592 Federal Government Contracting: New Obligations and Risks

Thomas Kelleher Jr.
September 2, 2008 — 1,712 views  

In recent months, the nature of obligations and risks that may face a federal government construction contractor are clearly changing. One rapidly evolving area relates to corporate ethics and compliance. The second involves the basis for obtaining time extensions for weather delays and the third relates to screening undocumented workers using the federal government’s E-Verify System. The following articles provide a summary of these trends and developments.

Proposed Compliance Programs
for Federal Government Contractors

On May 16, 2008 the Federal Acquisition Regulation Councils issued a second Proposed Rule to FAR Case 2007-006, Contractor Compliance Program and Integrity Reporting (73 FR 28407). This proposed rule effectively modifies the proposed regulation published in the Federal Register at 72 FR 64019.

While the new proposed rule includes changes affecting contracts for commercial items and contracts performed entirely outside of the United States, the more critical provisions for construction contractors include:

  • Suspension or debarment for a knowing failure to disclose an overpayment on a federal government contract.
  • Suspension or debarment for a knowing failure to report a violation of the Civil False Claims Act or violation of a federal criminal law in connection with the award or performance of any federal government contract.
  • These disclosures and reports regarding a violation of the civil False Claims Act or federal criminal law are to be made in writing to the agency inspector general with a copy to the contracting officer.

The proposed regulation does not expressly identify the agency inspector general as the recipient of the notice of overpayments. In addition, the proposed regulation does not provide guidance regarding the concept of a violation of federal criminal law in connection with the award or performance of a contract. In essence, a contractor is apparently expected to have some knowledge of federal criminal laws which comprised Title 18 of the U.S. Code. The relevant chapters of Title 18 total in excess of 375 pages in print.

The comment period on this proposed regulation ends on July 15, 2008. If you would like further information on this topic and possible comments, please feel free to contact us.

Weather Delays on COE Projects

Traditionally, many Corps of Engineers contracts have contained a weather data clause that typically sets forth statistical information reflecting monthly averages of rainfall and rain days. This data was then used as baseline information to determine time extensions for unusually severe weather. Based upon the recent use of a very different severe weather clause in some Corps of Engineers’ contracts, that practice may become history. The following is the text of that clause:

Time Extensions for Unusually
Severe Weather (Nov 2005) (Ref. FAR 52.249-10)

(a) This provision specifies the procedure for the determination of time extensions for unusually severe weather in accordance with the contract clause entitled DEFAULT (FIXED-PRICE CONSTRUCTION). In order for the contracting officer to award a time extension under this clause, the following conditions must be satisfied:

(1) The weather experienced at the project site during the contract period must be found to be unusually severe. Unusually severe weather is defined as hurricanes, floods, tornados or earthquakes.

(2) The unusually severe weather must actually cause a delay to the completion of the project. The delay must be beyond the control and without the fault or negligence of the contractor.

(3) The contractor’s progress schedule must reflect completion of the project within the specified contract duration including all weather except that as defined as unusually severe in (a)(1).

(b) Upon acknowledgement of the Notice to Proceed and continuing throughout the contract, the contractor will record on its daily Contractor Quality Control report the weather experienced each day, including the occurrence of unusually severe weather as defined in (a)(1). For a time extension to be granted under this clause, unusually severe weather must prevent work on critical path activities for 50 percent or more of the contractor’s scheduled workday. The contracting officer will convert any qualifying delays to calendar days and issue a modification in accordance with the contract clause entitled DEFAULT (FIXED PRICE CONSTRUCTION).

If the severe weather clause is included in the contract, the concept of unusually severe weather is stated to be limited to situations when a hurricane, tornado, flood or earthquake affects work on the critical path. For example, even if multiple days were lost due to rainy conditions affecting site work, entitlement to a time extension would depend upon showing that a flood or hurricane caused the contractor to be delayed. In addition, the COE’s apparent intent is that the delay is to be contemporaneously recorded on the Contractor’s Quality Control report.
While seemingly precluding the use of statistical averages to determine weather delays, this clause does not answer all questions. For example, who determines what is a flood? If a hurricane is downgraded to a tropical storm, is it no longer the basis for relief for severe weather? Finally, the requirement to record the event (lost working day on a critical path activity) has some history in federal government construction contracting. For further information, please feel free to contact us.
E-Verify System Mandated
for Government Contractors

On June 6, 2008 President Bush issued an executive order entitled “Economy and Efficiency in Government Procurement through Compliance with Certain Immigration and Nationality Act Provisions and Use of an Electronic Employment Eligibility Verification System”. In essence, this executive order directed the adoption of a new provision in the Federal Acquisition Regulation to require certain contractors and subcontractors involved in the performance of federal government contracts to utilize the E-Verify System to verify the employment eligibility of certain categories of employees.

Following that executive order, the FAR Councils issued a proposed regulation on June 12, 2008. (See 73 FR 33374, June 12, 2008). The proposed FAR provision contains the following key sections:

  • Requires the insertion of a new clause in all federal government prime contracts except those that do not exceed the micropurchase threshold (usually $3,000.00) or those for commercially available off-the-shelf items.
  • Requires the contractor to enroll in the U.S. Citizenship and Immigration Service’s E-Verify System within 30 days of contract award.
  • Requires the use of the E-Verify System to verify employment eligibility of all new employees that are hired after enrollment in the system.
  • Requires the use of the E-Verify System to confirm the employment eligibility of all existing employees who are directly engaged in the performance of the covered federal government contract.
  • Requires that prime contractors flow down a clause to all subcontracts for construction in excess of $3,000.00 that include work performed in the United States to impose comparable requirements on the subcontractors.

The proposed clause will not require a contractor to perform an additional employment verification on employees who were previously verified through the E-Verify program. Nothing in the proposed clause would appear to eliminate or preclude base or installation specific background checks on employees prior to that employee being allowed on the installation or federal government facility.

The comment period for this proposed regulation ends on August 11, 2008. If you would like additional information on this proposed regulation, please feel free to contact us.

Thomas J. Kelleher, Jr.
[email protected]
Member of the State Bars of
Georgia and Virginia

Thomas Kelleher Jr.

Smith, Currie, & Hancock LLP