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.

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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.

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James A. Tucker

Deregulating Federal Procurement: Implications of Three Recent Executive Actions

Kickstarting AI in the Federal Government: OMB’s Policy to Implement Executive Order 14179

Bid Protest Spotlight: Instructions, Price Evaluation, Standing

FAR Overhaul Underway

FedRAMP 20x: Reformulating the Authorization Process

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On December 23, 2024, President Biden signed into law the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2025. The annual bill authorizes spending for the Department of Defense (DOD) while setting other priorities and amending defense procurement law. This year, among many other things, Congress balanced goals of expediting acquisition and expanding the defense industrial base, on the one hand, against competing interests in circumventing private intellectual property rights and securing the supply chain, on the other. This post highlights provisions of particular interest to government contractors, their investors, and legal practitioners.Streamlined Acquisition Pathways and Nontraditional Defense ContractorsSeveral provisions of the FY25 NDAA reflect a renewed sense of urgency in fielding innovative technologies. For example, Section 804 formally codifies the Middle Tier of Acquisition (MTA) pathways, first introduced in the FY16 NDAA, to expedite and reduce regulatory burdens on rapid prototyping and rapid fielding efforts. Similarly, Section 805 formally codifies the Software Acquisition Pathways, first introduced in the FY20 NDAA, with modified requirements and acquisition timelines to better align with the iterative nature of software development. And Section 861 codifies a pilot program introduced in the FY22 NDAA to accelerate the procurement and fielding of innovative technologies through competitive, merit-based solicitations, with preferences for small businesses and nontraditional contractors. Even with respect to more traditional major defense acquisition programs, Congress attempted to streamline the requirements for obtaining Milestone A and Milestone B approvals in Sections 806 and 807, respectively.Congress also expanded DOD’s authority to award other transaction (OT) agreements for prototyping projects and follow-on production efforts. Under Section 816, prototype OTs of more than $100 million now can be authorized by the head of an individual contracting activity (rather than the agency’s senior procurement executive), and prototype OTs of more than $500 million can be authorized by the senior procurement executive (rather than requiring an under secretary). Section 817 clarified that the authority in 10 U.S.C. § 4022(f) to award sole-source follow-on production contracts extends broadly to any contract or OT to “produce, sustain, or otherwise implement the results of a successfully completed prototype project for continued or expanded use” by DOD, and may be used for any number of separate sole-source follow-on production awards based on the same underlying prototype OT. In turn, Section 888 requires DOD to establish a process to track OT awards to small businesses and nontraditional defense contractors, while minimizing reporting requirements of such businesses to the extent practicable. Data collection will focus on both the number and value of awards made to small businesses and nontraditional defense contractors, including transactions carried out through consortia.There are other overtures to entice nontraditional contractors into the defense industrial base. Section 815 permits nontraditional defense contractors to submit prices previously paid for their goods or services instead of cost or pricing data for subcontracts valued up to $5 million, while Section 863 extends for another five years, through October 1, 2029, a pilot program exempting certain awards<a href="#_ftn1" target="_self">[1]</a> to small businesses and nontraditional defense contractors from requirements to provide certified cost or pricing data or submit to audit. Section 864 further permits contracting officers to evaluate a nontraditional defense contractor’s price or fee for commercial products or services using an alternative “capability-based” analysis that examines fitness for a particular purpose, technical expertise and resources required for production, the company’s financial projections or business model, DOD’s estimated cost avoidance or increased capacity afforded by the product or service, and input from anticipated users on the potential value added by the improved capabilities or production processes resulting from the product or service.In a similar vein, Congress seeks to increase connection points between DOD and private-sector investors. Section 230 encourages the creation of programs whereby employees of DOD’s Office of Strategic Capital can pursue temporary assignments with venture capital firms, private equity firms, or other similar groups, with the hope they will learn about “critical and emerging defense industrial base capabilities” and gain an understanding of “the strategic role that venture capital and private equity operations have in shaping future sustainment and modernization requirements for the defense industrial base.”Intellectual PropertyAt the same time it seeks to pull innovative commercial