confused as to how it would be possible (or reasonable) to perform a full audit on a company’s finances on sequential days.Thanks to the FAR Council’s invitation for comments, contractors now can do more than grumble under their breath or complain to each other about the manifold inefficiencies and useless red tape. The FAR Council has now provided contractors the ability to weigh in directly on whether the collection of the above information is necessary for the proper performance of the functions of federal government acquisitions, including whether the information has practical utility, the accuracy of the estimate of the burden of the information collection, and ways to minimize the burden of the information collection on respondents, including the use of automated collection techniques or other forms of information technology. Do you have other suggestions for how the government can improve these archaic processes? The FAR Council wants to hear from you, and we encourage all interested parties to weigh in.The notice can be found on the <a href="https://www.federalregister.gov/documents/2024/04/05/2024-07276/information-collection-novation-and-change-of-name-agreements" target="_blank">Federal Register website</a>.

Airing of Grievances: FAR Council Invites Novation Comments

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Damien is a partner in the firm’s Government Contracts & Public Procurement practice. He represents clients in all facets of government contracts transactions, as well as regulatory counseling, subcon

Damien Specht

Damien C. Specht

Jim Tucker is of counsel in Morrison & Foerster’s Government Contracts and Public Procurement Practice Group and is based in the firm’s Washington, D.C. office.
Jim’s practice runs the gamut of litiga

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Nicole Giles is an associate in the Government Contracts practice in Morrison Foerster’s Washington, D.C. office.

Nicole Giles

Nicole E. Giles

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Liam Bowers is an associate in the Government Contracts practice in Morrison Foerster’s Washington, D.C. office.

Liam M. Bowers

Liam Bowers

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Airing of Grievances: FAR Council Invites Novation Comments

SBA Issues Final Rule on Appeals Process for PPP Loan Review Decisions

Is it finally time to fix the outdated, incomplete, and often misunderstood novation regulations?

