October 16, 2018July 31, 2019 by dietrichknauth

U.S. takes more direct oversight of foreign investment in tech

The U.S. government is planning to ramp up its scrutiny of foreign investment in national-security-sensitive businesses and technology, which could affect the way some private equity funds deal with foreign investors.

The 2018 National Defense Authorization Act, passed in August, expanded the jurisdiction of the Committee on Foreign Investment in the United States to include a broader range of investments.

CFIUS, a multiagency body that includes representatives from the U.S. Departments of Defense, Treasury, Homeland Security, Commerce and others, has long had authority to review or block transactions that could lead a foreign buyer to acquire control of a business or location that could affect national security.

That mandate was often interpreted broadly by CFIUS, such as when it prevented a Chinese company from building wind farms near a U.S. Navy facility, but the new defense bill gives CFIUS even more authority, sweeping in investments that do not include “control” but enable foreign investors to access critical technology, critical infrastructure, or personal data.

“This is going to sweep a larger number of transactions into the ambit of CFIUS review, so it will be a challenge for investors,” said Priya Ayar, a partner at Wilkie Farr & Gallagher and a former acting general counsel of the Treasury Department.

Read the full story, as published by Buyouts: https://bit.ly/2YhNQK1

October 17, 2014February 6, 2017 by dietrichknauth

Offsets Offer Traps For Unwary Defense Exporters

By Dietrich Knauth

Law360, New York (October 17, 2014, 2:31 PM EDT) — With defense contractors increasingly looking to drum up business abroad, experts say they must be wary of the frequent demands for offsets — work designed to contribute to the local economy but often used as an excuse for lining a contracting official’s pockets.

Offsets are becoming more common throughout the globe, as a way for governments to ensure that their tax dollars don’t simply enrich foreign defense companies without supporting its own defense industry or overall economy. India, for example, codified a strong offset in 2005, and the defense division of the Confederation of Indian Industry has said that a defense import policy that doesn’t include offsets “robs the country of dignity and makes it vulnerable.”

But defense exports carry risks of running afoul of anti-corruption laws like the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act, as well as local anti-corruption laws and other extraterritorial anti-bribery laws. Offsets can be used to funnel payments to corrupt government decision makers, and it can be politically difficult for international companies to refuse offset demands even if they are concerned about potential corruption.

“Offsets are the biggest risk area now because [potentially corrupt payments] are not so easily identified,” said Steven Shaw, a senior counsel at Covington & Burling LLP. “Often, the only option if you don’t agree to them is to walk away from the contract, and that’s hard to do.”

Offsets are a topic of increasing discussion and concern within the global defense industry, according to Tim Schultz, vice chairman of the International Forum on Business Ethical Conduct for the Aerospace and Defense Industry and vice president of ethics and business conduct at Raytheon Co.

Shaw and Schultz will both discuss offsets and other corruption risks at IFBEC’s Nov. 6-7 annual conference in Brussels, and are seeking input from global aerospace and defense companies, government officials, international transparency groups and others.

“There’s a lot of money that gets siphoned off that could be used more effectively for social good,” Schultz said.

Offsets can hide corruption even if they appear legitimate on the surface, because procuring officials may recommend or insist on the use of certain suppliers, and contractors need to make sure that the companies they’re working with aren’t being used to enrich the government decision makers, Schultz said.

“In offset agreements, because there are usually multiple actors and various fees, the risk of corruption and improper payments that may be unbeknownst to a contractor necessarily increases,” Schultz said. “You may be asked to do business with suppliers that might build systems that are used in the prime contract, and you need to do a lot of due diligence to determine who those third parties may be.”

Offsets can be direct or indirect, and may include economic development work that’s far removed from the defense contract a company is trying to win, according to Jessica Tillipman, an assistant dean at George Washington University Law School.

“It can be a subcontract related to the procurement, or it can be something completely separate, like building roads or building a new school,” Tillipman said.

Even though offsets are becoming common in some parts of the world, defense companies can’t afford to let their guard down on corruption risks, Tillipman said.