businesses and investors into the defense industrial base, Congress remains concerned that private intellectual property rights may hinder DOD’s mission. Section 882 of the FY25 NDAA directs DOD activities to establish procedures for reverse-engineering or re-engineering items for which the government lacks technical data or sufficient data rights to permit manufacture of the item, particularly where (1) production of the item may be required for point of use manufacturing or for a contested logistics environment; (2) the manufacturer of the item will not meet the schedule for delivery needed to maintain weapon system readiness or responsiveness; or (3) the item may only be acquired by entering into a sole-source contract and the agency determines reverse-engineering or re-engineering would be beneficial to sustain training or DOD operations.As <a href="/topics/dod-s-proposed-data-rights-regulations-for-mosa-undercut-its-pursuit-of-commercial-innovation" target="_self">we have written before</a>, a broader data rights grab is underway in the name of implementing a modular open systems approach (MOSA), initiated in past NDAAs and expanded by DOD’s recent implementing regulations. Congress declined to legislate further data rights changes in the FY25 NDAA, but under Section 819, DOD now must publish any open interface standards for implementing MOSA in contracts. Service acquisition executives may request approval from the Secretary to withhold disclosure, but that request can only be made “with respect to a specific contract.” Supply Chain Security and Foreign CompetitionOther provisions of the FY25 NDAA reveal consternation about defense supply chain vulnerabilities. For example, Section 812 expands DOD’s authority to purchase excess supplies (i.e., more than two years’ worth) “to protect against identified risk of supply chain disruptions.” Congress remains concerned with potential connections to China. Soon, under Section 853, contractors providing semiconductors or related manufacturing equipment or design tools to DOD will be required to certify they do not also provide such products to the Chinese technology firm Huawei. And as of June 30, 2026, Section 851 will prohibit the award of DOD contracts to concerns that do business with lobbyists for Chinese military companies.Turning back home, Section 848 instructs the Under Secretary of Defense for Acquisition and Sustainment to create a list of all items exempted from the domestic sourcing requirements of the Berry Amendment (10 U.S.C. § 4862) based on determinations of nonavailability in “satisfactory quality and sufficient quantity” at U.S. market prices. Once prepared, DOD must share this list with its industry partners and with Congress.Turning to the sky, Section 1601 revises and formally codifies the Air Force’s Space Contractor Responsibility Watch List for underperforming or potentially vulnerable contractors. A contractor may be included on the list based on poor past performance, inadequate management or financial controls, or security concerns, including unmitigated vulnerabilities arising from foreign ownership, control, or influence. Once listed, a company may not bid on or receive contracts or subcontracts for Air Force space systems and programs, absent a written determination of compelling reasons for the award. A contractor may request to be removed from the watch list, but the contractor must demonstrate that the problem resulting in placement on the watch list has been satisfactorily remediated.Bid Protests and ClaimsCongress included two provisions of particular interest to government contracts litigators. One is Section 885, which requires the Government Accountability Office (GAO) to prepare a report proposing measures to reduce the number of bid protests it receives. We discuss those proposed changes in more detail <a href="https://govcon.mofo.com/topics/less-oversight-and-undefined-penalties-the-ndaa-s-proposed-protest-reforms" target="_self">on a previous post</a>.The other, Section 803, overturns a Federal Circuit decision affecting the process for appealing a unilateral contract definitization by DOD. As <a href="/topics/challenging-unilateral-definitizations-of-undefinitized-contract-actions-what-is-a-claim" target="_self">we have discussed on this blog</a>, the Federal Circuit previously held that DOD’s unilateral definitization of contract price is not itself a “claim” or a contracting officer’s final decision for purposes of initiating an appeal at the Armed Services Board of Contract Appeals (ASBCA) or U.S. Court of Federal Claims. This meant a contractor had to present a claim to a contracting officer challenging the same definitization that the contracting officer had just made, before the contractor could file an appeal. The statute now addresses this by explicitly stating a unilateral definitization shall be considered a final decision appealable to the ASBCA or Court.Thomas Lee, an associate in our Washington, D.C. office and Ethan Sterenfeld, a law clerk in our Washington, D.C. office, contributed to the writing of this article.<a href="#_ftnref1" target="_self">[1]</a> Specifically, awards of less than $7.5 million made pursuant to a technical, merit-based selection procedure, such as a broad agency announcement, or pursuant to the Small Business Innovation Research (SBIR) program.

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Locke Bell is a partner in the firm’s Government Contracts & Public Procurement practice.