For the second time in as many years, the Department of Defense (DOD) has issued a <a href="https://www.federalregister.gov/documents/2024/02/15/2024-01220/defense-federal-acquisition-regulation-supplement-dfars-buy-american-act-requirements-dfars-case" target="_blank">final rule</a> that brings its Buy American Act (BAA) requirements into alignment with the Federal Acquisition Regulation (FAR). The final rule amends the Defense FAR Supplement (DFARS) Part 225 to introduce a stepwise increase in the percentage of domestic components needed for manufactured end products to qualify as domestically manufactured. The rule leaves untouched the higher threshold for products composed wholly or predominantly of iron or steel. As under the FAR rule, offerors unable or unwilling to meet the increased domestic content threshold remain eligible for award but must compete against the price preference given to domestic end products.New DOD contracts that are subject to the Buy American Act will require components from domestic or qualifying countries to make up at least 65% of a manufactured end product’s cost for the end product to qualify as “domestically manufactured” if delivered between 2024 and 2028. The threshold rises to 75% domestic or qualifying country components for manufactured end products delivered in 2029 and beyond. Previously, a domestic end product needed to contain only 55% domestic components to meet the definition of “domestically manufactured.”The final rule brings the DFARS into alignment with the regulations that apply to non-DOD procurements for the first time since October 2022, when a <a href="https://govcon.mofo.com/topics/220331-far-council-tightens-requirements" target="_blank">FAR rule took effect</a> that introduced the same stepwise increase in domestic content thresholds.  For contractors that sell to both the DOD and civilian agencies, the new alignment between the FAR and DFARS will make BAA requirements more consistent but may make compliance more expensive, given that stricter requirements now apply across the board.The new DFARS rule makes the following changes to BAA requirements for covered DOD contracts:<ul><li>Domestic end products must contain at least 75% domestic components, calculated by the value of components, beginning in calendar year 2029.  For calendar years 2024 through 2028, only 65% domestic components are required.  These thresholds replace the 55% threshold for domestic components that was set in a June 2022 final rule.  An earlier Obama-era rule had set the domestic component threshold at 50%.</li><li>The DFARS rule contains a fallback provision that will allow some contractors to wait until 2030 to comply with the new requirements, just as the FAR rule does.  Contractors may qualify for the 55% fallback rule if no domestic products are available at a higher threshold or if the cost to acquire compliant goods would be unreasonable.</li><li>The new DFARS rule provides for enhanced price preferences for critical items and critical components; however, the enhanced price preferences cannot take effect until the FAR defines which items and components are critical.  Once that list has been defined at FAR 25.105, the enhanced price preference rule will increase reporting requirements for interested contractors.</li><li>One difference between the DFARS and FAR Buy American requirements remains in place: components produced in more than two dozen qualifying countries outside the United States count towards qualifying as a domestic end product. In addition, end products from qualifying countries count as domestic end products. Thresholds for qualifying country end products will increase according to the same schedule as for domestic end products. Qualifying countries include those with a reciprocal defense procurement memorandum of understanding or another international agreement with the United States.</li></ul>Domestic sourcing requirements have become more difficult to navigate following repeated amendments over the last several years.  A single DOD contractor selling the same product might have to up to three versions of the Buy American rule across otherwise equivalent contracts.  The rule change applies only to new contracts; older versions of the Buy American clauses in existing contracts will remain in effect.  As a result, contractors should carefully monitor the requirements that apply to each contract—and each performance year in each contract—and prepare to comply with the 75% threshold.Contracts with a period of performance that spans a change in content threshold will require a change in domestic content during the contract’s performance.  That is, if a three-year contract begins in 2028, those manufactured end products delivered in 2028 must have at least 65% domestic content, but then must increase to at least 75% domestic content if delivered in 2029 and after. The DOD recognized that some contractors, especially those with indefinite-delivery, indefinite-quantity (IDIQ) contracts, might be unable to meet changing domestic content thresholds throughout the performance of a contract.  Alternate domestic content tests will be available for those contracts.  Contractors who receive the alternate test, with permission of the senior procurement executive, will only have to meet the domestic component threshold that applied at award of the IDIQ contract.The following DFARS clauses are amended by the new rule:<ul><li>DFARS 252.225-7000 Buy American—Balance of Payments Program Certificate</li><li>DFARS 252.225-7021 Trade Agreements</li><li>DFARS 252.225-7035 Buy American—Free Trade Agreements—Balance of Payments Program Certificate</li><li>DFARS 252.225-7036 Buy American—Free Trade Agreements—Balance of Payments Program</li><li>DFARS 252.225-7044 Balance of Payments Program—Construction Material</li><li>DFARS 252.225-7045 Balance of Payments Program—Construction Material Under Trade Agreements</li></ul>Updated versions of each clause are dated February 2024.The rule does not alter the exception to the component test for commercially available off-the-shelf (COTS) end products from the United States or qualifying countries. Similarly, the rule does not alter the higher threshold for end products that consist wholly or predominantly of iron or steel: 95% of the components in those end products, as measured by the cost of components, must be manufactured in the United States or qualifying countries.The new domestic content requirements and enhanced price preferences are likely to increase reporting requirements for defense contractors.  We will continue to watch for updates, including the definitions of critical items and components for which the enhanced price preference will apply.Ethan Sterenfeld, a Law Clerk, contributed to the writing of this post.

DFARS Realigns with FAR Buy American Requirements

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Markus Speidel is an associate in Morrison & Foerster’s Government Contracts & Public Procurement group, in Washington, D.C. Markus assists clients across a wide range of contract matters, including contract claims and disputes, bid protests, compliance counseling, and investigations.

Markus Gerhard Speidel

Markus Speidel

DFARS Realigns with FAR Buy American Requirements

For the second time in as many years, the Department of Defense (DOD) has issued a final rule that brings its Buy American Act (BAA) requirements into alignment with the Federal Acquisition Regulation (FAR).