“I look at offsets as another wrinkle on the risk that companies face when doing business abroad, a more complicated wrinkle,” Tillipman said. “For the most part, government contractors have accepted that offsets are a cost of doing business in certain countries. But at the same time, even though it’s become a more normalized part of doing business abroad, it doesn’t mean that companies can relax their compliance programs.”

For example, a partner of a company that comes recommended by a government official should raise an immediate red flag for further investigation, Tillipman said. The connection could be something innocuous, like being on a list of reputable companies that could do the work required, or it could be a sign that a procuring official is funneling funds to a company that he or she has improper ties to, she said.

“With an offset, you’re often being told to use particular people or invest in certain areas that may have an improper connection to a government official,” Tillipman said. “Contractors need to be prepared to walk away or negotiate a different type of offset if that’s feasible.”

Any time a contractor tries to expand its market abroad — something that’s increasingly attractive as a result of budget cuts in the U.S. — they become more vulnerable to bribery risks because they’re often relying on in-country agents or representatives who know the market, know the country, know the institutions and know how to get things done, according to Schultz. Those kinds of connections can often be the same ones that create risks of bribery, he said.

“Those are the people who can often get you into trouble,” Schultz said. “You want to have a rigorous vetting process for representatives where you learn who they are and if they have connections with politically exposed persons who might be government decision-makers in the procurement.”

To protect themselves, companies can ask for audit rights for any fees that they pay so that they know where there money is going and can look for signs of corrupt payments, Schultz said.

Although the FCPA has been the biggest compliance risk for global defense companies, other countries, like Brazil, are passing similar statutes that can reach abroad, and nations like China are being more aggressive in pursuing anti-corruption laws within their own borders, Tillipman said.

“Risk is not just coming from the U.S., it’s all around the globe and that makes offsets even riskier,” Tillipman said.

Published by Law360

September 23, 2014June 12, 2018 by dietrichknauth

Cyber Risks Loom Ever Larger For Government Contractors

By Dietrich Knauth

Law360, New York (September 23, 2014, 4:30 PM ET) — Government contractors’ cybersecurity practices are coming under increasing scrutiny from the government, and recent events highlight the unique risks and vulnerabilities that companies face when they hold valuable government data.

Government and contractor networks are under continuous threat from cyberattack, and security and reporting remain serious challenges, as shown by a Sept. 17 Senate report on successful attacks on the networks and databases of U.S. Transportation Command contractors.

The fallout for contractors, especially ones that rely principally on the government for business, can be significant if cyberattacks cause the government to lose faith in them, as has happened to embattled U.S. Investigative Services, which lost its Office of Personnel Management contracts earlier this month.

“What’s happened with USIS should be a wake-up call to industry,” said Robert Nichols, co-chair of Covington & Burling LLP’s government contracts group. “USIS won’t be the last company that suffers from this. I think major contractors will be put out of business to set an example for other contractors.”

USIS had a history of contracting woes dating back to its background checks for NSA leaker Edward Snowden and Navy Yard shooter Aaron Alexis and continuing with a massive fraud suit that accuses the company of filing incomplete background check reports while billing the government for completed work.

But a state-sponsored cyberattack that breached USIS’ systems was apparently the straw that broke the camel’s back, with the OPM and the Department of Homeland Security suspending USIS’ contracts in its wake. OPM, which was USIS’ primary customer, decided Sept. 9 that it would not renew USIS’ background check contract, putting a serious dent in the company’s revenues.

To truly protect themselves, contractors should not relegate cybersecurity just to their IT departments and should instead embrace a top-down approach that recruits all a company’s employees into the effort, according to Michael Chertoff, a former Secretary of Homeland Security who now heads a security consulting group.

Chertoff and Nichols, who are partnering with George Washington University for a Sept. 29 seminar on cybersecurity for government contractors, said the recent events re-emphasized the need for bigger thinking from vulnerable companies.

“There is a bit of a tendency to think of this as if it’s just a technical issue, but you’ve got to take a broader view of this than just finding the right piece of equipment or software to put on your network,” Chertoff said.