Locke Bell

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Thomas Lee

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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New DCMA Defective Pricing Pilot Team Will Possess Audit Resolution Authority

FY25 NDAA: Promoting Nontraditional Acquisition While Securing the Supply Chain, and More

Buried in Section 885 of the current draft of the National Defense Authorization Action (NDAA) for Fiscal Year 2025 is a new attempt to figure out how to make unsuccessful bid protesters pay. As of this posting, the NDAA has not passed Congress or been signed by the President. But, like prior attempts, this effort to change the rules of bid protests seems more performative than practical as it is riddled with unanswered (and perhaps unanswerable) questions. Note that the current statutory text does not oblige the Government Accountability Office (GAO) to do anything other than write a proposal for Congress to consider, so it is entirely possible this effort will eventually die on the vine. Section 885 contains two requirements: (1) an increase to the protest threshold amount for task orders issued under Indefinite Delivery, Indefinite Quantity (IDIQ) contracts awarded by Title 10 agencies (primarily, the Department of Defense (DOD)), and (2) submission of a “proposal” by the GAO to provide certain requested information to Congress in support of future efforts to make GAO protests more difficult and less attractive to pursue. The task order threshold change is straightforward. Currently, with few exceptions, there is no jurisdiction anywhere for formal protests of task orders valued at less than $25 million under DOD, Coast Guard, or National Aeronautics and Space Administration IDIQ contracts. The 2025 NDAA will raise that threshold to $35 million. The $10 million threshold for task orders under civilian IDIQ contracts remains unchanged. This change will reduce protests around the margins but does not appear to be significant. The other part of Section 885 is far less straightforward. Within 180 days of passage of the 2025 NDAA, GAO will be required to provide a proposal to the relevant Congressional committees. The GAO proposal must contain three things:<ol><li>Enhanced Pleading Standards: The GAO must confer with the DOD to propose “enhanced pleading standards” that an “interested party” must satisfy in a GAO protest before “such interested party” can receive access to administrative records of the DOD. This apparently intends to say that a GAO protest should contain a heightened level of factual allegations before the GAO will direct a DOD agency to produce relevant procurement records. This language appears to have been drafted by individuals who have never litigated a bid protest at the GAO, at the instigation of agency functionaries who want to keep their procurement records from being audited. The drafters may be surprised to learn that the GAO already requires enhanced pleading for all protests, not just those against DOD procurements—pleading in excess of what is usually required in a court. Failure to meet this standard results not only in no document production, but also in summary dismissal of the protest ground. And the GAO is already far more deferential to agencies with respect to record production than courts are, and these productions generally occur with extensive redactions (usually based solely on what agencies decide the GAO and parties should see), under a protective order that prevents disclosure of the records to outside parties. The bid protest function serves a necessary audit function—as evidenced by the number of protests sustained despite the significant deference given to agencies. This provision would seem designed to limit that function and runs counter to sunlight being the best disinfectant. In short, GAO’s most appropriate response would be to help inform legislators of its already enhanced pleading standards, and perhaps offer to clarify them in light of existing GAO decisional law. </li><li>Cost Benchmarks: Congress wants GAO to give it a “chart of the average costs to the DOD and the Government Accountability Office of a covered protest based on the value of the contract that is the subject of the covered protest.” GAO almost certainly does not have those data—but that isn’t the real problem. The problem is that this task is meaningless busy work. It is very unlikely that there is a direct correlation between a contract’s value and the cost of defending against a protest of that contract. Congress also wants GAO to provide a “chart of the costs of the lost profit rates of the contractor awarded a contract that was the subject of a covered protest after such award.” This is more data that GAO will not have. Most fundamentally, an awardee does not lose profit as the result of an