The Biden Administration unveiled <a href="https://www.sustainability.gov/federalsustainabilityplan/fed-supplier-rule.html">details</a> regarding a forthcoming proposed Federal Acquisition Regulation (FAR) rule on Greenhouse Gas (GHG) emission disclosures for major federal suppliers on November 10, 2022. Titled the “Federal Supplier Climate Risks and Resilience Rule,” the proposed FAR rule would impose emission disclosure requirements on contractors that received $7.5 million or more in federal contract obligations<a href="#_ftn1" target="_self" id="_ftnref1">[1]</a> in the prior fiscal year as a mandatory element of a FAR Part 9 responsibility determination.  The <a href="https://www.federalregister.gov/public-inspection/2022-24569/federal-acquisition-regulation-disclosure-of-greenhouse-gas-emissions-and-climate-related-financial">proposed FAR rule</a> is expected to be published in the Federal Register for comments on November 14, 2022, and marks the next step in the administration’s steady drive toward net-zero procurement. Previously, we <a href="https://govcon.mofo.com/topics/sustainable-procurement-far-case-to-clarify-far-part-23.html">commented</a> on related regulatory efforts, including the underlying FAR Case 2021-015 and two other open FAR cases. While the following discussion sheds light on the proposed rule, contractors should keep in mind that the rule’s mechanics will likely change somewhat in response to the ongoing notice and comment process.BackgroundThe current administration has made combating climate change a mainstay of its agenda, issuing a steady drumbeat of climate-related executive orders culminating in President Biden’s Executive Order 14057. In Executive Order 14057, the President articulated a vision of a carbon‑neutral economy by laying out a series of ambitious goals for achieving carbon neutrality by 2050. Those goals, as clarified by the Council on Environmental Quality’s <a href="https://www.sustainability.gov/pdfs/EO_14057_Implementing_Instructions.pdf">Implementing Instructions</a> issued in late August, include federal agencies reducing their own GHG emissions by 2030, with progress noted on Office of Management and Budget (OMB) scorecards. GHG emissions are defined to include carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, nitrogen trifluoride, and sulfur hexafluoride.  The implemented framework categorizes emissions into three “scopes”:<div data-reactroot=""><span class="rich-text-component-embed" data-component-info="{&quot;_version&quot;:1,&quot;locale&quot;:&quot;en-us&quot;,&quot;uid&quot;:&quot;blt147f90192e04e34f&quot;,&quot;table_source&quot;:&quot;&lt;table border=\&quot;1\&quot; cellspacing=\&quot;0\&quot; cellpadding=\&quot;0\&quot;&gt;\n &lt;tr&gt;\n &lt;td width=\&quot;100%\&quot; colspan=\&quot;2\&quot; valign=\&quot;top\&quot;&gt;&lt;p align=\&quot;center\&quot;&gt;The Three Scopes of Emissions&lt;/p&gt;&lt;/td&gt;\n &lt;/tr&gt;\n &lt;tr&gt;\n &lt;td width=\&quot;18%\&quot; valign=\&quot;top\&quot;&gt;&lt;p&gt;Scope 1&lt;/p&gt;&lt;/td&gt;\n &lt;td width=\&quot;82%\&quot; valign=\&quot;top\&quot;&gt;&lt;p&gt;GHG emissions from sources that are owned or controlled by the reporting entity&lt;/p&gt;&lt;/td&gt;\n &lt;/tr&gt;\n &lt;tr&gt;\n &lt;td width=\&quot;18%\&quot; valign=\&quot;top\&quot;&gt;&lt;p&gt;Scope 2&lt;/p&gt;&lt;/td&gt;\n &lt;td width=\&quot;82%\&quot; valign=\&quot;top\&quot;&gt;&lt;p&gt;GHG emissions associated with the generation of electricity, heating and cooling, or steam when purchased or acquired for the reporting entity&amp;rsquo;s own consumption &lt;/p&gt;&lt;/td&gt;\n &lt;/tr&gt;\n &lt;tr&gt;\n &lt;td width=\&quot;18%\&quot; valign=\&quot;top\&quot;&gt;&lt;p&gt;Scope 3&lt;/p&gt;&lt;/td&gt;\n &lt;td width=\&quot;82%\&quot; valign=\&quot;top\&quot;&gt;&lt;p&gt;GHG emissions that are a consequence of the reporting entity&amp;rsquo;s operations but occur at sources other than those owned or controlled by the entity&lt;/p&gt;&lt;/td&gt;\n &lt;/tr&gt;\n&lt;/table&gt;&quot;,&quot;title&quot;:&quot;White House Climate Risks Table 1&quot;,&quot;publish_details&quot;:{&quot;environment&quot;:&quot;bltf4674cd9142c5020&quot;,&quot;locale&quot;:&quot;en-us&quot;,&quot;time&quot;:&quot;2022-11-14T19:01:12.603Z&quot;,&quot;user&quot;:&quot;blt78790fe6eb9ff08f&quot;,&quot;_trace&quot;:&quot;array_node;blog_global_fields;publish_details&quot;,&quot;_key&quot;:&quot;publish_details&quot;},&quot;_fetched&quot;:true,&quot;_content_type_uid&quot;:&quot;table_content&quot;,&quot;_trace&quot;:&quot;array_node;blog_global_fields&quot;,&quot;_key&quot;:&quot;key&quot;}" data-component-type="table_content" data-component-inline="false"></div>The Implementing Instructions recognize the federal government’s supply chain as a “major source of GHG emissions,” with federal contractors and subcontractors emitting double the government’s own Scope 1 and 2 emissions. The Instructions urged agencies to begin exploring vehicles to reduce contractor emissions in preparation for anticipated changes to the FAR. In particular, the Instructions exhorted agencies to develop pilot projects targeting areas of “significant agency spending” or “greatest potential . . . impact,” and to seek supplier information on “life-cycle carbon emissions and related economic costs, including the social cost of greenhouse gases (SC-GHG), of procured products and services.”Now, in what