Before investing in software or other technical solutions, companies should think long and hard about the types of data that could be an attractive target and come up with a comprehensive strategy to limit access to that data, Chertoff said. That strategy could include steps like limiting access to data within the company, limiting remote access or preventing downloads of certain data, Chertoff said.

“Once you’ve laid the rules down, you can then configure your hardware and your software to enforce those rules,” Chertoff said. “What you can’t do is just buy hardware and software and put it on a network and think that solves the problem.”

Ray Aghaian, co-chair of McKenna Long & Aldridge LLP’s cybersecurity practice, also advocates a broad approach where employees, “from the executives on down, place a strict emphasis on security.”

Without high-level executive attention, companies may not be able to align their cybersecurity budgets to their actual needs and may not be able to move quickly enough to respond to breaches, Aghaian said. Employee sloppiness can create vulnerabilities if training isn’t seen as a high priority, as can overemphasizing static defenses over more demanding but more responsive approaches, he added.

“The mistake that a lot of folks make is that there’s a lot of emphasis placed on the intrusion protection system,” Aghaian said. “People often forget about their IDS, their intrusion detection system — and that is just as important, if not more, because you need to very quickly understand if you’ve been compromised.”

Contractor cybersecurity remains a high priority for the government. In the week after the USIS decision, the Senate passed legislation that would grant DHS additional hiring and compensation authority to help recruit and retain cybersecurity experts. It also released a report on cyberattacks launched on U.S. Transportation Command contractors, which carry valuable intellectual property and sensitive information about military personnel movement and cargo transportation.

“These peacetime intrusions into the networks of key defense contractors are more evidence of China’s aggressive actions in cyberspace,” Sen. Carl Levin, D-Mich., said when announcing the report’s findings. “Our findings are a warning that we must do much more to protect strategically significant systems from attack and to share information about intrusions when they do occur.”

The public version of the report revealed that Chinese hackers had stolen emails, documents, passwords and other sensitive information from Transcom contractor networks multiple times between 2008 and 2014. The report called for a tightening of information sharing and disclosure requirements, noting that Transcom heard about only two of the intrusions, even when the FBI and other federal agencies had learned of the successful attacks.

Contractors holding government data are often the “weak link” for potential cyberattackers, and agencies are attempting to enforce better security through several pieces of regulation, as well as through ad hoc contract clauses, according to Nichols.

Because the penalties for a failure can be so steep — terminated contracts, negative past performance ratings, and the threat of suspension and debarment — contracting attorneys need to take care to look

for cybersecurity clauses that could impact their clients’ business, Nichols said.

“Different agencies are putting clauses into contracts that shift enormous risk to contractors, without the contractors really understanding what they are agreeing to,” Nichols said. “Because they don’t understand it, they’re not getting insurance for it, so what they are effectively doing is putting the viability [of] the continued existence of their companies at risk.”

Lawyers can help companies set up insurance policies covering cyberattacks and data breaches — a market that remains somewhat underdeveloped — and help them seek DHS certification under the Support Anti-terrorism by Fostering Effective Technologies Act, or SAFETY Act, according to Aghaian. The SAFETY Act limits liability for “claims arising out of, relating to, or resulting from an act of terrorism” and allows the DHS to designate certain cyberattacks as acts of terrorism.

“It’s a very powerful form of liability protection to have, but surprisingly, most companies aren’t making use of that,” Aghaian said.

In the near term, the USIS breach should be a stark reminder that companies face significant risk and uncertainty even when they appear to have handled a cyberattack responsibly, according to Anuj Vohra, a senior associate at Covington.

“Because this is such an evolving threat and the government hasn’t gotten its hands around it, it’s hard for contractors to know what to do,” Vohra said. “USIS is obviously its own discrete circumstance because of everything else it had going on, but it seemed to take all the right steps following the breach to work with the government and address the threat and the breach in an efficient and responsible way, and it still ended up in the same place.”

