OMB Answers Questions Surrounding Contractor Management During COVID-19 Response

Published: March 23, 2020

Federal Market AnalysisCoronavirus (COVID-19) PandemicOMB

OMB guidance addresses questions emerging around contractor management and emergency procurement.

Key Takeaways:

  • The unique nature of current circumstances warrants agencies flexibility in allowing for teleworking, extending contract deadlines, and adjusting contract terms.
  • To maintain transparency in COVID-19-related spending, agencies must use a dedicated “National Interest Action” code for reporting acquisition costs to the Federal Procurement Data System (FPDS).
  • Contractor costs incurred due to reasonable actions to protect their employees on government sites or performance disruptions due to government decisions may be reimbursed.
  • The COVID-19 national emergency designation triggers provisions that increase the simplified acquisition threshold to speed procurements related to the response.

The top advice to federal contractors trying to assess the state of their contracts and employees working in government facilities has been, up to this point, “talk to your contracting officer.”  On March 20, 2020, the Office of Management and Budget (OMB) provided agencies with more information to help contracting officers, program managers and other government personnel respond to a worried contracting community.

In its memo, “Managing Federal Contract Performance Issues Associated with the Novel Coronavirus (COVID-19)”, Deputy Director for Management Margaret Weichert emphasized the critical role of contractors in maintaining operations and answered several key questions about contractor personnel, procurement rules and tracking coronavirus-related spending. Highlights of key components of the guidance:

Tracking COVID-19 Spending - OMB reviews the new National Interest Action (NIA) code that GSA added to Federal Procurement Data System (FPDS) reporting to track COVID-19 acquisition costs. This NIA code will be effective from March 13, 2020 to July 1, 2020. GovWin is already prepared to capture that data, which will be available in our Federal Contract Awards and Federal Spending Analytics tools (both require GovWin subscriptions) starting today, Monday, March 23, 2020.

Teleworking - Federal telework policies only govern federal employees, but given the nature of the emergency agencies are strongly encouraged to work with contractor employees in expanding telework where feasible. This includes the potential for modifying contracts that do not currently allow for telework, and flexibility regarding contract milestone dates for work that contractor employees cannot perform remotely.

Contract Deadlines - If contractors miss contract milestones due to personnel being under quarantine due to exposure to the virus (whether or not related to the performance of the contract), agencies CAN extend contracts based on “excusable delay” clauses in the FAR (52.249-14, 52.212-4(f) and 52.211-13). However, if OMB also notes that if alternate options are not available with the existing contractor (e.g. telework, substitute employee), the agency can “re-procure” with another contractor. Extended deadlines nor replacement would negatively affect the contractor’s performance rating.

Equitable Adjustment Costs (contractor’s cost incurred to protect employees from the virus or from performance disruption caused by the government when telework is not an option)
Agencies should consider those on a case-by-case basis. OMB provides several FAR clauses agencies’ can use to adjust contracts. OMB encourages agencies to consider whether the contractor’s actions were reasonable given the circumstances, and whether the skills and capabilities offered under the contract are critical enough to justify “retooling” of the contract to allow for these costs in light of the pandemic. Given no alternatives, agencies may suspend or stop work. See FAR clauses 31.201-3, 52.243-1 through 52.243-3, 52.212-4(c), 52.242-14 and 52.242-15.

Procurement Flexibilities and Options - The memo gives agencies guidance on the various emergency procurement provisions and resources available to them during this national emergency:

  • FAR clause 18.202 “Defense or recovery from certain events” provides agencies with guidance on emergency contracting under a national emergency. It provides for the following:
    • Increase in micro-purchase threshold from $10K to $20K for domestic purchases (and up to $30K for those outside of the U.S.)
    • Increase in Simplified Acquisition Threshold (SAT) to $750K for domestic purchases (and up to $1.5M for purchases outside of the U.S.)
    • Use of simplified acquisition procedures up to $13M for commercial item purchases.
  • Category management resources to support acquisition of common goods and services to “meet many pressing requirements in connection with the COVID-19 response
  • Clarifies expectations under the Stafford Act, which encourages contracting officers to give set-aside preference to companies local to the area of a national emergency. Given that the emergency is nation-wide, the Stafford Act does not apply but OMB plans to review in light of the impact of COVID-19 on small business contractors.

Postponing Acquisition Activities - Agencies should evaluate this on a case-by-case basis. In general, agencies should consider virtual activities but if face-to-face is required, they should following CDC guidance for social distancing and other guidelines.

Enhancing Communication - OMB encourages timely communications from agencies to their industry partners, and recommends engaging with industry liaisons, offices of small and disadvantages business utilization and acquisition innovation advocates to help them do so.

Contractor employees currently sit in a gray area – impacted by government decisions but not entirely governed by them. This guidance was helpful and necessary, but much uncertainty remains. Contractors should continue to maintain open communication with their contracting officers and program managers, and educate themselves on the FAR clauses and agency-specific policies that will shape their customers’ decisions as they navigate this unprecedented environment.