the <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2022/11/10/fact-sheet-biden-harris-administration-proposes-plan-to-protect-federal-supply-chain-from-climate-related-risks/">White House</a> hails as “historic action to address greenhouse gas emissions and protect the Federal Government’s supply chains from climate-related financial risks,” the administration has announced the highly anticipated proposed rule. As is discussed in greater detail below, the proposed rule requires “major contractors” to annually disclose Scope 1, 2, and 3 emissions and to set science-based target requirements, while requiring “significant contractors” to annually disclose Scope 1 and Scope 2 emissions. Major contractors are defined as receiving at least $50 million in Federal contract obligations in the prior fiscal year, while significant contractors are defined as those receiving at least $7.5 million, but less than $50 million. The proposed rule, if made final, will effect suppliers of both commercial and non-commercial goods and services. President Biden highlighted the proposed rule at this year’s U.N. Framework Convention on Climate Change (COP27). The announced proposed FAR rule, which arises out of the earlier Executive Order 14030, is the first of three related Net-Zero Procurement FAR cases to be issued as a proposed rule. The announcement signals the administration’s continued commitment to use the federal government’s procurement power to pursue climate change-related action via sustainable procurement. Embodying the mantra “what gets measured gets managed,” the proposed rule suggests it is but the first step in managing contractor emissions. To reduce agencies’ Scope 3 emissions, the federal government first needs insight into contractor emissions. Thus, by requiring major federal suppliers to disclose their annual greenhouse gas emissions, the administration lays the groundwork for further measures, which may culminate in evaluating emissions during source selection decisions. The Proposed RuleThe proposed FAR rule would create a new FAR subpart at 23.XX, entitled “Public Disclosure of Climate Information.” The proposed FAR rule leverages the same GHG Protocol Corporate Accounting and Reporting Standards as the <a href="https://www.federalregister.gov/documents/2022/04/11/2022-06342/the-enhancement-and-standardization-of-climate-related-disclosures-for-investors">SEC proposed rule</a> published in April, 2022. However, the proposed FAR rule goes further, requiring that major contractors also use the CDP Climate Change Questionnaire to assess their climate-related financial risks and set science-based targets to reduce their GHG emissions. The proposed rule would also expand the solicitation provisions at FAR 52.223-22 (Public Disclosure of Climate Information – Representation), and 52.212-3 (Offeror Representations and Certifications – Commercial Products and Commercial Services) and establish a new standard of responsibility for certain contractors in FAR part 9. Currently, GHG disclosures are voluntary.<div data-reactroot=""><span class="rich-text-component-embed" data-component-info="{&quot;_version&quot;:1,&quot;locale&quot;:&quot;en-us&quot;,&quot;uid&quot;:&quot;bltd3d34bc0290f0bf8&quot;,&quot;table_source&quot;:&quot;&lt;table border=\&quot;1\&quot; cellspacing=\&quot;0\&quot; cellpadding=\&quot;0\&quot;&gt;\n &lt;tr&gt;\n &lt;td width=\&quot;40%\&quot; colspan=\&quot;2\&quot; valign=\&quot;top\&quot;&gt;&lt;p&gt;Contractor Classification&lt;/p&gt;&lt;/td&gt;\n &lt;td width=\&quot;60%\&quot; colspan=\&quot;3\&quot; valign=\&quot;top\&quot;&gt;&lt;p&gt;Proposed Requirement&lt;/p&gt;&lt;/td&gt;\n &lt;/tr&gt;\n &lt;tr&gt;\n &lt;td width=\&quot;20%\&quot;&gt;&lt;p&gt;&lt;strong&gt;Category&lt;/strong&gt;&lt;/p&gt;&lt;/td&gt;\n &lt;td width=\&quot;20%\&quot;&gt;&lt;p&gt;&lt;strong&gt;Annual Value of Federal Contracts&lt;/strong&gt;&lt;/p&gt;&lt;/td&gt;\n &lt;td width=\&quot;20%\&quot;&gt;&lt;p&gt;&lt;strong&gt;Emissions Type Requiring Disclosure&lt;/strong&gt;&lt;/p&gt;&lt;/td&gt;\n &lt;td width=\&quot;20%\&quot;&gt;&lt;p&gt;&lt;strong&gt;Disclosure of Climate-Related Financial Risks?&lt;/strong&gt;&lt;/p&gt;&lt;/td&gt;\n &lt;td width=\&quot;20%\&quot;&gt;&lt;p&gt;&lt;strong&gt;Science-Based Emission Reduction Targets Required?&lt;/strong&gt;&lt;/p&gt;&lt;/td&gt;\n &lt;/tr&gt;\n &lt;tr&gt;\n &lt;td width=\&quot;20%\&quot;&gt;&lt;p&gt;Major Contractors&lt;/p&gt;&lt;/td&gt;\n &lt;td width=\&quot;20%\&quot;&gt;&lt;p&gt;&amp;gt; $50M&lt;/p&gt;&lt;/td&gt;\n &lt;td width=\&quot;20%\&quot;&gt;&lt;p&gt;Scope 1, 2, and relevant Scope 3 emissions&lt;/p&gt;&lt;/td&gt;\n &lt;td width=\&quot;20%\&quot;&gt;&lt;p&gt;Yes&lt;/p&gt;&lt;/td&gt;\n &lt;td width=\&quot;20%\&quot;&gt;&lt;p&gt;Yes&lt;/p&gt;&lt;/td&gt;\n &lt;/tr&gt;\n &lt;tr&gt;\n &lt;td width=\&quot;20%\&quot;&gt;&lt;p&gt;Significant Contractors&lt;/p&gt;&lt;/td&gt;\n &lt;td width=\&quot;20%\&quot;&gt;&lt;p&gt;&amp;gt; $7.5M&lt;/p&gt;&lt;/td&gt;\n &lt;td width=\&quot;20%\&quot;&gt;&lt;p&gt;Scope 1 and 2 emissions&lt;/p&gt;&lt;/td&gt;\n &lt;td width=\&quot;20%\&quot;&gt;&lt;p&gt;No&lt;/p&gt;&lt;/td&gt;\n &lt;td width=\&quot;20%\&quot;&gt;&lt;p&gt;No&lt;/p&gt;&lt;/td&gt;\n &lt;/tr&gt;\n &lt;tr&gt;\n &lt;td width=\&quot;20%\&quot;&gt;&lt;p&gt;Other Contractors&lt;/p&gt;&lt;/td&gt;\n &lt;td width=\&quot;20%\&quot;&gt;&lt;p&gt;&amp;lt; $7.5M&lt;/p&gt;&lt;/td&gt;\n &lt;td width=\&quot;20%\&quot;&gt;&lt;p&gt;None&lt;/p&gt;&lt;/td&gt;\n &lt;td width=\&quot;20%\&quot;&gt;&lt;p&gt;No&lt;/p&gt;&lt;/td&gt;\n &lt;td width=\&quot;20%\&quot;&gt;&lt;p&gt;No&lt;/p&gt;&lt;/td&gt;\n &lt;/tr&gt;\n&lt;/table&gt;&quot;,&quot;title&quot;:&quot;White House Climate Risks Table 2&quot;,&quot;publish_details&quot;:{&quot;environment&quot;:&quot;bltf4674cd9142c5020&quot;,&quot;locale&quot;:&quot;en-us&quot;,&quot;time&quot;:&quot;2022-11-14T19:01:45.343Z&quot;,&quot;user&quot;:&quot;blt78790fe6eb9ff08f&quot;,&quot;_trace&quot;:&quot;array_node;blog_global_fields;publish_details&quot;,&quot;_key&quot;:&quot;publish_details&quot;},&quot;_fetched&quot;:true,&quot;_content_type_uid&quot;:&quot;table_content&quot;,&quot;_trace&quot;:&quot;array_node;blog_global_fields&quot;,&quot;_key&quot;:&quot;key&quot;}" data-component-type="table_content" data-component-inline="false"></div>Impact on Federal SuppliersRegarding potential climate impact, the government notes that major contractors alone account for approximately 69 percent of federal supply chain emissions. In an effort to address this, based on the government’s calculations using Federal Procurement Data System (FPDS) award data, the rule would regulate 86 percent of annual federal spend and about 86 percent of supply chain GHG impacts. According to the government’s analysis, 4,413 entities would qualify as significant contractors, of which 2,835 (or 64 percent) are small businesses, and another 1,353 entities would qualify as major contractors, of which 389 (or 29 percent) are small businesses. While some federal contractors already voluntarily disclose their emissions, the proposed rule would require many more to do so. Currently only 10 percent of contractors qualifying as significant, and 31 percent of major contractors disclose their GHG emissions in SAM, though these disclosures are not standardized in terms of scopes of reporting. The proposed rule’s reporting requirements are no small imposition on contractors who, particularly if they do not already collect emissions data, will need to invest significant time and money in developing emissions accounting regimes. This burden is lessened only slightly by the one-year period that the proposed rule sets to allow contractors to develop their accounting methods before they’re required to make official disclosures.A Presumption of NonresponsibilityUnder the second prong of the proposed rule, contractors would be presumed nonresponsible until the Contracting Officer makes a positive determination of compliance with the GHG tracking and disclosure rule. Both major and significant contractors would be deemed nonresponsible (and thus ineligible for contract award) if they fail to inventory and disclose annual GHG emissions within one year of the proposed rule taking effect. Moreover, major contractors are deemed nonresponsible if they fail to complete the <a href="https://www.cdp.net/en/guidance/how-cdp-is-aligned-to-the-tcfd">CDP Climate Change Questionnaire</a> and set <a href="https://sciencebasedtargets.org/faqs#what-are-science-based-targets">science‑based targets</a> to reduce their own emissions within two years of the rule’s effective date.Exceptions, Exemptions, and WaiversThe proposed rule contains several measures to tailor compliance. First, exceptions will be proposed for Alaska Native Corporations, higher education institutions, nonprofit research entities, state or local governments, and federal management and operating (M&O) contractors, which need not comply with the proposed requirements. Additionally, major contractors that qualify as small businesses may report under the standards for significant contractors (disclosing Scope 1 and 2 emissions only, with no targets required). The Senior Procurement Executive of an agency may also exempt certain procurements from the proposed rule’s ambit, by waiving the requirements for emergencies, national security, or other mission essential purposes. Finally, the Senior Procurement Executive may waive the requirements for an additional period not to exceed one year to permit an entity to come into compliance.Takeaways for Government ContractorsFor contractors who have not yet given serious thought to greenhouse gas accounting, or how they would disclose emission data to the government if it became a requirement, now is the time to get smart. This article links to several key tools that contractors can familiarize themselves with now to prepare for implementation. The more robust an organization’s emissions accounting methods become, the less risk the organization will face downstream when the government ultimately requires greenhouse gas disclosures.  Pursuing emission reduction strategies can also prove to be good for business, leading to cost-savings, brand enhancement, and increased innovation. As part of the puzzle, contractors should consider their own supply chains and plan to flow down requirements. Interested contractors should further consider submitting comments by January 13, 2023, on the Federal eRulemaking portal.  Morrison Foerster will continue to monitor developments related to Net-Zero Procurement. Michaela Thorton, a Law Clerk in our Washington, D.C. office, contributed to the writing of this alert.<a href="#_ftnref1" target="_self" id="_ftn1">[1]</a> This number should be calculated in accordance with OMB Circular A-11.