Published by Law360

August 15, 2014February 9, 2017 by dietrichknauth

Employee Secrecy Pacts Don’t End Whistleblower Threat

Law360, New York (August 15, 2014, 6:54 PM EDT) — Although some regulators and lawmakers have expressed concerns about companies attempting to silence potential relators with nondisclosure agreements, attorneys on the defense side say that such employee agreements can rarely inoculate a company from False Claims Act allegations.

Contractors’ nondisclosure agreements have been the subject of recent discussion by lawmakers, regulators and advocacy groups, and the Washington Post has run recent stories on agreements used by KBR Inc. and International Relief & Development.

Recent debate on the topic has focused on the potential suppression of whistleblowers and False Claims Act relators, obscuring some of the legitimate and legal reasons why companies use such agreements — such as the protection of a company’s trade secrets, confidential information and reputation — according to Marcia Madsen of Mayer Brown LLP, who moderated a discussion on the topic at the American Bar Association’s annual meeting in Boston.

“You can’t prevent someone from disclosing fraud to a regulator, but there are very legitimate reasons that companies would ask employees for confidentiality agreements,” Madsen told Law360 after the ABA discussion. “Recently, whenever the subject’s come up, people have tried to treat it as all or nothing.”

Some of the recently debated agreements require employees to get permission from their company’s lawyers before discussing their allegations outside of a company, or forbid employees and former employees from making any disparaging statements about the company, or waive their right to file a qui tam suit under the False Claims Act, all of which could limit whistleblowers’ rights under federal law, according to the nonprofit Project on Government Oversight.

POGO recently asked Attorney General Eric Holder to investigate contractor confidentiality practices, saying that contractors “have no incentive to identify, report and remedy misconduct if they know their employees are afraid to step forward and report their allegations to the government.”

KBR’s nondisclosure agreements also came up during recent litigation in U.S. ex rel. Barko v. KBR, a False Claims Act suit accusing the company of defrauding the government by overcharging for substandard work performed by an Iraq War subcontractor. KBR argued that documents related to its internal investigation of the claims were protected both by attorney-client privilege and by employee confidentiality agreements.

The most expansive confidentiality agreements should be challenged, or else they run the risk of discouraging oversight of federal spending, according to POGO General Counsel Scott Amey.

“If companies force employees to sign nondisclosure and confidentiality statements, and the employee or the government never challenges them, the companies are in control and able to conceal the subject of the report,” Amey said. “These agreements are a new attempt to silence people who want to step forward when they see questionable activities. I think these agreements are ripe for a challenge, and we’ll see balancing between the rights of the company and the rights of the whistleblowers.”

But balance doesn’t mean that confidentiality agreements will go away entirely, according to the ABA panelists.

The key question when examining confidentiality agreements is whether they get in the way of the government’s ability to investigate fraud, according to Kelley Hauser, a trial attorney with the Department of Justice. Hauser said at the ABA meeting that the DOJ would generally challenge overly broad confidentiality agreements that discourage an employee from reporting fraud or agreements that require relators to waive their standing as qui tam relators after a suit has already been filed.

“Conceptually trade secret protection, noncompetes, we don’t have problems with those clauses,” Hauser said. “The clauses that we have problems with are the clauses that would eliminate an incentive for a whistleblower to come forward. Filing a qui tam is a powerful incentive to come forward with allegations of fraud, and if you’re going to try to get a relator to release that, we may have a problem with that and we may challenge that, and we’ve been successful in that area.”

And in cases where legitimate confidentiality agreements are in place, the DOJ has tools to compel necessary testimony despite those agreements, Hauser said.

Scott MacKay, vice president and general counsel at Lockheed Martin Information Systems & Global Solutions, said that companies should look to craft confidentiality agreements that can legally protect a company from the release of damaging information and that contractors could try to get employees to waive their standing in future qui tam suits as part of a severance agreement.

“It’s probably not a great practice to try to gag people, because it’s going to be unsuccessful, but I do think there are parameters that you can very legitimately seek from a departing employee, in consideration of a payment, to limit your potential exposure, consistent with the case law,” McKay said.