unsuccessful protest: its performance of the full contract is simply delayed, and any increased costs as a result of that are recoverable under the Protest After Award clause (FAR 52.233-3). The statute, however, defines “lost profit” as “the profit that the contractor awarded the contract would have earned if the contractor has [sic] performed” during the protest triggered stay of performance. This, too, will be impossible for the GAO to quantify as most procurements are fixed price, and fixed price proposals rarely disclose the contractor’s anticipated profit rates, much less what that profit rate is anticipated to be during the first 100 days of performance, when a stay will be in place. In many multiple-award procurements where performance occurs under future task orders, there would be no profits in the first 100 days at all. In response to this request, it might be helpful for the GAO to highlight these issues.</li><li>Process for Payment: Finally, the GAO must propose a “process for payment by an unsuccessful party in a covered protest to the Government and the contractor awarded the contract” based on the “benchmarks” above. The statute assumes everyone knows what an “unsuccessful party” is. As bid protest litigators know, there is no such definition. Is an unsuccessful party a protester that receives a written denial on the merits after 100 days? A summary dismissal for some procedural foot fault within the first couple of weeks? Does a withdrawn protest count as unsuccessful? And, given the statutory text’s definition of a “covered protest” as one brought by an “interested party,” does that mean an unsuccessful protester doesn’t have to pay if the GAO ultimately dismisses the protest because the protester was not an interested party? That is how the statute’s text reads, but who knows what the drafters intended. All this language appears to come from an assumption that most protests are frivolous and simply serve a delaying function, and Government agencies should be trusted to spend taxpayer dollars in wise, lawful, and efficient ways without contractors looking over their shoulders. Yet, year after year, the “effectiveness rate” of GAO protests hovers around 50%—an astoundingly high rate in light of the enormous deference agencies receive, and the blind eye GAO turns to a wide variety of agency errors and omissions that a protester cannot actually prove might have changed an award outcome. That is, roughly half of all protests filed with the GAO result in the Government taking corrective action of some sort due to real, prejudicial errors by the Government. To be more blunt: the Government gets it wrong essentially half the time in multimillion (or multibillion) dollar procurements that come under protest. Against that backdrop, after protesters are forced to spend their own funds to identify Government errors and make the Government evaluate their bids fairly, the Government almost never has to pay the successful protester for the real cost of a successful protest. Under the current rules, a protester can recover costs only if a GAO protest is sustained on the merits or the Government otherwise “unreasonably” delays correcting errors brought to light by a “clearly meritorious” protest. Even then, the recoverable costs for other than small businesses are capped at levels that are far lower than modern legal fees. If Congress wants to adopt the English Rule for who pays for litigation, it might as well make it work both ways. </li></ol>In any event, the statute does not establish a new loser-pays rule: it simply asks the GAO to work with DOD to propose one, presumably for some future NDAA to mandate or (as happened the last time) repeal. In the meantime, the Government people who are pushing this measure may want to <a href="https://govcon.mofo.com/topics/dod-protest-reform-initial-thoughts-on-the-congressionally-mandated-rand-report" target="_blank">review the RAND Corporation’s Congressionally-ordered report</a> from a few years ago. That report found there was no epidemic of bid protests: only a tiny fraction of procurements are ever protested. It also recommended that agencies enhance the quality of debriefings and be more transparent to avoid unnecessary protests. If something like the rule envisioned by Section 885 eventually comes into being, it will weaken a primary safeguard against sloppy and wasteful acquisitions and will reduce public confidence in the integrity of the procurement system. It also almost certainly will cause a further uptick of protesters going straight to the Court of Federal Claims with their complaints, where this loser-pays rule will be inapplicable, administrative records will remain unrestricted, and a growing number of judges are inclined to be more skeptical of agency decision-making than the GAO traditionally has been.

