OMB Issues Additional Guidance on Contractor Reimbursement Payments

Key Takeaways

• New OMB guidance recommends that agencies consider if reimbursing paid leave to keep contractors in a ready state is in the best interest of the Government for meeting current and future needs.
• Agencies could treat contractors differently depending on the type of work they perform and its importance to the agency’s mission.
• Contractors should remain in contact with government personnel to understand the importance of their work to the agency.

Last week I wrote on the Department of Defense’s implementation of Section 3610 of the CARES Act, which provided OMB-recommended guidelines for ensuring that payments to contractors enable industry partners to keep their employees in a ready state should they be called on to support efforts against the COVID–19 pandemic. Now the Office of Management and Budget has released additional guidance intended to help agencies understand when it is appropriate to act according to Section 3610 in support of the federal contracting community.

The new OMB memorandum, titled “Preserving the Resilience of the Federal Contracting Base in the Fight Against the Coronavirus Disease 2019 (COVID-19),” offers two guiding principles intended to ensure what it calls the “sound” use of Section 3610: supporting contractor resiliency and exercising good stewardship of the financial resources provided in the CARES Act for COVID-19 relief and response.

Supporting Contractor Resiliency

Under this first principle, the OMB recommends that agencies “consider if reimbursing paid leave to keep the contractor in a ready state is in the best interest of the Government for meeting current and future needs.”

The earlier-issued guidance (i.e., Class Deviation - CARES Act Section 3610 Implementation) made it clear that agencies have considerable flexibility for determining how to reimburse or otherwise support contractors for expenses that are not covered in ordinary times. In particular, OMB calls out the challenges faced by small businesses, recommending that contacting personnel provide extra support to small businesses by ensuring they understand the types of resources financial that are available to them and how payments might be accelerated to keep them viable.

Exercising Good Stewardship

Announcing the unprecedented nature of the relief package provided by the CARES Act, OMB asks agencies “to ensure this relief achieves its desired impact and federal funds are not being used to make multiple payments for the same purpose” by taking the following steps:

1. Maintaining mission focus and evaluating the use of Section 3610 in the broader context of all strategies to promote contractor resiliency.
2. Following the restrictions in Section 3610.

Step 1 reminds agencies that while they “may use their discretion to make reimbursements” for paid leave, etc., they should do so “only when they find that making such payments are in the best interest of the government.” In other words, the mission of the agency and the role played by contractors in furthering it should be criteria for determining when it is appropriate to make the extraordinary reimbursement payments outlined in Section 3610.

Step 2, meanwhile, reminds agency contracting personnel that Section 3610 allows reimbursement payments only to those who work on “a government-owned, government-leased, contractor-owned, or contractor-leased facility or site approved by the federal government for contract performance.” The restriction also applies to contract personnel who are “unable to telework because their job duties cannot be performed remotely.” In addition, agencies are requested to “work with the contractor to secure necessary documentation to support reimbursement and prevent [the] duplication of payment[s].” Agency contracting personnel are also required to label payments made under Section 3610 as “COVID-19 3610” in the Federal Procurement Data System (FPDS) when those payments are recorded.

This new guidance implies that not all contractors will be eligible for reimbursement payments. Agencies are being asked to identify contractors performing work that is considered important “for meeting current and future needs.” Which work is considered important will differ from agency to agency so it is a good idea for vendors to stay in close contact with agency personnel to know where they stand.