Under recent case law, it’s harder to get confidentiality agreements to stand up if they’re signed before an employee leaves. But if an employee takes money and waives his or her right to file a qui tam suit as part of a severance package, courts have upheld the waiver.

The Fourth Circuit decided against an employee who took such a severance package and later filed a quit tam suit in its 2010 decision in U.S. ex rel. Radcliffe v. Purdue Pharma LP. In that case, plaintiff Mark Radcliffe alleged that Purdue defrauded the government by selling the more expensive Oxycontin when a cheaper generic would have served just as well. When Purdue brought up the waiver in the severance agreement, Radcliffe argued that the agreement only covered lawsuits related to Purdue’s liability to him, personally, not claims on behalf of the government, but the Fourth Circuit sided with Purdue.

Courts have also taken the approach of separating the question of standing in qui tam suits from the question of damages related to breaches of confidentiality agreements. The Eastern District of Pennsylvania recently allowed a False Claims Act defendant, AmerisouceBergen Corp., to countersue a relator who breached his confidentiality agreement by including Amerisource’s confidential and proprietary information in his complaint, which eventually became public.

Simply getting a defensible confidentiality agreement or litigation waiver in place isn’t always enough for companies looking to protect themselves, according to Angela Styles, co-chair of Crowell & Moring LLP’s government contracts group.

Employees may sign documents but not fully understand their responsibilities or what information they need to protect from disclosure, so it’s important for a company to clearly communicate with employees and former employees about the agreements, Styles said.

“It’s not the agreement that’s critical, it’s the employee’s understanding of what’s confidential and proprietary,” Styles said.

Published by Law360

August 13, 2014March 21, 2017 by dietrichknauth

5 Tips For Internal False Claims Act Investigations

By Dietrich Knauth

Law360, New York (August 13, 2014, 2:39 PM EDT) — When federal contractors investigate potential violations of the False Claims Act within their company, they must walk a fine line between self-preservation and cooperation with the feds.

Contractors are required to report credible evidence of fraud or significant overpayments on their contracts, but sometimes they struggle with ways to protect themselves during internal FCA investigations. The topic was the subject of a panel discussion involving representatives from law firms, in-house counsel and the government, moderated by Marcia Madsen of Mayer Brown LLP, at the American Bar Association‘s recent meeting in Boston.

Here are some tips that emerged for balancing the competing interests in such investigations and minimizing potential liability:

Take Care When Interviewing Employees

Interviewing employees can require a delicate touch, as it’s easy for an internal investigation to scare employees and disrupt their work. The right approach requires careful coordination between in-house attorneys and outside counsel on a range of issues, from explaining the purpose of interviews to employees to agreeing on who should keep interview notes, attorneys say.

Angela Styles, co-chair of Crowell & Moring LLP’s government contracts group, said that outside attorneys like her often have to overcome a poor first impression with the employees they’re interviewing.

“I don’t think I’m scary, but apparently lots of employees do, and I think outside counsel has that problem a lot,” Styles said. “It’s so important to realize that when you’re outside counsel and you’re coming in and you’re talking to employees, you are a really scary individual to a lot of men and women.”

Employees can freeze up as soon as outside lawyers give them an “Upjohn warning,” reminding them that they represent only the corporation and not the individual, Styles said. It’s crucial to quickly develop a rapport and deliver the warning in a way that is is both gentle and clear, allowing the interview to proceed smoothly, Styles said.

“I’ve got to say, it’s very, very difficult because you don’t have that long-term relationship [that inside counsel has with employees], but it really affects the entire tenor of the interview, as to how gently you are able to give the Upjohn warning and make this person feel comfortable but get out everything that you need to get out there,” she said.

It’s part of in-house counsel’s job to clearly explain the need for interviews by outside counsel, said Scott MacKay, vice president and general counsel at Lockheed Martin Information Systems & Global Solutions. Generally, employees are willing to cooperate if they understand what’s happening, he said.

“It shouldn’t be just the outside counsel parachuting in and meeting these people out of the blue,” MacKay said. “You need to work these people. You need to work the organization so they’re ready, so they know who Angela is, so they know that she’s really a good lawyer and a nice person, and not scary, and they hear that from someone they know.”