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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

Less Oversight and Undefined Penalties: The NDAA’s Proposed Protest Reforms

Less Oversight and Undefined Penalties: The NDAA’s Proposed Protest Reforms

On May 2, 2024, the U.S. Department of Defense (DoD) issued an important class deviation that provides necessary relief for contractors endeavoring to comply with ever-changing cybersecurity requirements. The deviation applies to Defense Federal Acquisition Regulation Supplement (DFARS) 252.204-7012, Safeguarding Covered Defense Information and Cyber Incident Reporting, and alters the requirement that contractors must comply with the most current version of National Institute of Standards and Technology (NIST) Special Publication (SP) 800-171, Protecting Controlled Unclassified Information in Nonfederal Information Systems and Organizations, in existence at the time of solicitation issuance. Absent the deviation, as soon as NIST implements a new final version of SP 800-171, the new version would take immediate effect. The deviation eliminates this absurd and impractical result.As currently drafted, DFARS 252.204-7012 states that, for non-cloud-based covered contractor information systems that are not part of an IT service or system operated on behalf of the U.S. government, contractors must implement whichever version of NIST SP 800-171 is “in effect at the time the solicitation is issued or as authorized by the Contracting Officer.” DFARS 252.204-7012(b)(2)(i). Since February 2020, this requirement has meant that contractors must implement NIST 800-171 Revision (Rev.) 2. As NIST is set to release the final version of NIST SP 800-171 Rev. 3 imminently, under the standard -7012 clause, the release of Rev. 3 would have required contractors to implement it immediately for any subsequent solicitations and contracts. The DoD issued this class deviation in recognition of the need to “provide industry time for a more deliberate transition” to NIST SP 800-171 Rev. 3. Under the deviation, contractors must comply with NIST SP 800-171 Rev. 2, instead of the version of NIST SP 800-171 in effect at the time the solicitation is issued, until further notice. The class deviation is effective immediately and will remain in effect until rescinded.Although the deviation is limited in scope – changing a mere 16 words from the standard DFARS clause – it offers welcome relief to DoD contractors. Based on the initial draft of NIST SP 800-171 Rev. 3, it contains several significant changes from its predecessor (see our <a href="https://govcon.mofo.com/topics/nist-releases-revised-cybersecurity-controls-and-requirements-for-protection-of-controlled-unclassified-information-resident-in-contractor-information-technology-systems" target="_blank">Summary of the Initial Public Draft of Revision 3</a>).<a href="#_ftn1" target="_self">[1]</a> These changes include eliminating the distinction between basic and derived security requirements; updating security controls; increasing the specificity of security requirements; updating security requirements to reflect changes to NIST SP 800-53, Security and Privacy Controls for Information Systems and Organizations, and NIST SP 800-53B, Control Baselines for Information Systems and Organizations; and introducing the concept of organization-defined parameters. Implementing NIST SP 800-171 Rev. 3 therefore is not a simple task, a fact the DoD appears to have recognized.The class deviation is also consistent with the DoD’s planned approach for implementation of the Cybersecurity Maturity Model Certification (CMMC) program. Level 2 CMMC certification requirements mirror existing contractor obligations to protect controlled unclassified information (CUI) under DFARS 252.204-7012, and the <a href="https://www.federalregister.gov/documents/2023/12/26/2023-27280/cybersecurity-maturity-model-certification-cmmc-program" target="_blank">proposed rule for the CMMC program</a> itself refers to NIST SP 800-171 Rev. 2. It therefore would not have made sense for the DoD to require compliance with Rev. 3 under the -7012 clause while allowing Level 2 CMMC certification to proceed based on Rev. 2. Our expectation is that DoD will ultimately amend the relevant DFARS clauses in the future to tie both Level 2 CMMC certification<a href="#_ftn2" target="_self">[2]</a> and -7012 clause compliance to NIST SP 800-171 Rev. 3. Until then, contractors can continue to focus on NIST SP 800-171 Rev. 2 with an eye toward Rev. 3 compliance in the future.<a href="#_ftnref1" target="_self">[1]</a> NIST issued a <a href="https://csrc.nist.gov/pubs/sp/800/171/r3/fpd" target="_blank">Final Public Draft</a> on November 9, 2023. The Final Public Draft further refined the content from the <a href="https://csrc.nist.gov/pubs/sp/800/171/r3/ipd" target="_blank">Initial Public Draft</a> to reduce the number of organization-defined parameters, reevaluate the tailoring categories and tailoring decisions, and restructure and streamline the discussion sections.<a href="#_ftnref2" target="_self">[2]</a> For more on CMMC, read our <a href="https://govcon.mofo.com/topics/an-overview-of-the-defense-department-s-long-awaited-proposed-regulations-for-its-cybersecurity-maturity-model-certification-program?_gl=1*8n5txw*_ga*MjA5MDkwNzI1OS4xNzExNTQ2MTIz*_ga_3HVRG7GH76*MTcxNDc0ODY5Ni4yNi4wLjE3MTQ3NDg2OTYuMC4wLjA." target="_blank">Overview of DoD’s CMMC Proposed Rule</a>.

A Sigh of Relief: DoD Issues Class Deviation for DFARS 252.204-7012

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Sandeep Nandivada is a partner in the Litigation Department of Morrison Foerster’s Washington, D.C. office.

Sandeep N. Nandivada

Sandeep Nandivada

Tina is a partner in Morrison & Foerster’s Government Contracts practice. She represents a wide variety of government contractors including information technology, defense, biotechnology, and pharmace

Tina Reynolds

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A Sigh of Relief: DoD Issues Class Deviation for DFARS 252.204-7012

DOD Proposes Enhanced Debriefing Regulations

On May 2, 2024, the U.S. Department of Defense (DoD) issued an important class deviation that provides necessary relief for contractors endeavoring to comply with ever-changing cybersecurity requirements. 

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