White House Announces Federal Supplier Climate Risks and Resilience Rule

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White House Announces Federal Supplier Climate Risks and Resilience Rule

New DCMA Defective Pricing Pilot Team Will Possess Audit Resolution Authority

The Biden Administration unveiled details regarding a forthcoming proposed Federal Acquisition Regulation (FAR) rule on Greenhouse Gas (GHG) emission disclosures for major federal suppliers on November 10, 2022. 

Recently, the Department of Defense (DOD) issued a <a href="https://www.govinfo.gov/content/pkg/FR-2022-06-23/pdf/2022-13373.pdf">final rule</a> that immediately implements President Trump’s Executive Order (E.O.) 13881 to maximize the government’s procurement of American-made goods, products, and materials under the Buy American Act (BAA) statute. The final rule conforms the DOD’s pre-existing BAA supplemental regulations, found in the Defense Federal Acquisition Regulation Supplement (DFARS), to match the Federal Acquisition Regulation (FAR) current requirements, which we <a href="https://govcon.mofo.com/topics/new-year-new-domestic-preference-restrictions-trump-final-rule-and-biden-executive-order.html">commented</a> on previously. The FAR Council, however, promulgated a more stringent rule in March to implement President Biden’s subsequent E.O., as we <a href="https://govcon.mofo.com/topics/220331-far-council-tightens-requirements.html">noted</a> previously. Thus, while now in sync, the FAR and DFARS requirements will be once more out-of-sync in October, when the March FAR rule goes into effect, unless the DOD promulgates a matching DFARS rule by then.

Chasing the FAR: DOD’s Buy American Act Final Rule