Outside counsel should also resist the urge to “travel in packs,” which can make employees uneasy, and generally try to minimize disruption in the workplace, Styles said.

“These people have work to do,” Styles said. “They’re operating under a lot of stress, and you’re bringing in a completely new unknown factor to them, and they also have to walk out the door and continue to do their job.”

In the relatively rare event that a False Claims Act relator still works at the company and is interviewed during an internal investigation, MacKay said, the interview could represent a “free shot” at the relator.

“To the extent that you know you have a whistleblower, it would strike me as prudent to interview that person as quickly as possible and reduce to writing what that person tells you,” MacKay said.

Preserve Attorney-Client Privilege …

In the recent case U.S. ex rel. Barko v. KBR, the D.C. District Court heightened the attention paid to questions about attorney-client privilege for internal FCA investigations by finding that internal investigations were performed to comply with regulatory responsibilities and not for the purpose of legal advice. Although Barko was recently overturned by the D.C. Circuit, it serves as a warning to companies that they should be as clear as possible that they are seeking legal advice if they want to preserve privilege later on, attorneys said.

If companies do not have attorneys do the employee interview, they should make it very clear that the investigation is being performed at the direction of their legal department, according to Brian Miller of Navigant. Miller, who helped write the mandatory-disclosure rule while serving as inspector general of the General Services Administration, said that the initial Barko decision tried to enforce an artificial separation between internal investigations performed for legal purposes and those performed for business purposes.

“If you’re doing an internal investigation to comply with the mandatory-disclosure rule, one of the issues is: Do you have credible evidence of an FCA violation? How is that not a legal issue?” Miller said. “When we did the mandatory-disclosure rule, we wanted to take privilege off the table and encourage companies to do these compliance reviews and investigations. The harder you make things to do, the less likely it is that companies will do it.”

… But Don’t Be Too Cagey With the Feds, Either

For Styles, there is some tension between protecting attorney-client privilege and the mandatory-disclosure rule, but companies shouldn’t obsess about protecting privilege at the expense of compliance with the rule.

“If you’re making a disclosure and you’re too worried about privilege, I can tell you that the disclosure isn’t going to go well,” Styles said. “If you or your client errs too far on the side of privilege, [the government is] not going to have enough information.”

MacKay said that companies will get themselves in even more trouble if they try to be too cagey when making a disclosure to the government.

“You really can’t slice the bologna thinly in disclosures,” MacKay said. “The fact is that you’re going in and making a disclosure. … OK, that’s given. You’ve said there’s credible evidence, so you don’t need to spend a lot of time discussing the legal niceties of whether it is implied certification or whether it’s something else under the False Claims Act.”

Kelley Hauser, a trial attorney in the U.S. Department of Justice‘s Civil Fraud Division, said that incomplete disclosures can encourage whistleblowers to come in after a disclosure, expanding on the original disclosure or finding things that aren’t included in the original disclosure.

DOJ attorneys are generally skeptical of overly broad claims of privilege, especially for lawyers who primarily act in a business role for a company or act in a hybrid capacity, Hauser said. The DOJ will look for relevant documents and facts underlying a company’s legal opinions, not the opinions themselves, he added.

“On the one hand, I’m not interested in knowing what an in-house attorney or … outside counsel thinks about an FCA case or your exposure,” Hauser said. “I don’t care, and I’m not going to agree anyway. That’s clearly privileged and we don’t want to see that and that’s fine.

“On the other hand, documents that are pre-existing and just happen to have been swept up in an internal investigation are not necessarily privileged and they should be produced, and everything in between is a more difficult call.”

Don’t Go Broke Fighting Over Document Requests

Companies should resist the urge to fight back against apparently overbroad subpoenas and discovery requests, MacKay said.

