Webinar 04.16.20
04.16
Government Contract Legal Developments Driven by COVID-19
2:00PM - 3:30PM EDT
Webinar
Alert
Alert
09.10.20
In a report issued on September 3, 2020, the Government Accountability Office (GAO) presented its observations on the implementation of Section 3610 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Section 3610 authorizes agencies at their discretion to reimburse contractors for the cost of paid leave incurred during the COVID-19 pandemic in order to maintain their workforces in a ready state. The GAO limited its analysis to the seven federal agencies with contract obligations greater than $10 billion in fiscal year 2019 (Department of Defense (DoD); Department of Energy (DOE); Department of Health and Human Services (HHS); Department of Homeland Security (DHS); Department of Veterans Affairs (VA); General Services Administration (GSA); and National Aeronautics and Space Administration (NASA)), as well as the Office of Management and Budget (OMB).
The GAO report discusses the extent to which agencies reported use of their Section 3610 authority. The GAO found that these agencies made relatively little use of the authority through July 20, 2020. While the DoD reported $18.3 million in reimbursements paid to contractors, HHS, DHS, VA, and GSA did not report any reimbursement under their Section 3610 authority. These statistics, however, may not capture the full amount of the agencies actual use of their Section 3610 authority. The GAO report noted that agencies, such as DOE, did not need to issue a contract modification to obligate additional funding, and therefore, some Section 3610 reimbursements would not have been reported to the Federal Procurement Data System. In addition, the GAO report analyzed agency use only up to July 20, 2020, which was less than a week after the OMB issued its July 14 guidance.
Based on feedback from agency officials and industry associations, the GAO noted several factors in its report that limited certain agencies’ use of Section 3610. First, when Congress passed the CARES Act, it did not appropriate funds for Section 3610 reimbursements. The OMB’s July 14 guidance further clarified that reimbursements must be made using an appropriation already available to agencies for fiscal year 2020. While Senate Republicans included $11 billion for DoD reimbursements in their July 2020 proposal for the COVID-19 relief bill, negotiations for that bill hit a stalemate. A new, scaled-down version of the relief bill that Senate Republicans introduced on September 8 does not include any appropriation for Section 3610 reimbursements, nor does it extend the reimbursement period.
Another factor was the existence of other sources of financial relief available to address COVID-19 disruptions. OMB guidance noted the availability of other sources of financial relief for contractors in addition to Section 3610, such as DoD’s final rule on accelerated payments to small businesses, favorable tax changes, and the Paycheck Protection Program. In addition, it appears that some agencies issued equitable adjustments in response to COVID-19 disruptions under the Federal Acquisition Regulation’s (FAR) Changes and Stop-Work Order clauses.
The GAO report also cited the administrative burden on contractors in making reimbursement requests as a factor. For DoD in particular, industry perceived DoD’s processes for requesting Section 3610 reimbursements as too burdensome. Industry raised concerns that DoD’s process would require submission of a significant amount of documentation before contractors knew whether they would be eligible for reimbursement or whether funds would be available. DoD issued finalized guidance on August 17, 2020, which encourages early engagement with a contracting officer and discussion of funding availability.
While the period for reimbursement of paid leave costs ends on September 30, 2020, this deadline does not mean that reimbursement requests must be submitted by that date. Pillsbury’s Government Contracts team looks forward to assisting any contractor with questions on the reimbursement process or submitting a Section 3610 reimbursement request.
Pillsbury is closely monitoring and analyzing the global legal, economic, policy and industry impacts of COVID-19. For our latest insights, visit our COVID-19 and Economic Impact Resource Center.