“The case law is replete with the carnage of companies that have sought to litigate the scope of discovery requests, and they always lose,” MacKay said. “At the end of the day, you’re going to have to produce the documents because the government does have a right to get it, and if you narrow it and work cooperatively with the agency attorney, you really are advancing your client’s interest. As distasteful as you may find it sometimes, the point is, it really advances the ball toward a faster, cheaper, quicker resolution — even if the resolution isn’t one that you are particularly enamored with.”

Instead of arguing with the government, a company can make more headway in narrowing a request if it just talks to the agency or trial attorneys and figures out what they really are looking for, Miller said.

“Contact the attorney right away and work with the attorney from the government to try to narrow the scope down or have a rolling production,” Miller said. “I think there’s a lot you can do, and I think you’ll find that government attorneys are cooperative and easy to work with these on these issues.”

Without that cooperative interchange, the only ones that benefit, really, are the outside counsel, because the legal fees can rack up quickly during scorched-earth fights over document production, MacKay said.

Work to Shape the Investigation

Cooperating with a trial attorney or the agency can also give a company insight into the case against them and can give the company an opportunity to help shape the investigation as it progresses, MacKay said.

“The key to cooperating with a trial attorney or the agency is that you learn about their case, what it is that they’re focused on, so that you can then start working with that investigator or regulator to formulate your defenses,” MacKay said.

Cooperating proactively can also help a company navigate potential suspension and debarment risks related to FCA allegations, according to Wayne Wisniewski, director of the U.S. Navy‘s civil recovery division. Good attorneys can play a key role in getting that cooperation off to the right start, Wisniewski said.

“There’s a real distinction between those that are represented by counsel and those, maybe a small or midsized business, that come in and think that he or she can do everything by themselves,” Wisniewski said. “They don’t shape the case, they’re all over the place, and it’s very unwieldy. It puts us in an awkward position as well, we have to assist them and its an ethical dilemma on our side.”

Published by Law360

August 7, 2014February 2, 2017 by dietrichknauth

Gov’t, Private Space Industries Becoming More Intertwined

By Dietrich Knauth

Law360, New York (August 7, 2014, 9:40 PM EDT) — U.S. funding and support for commercial space companies, often with the goal of graduating those companies into more typical government contracts, have increasingly blurred divisions between commercial and public projects in the space industry, a panel of attorneys at the American Bar Association’s annual public meeting said Thursday.

The panel in Boston noted that the mixing of Space Act agreements with more typical contracts governed by the Federal Acquisition Regulation has created more opportunities for the growing space industry, while also creating new regulatory challenges for the agencies involved in regulating space launches.

“What you’re seeing here, with FAR contracts and Space Act agreements more broadly, is a new blurring of the lines between government and commercial programs,” Chuck Dickey, general counsel for Lockheed Martin Space Systems Co.

A recent example of that blurring is NASA’s Orion program, which aims to build a next-generation space shuttle that can take astronauts to Mars and beyond, according to Dickey. Test launches for the program began with indemnity provisions governed by the FAR contract and the company’s NASA contract, but later launches have involved the Federal Aviation Administration’s requirements for indemnifications and waivers of liability, which are more often used in commercial space launches, Dickey said.

Space Act Agreements are not subject to the competition or pricing rules in FAR and allow NASA to pursue a wider variety of partnerships in its quest to support America’s nascent commercial space industry.

Agreements under the act are generally classified as funded agreements, in which NASA pays contractors who are working in support of a NASA mission; non-reimburseable agreements, in which NASA and its partners bear their own costs for joint projects; and reimburseable agreements, in which contractors pay NASA to borrow NASA facilities or expertise to support a commercial project.

Julie Jiru, a contracts officer with Space Exploration Technologies Inc., said that NASA support in Space Act projects like the Commercial Orbital Transportation Services and Commercial Crew Development program have helped SpaceX win contracts for a NASA commercial launch market that didn’t exist until recently. The law allows companies to turn the tables on the normal government contracting by hiring out NASA expertise to support commercial goals that line up with NASA’s mission.

“When we talk about government contracts in general, it’s usually thinking of what does the government want from you — what do you do for the government, what are the requirements, etc.,” Jiru said. “The reimbursable space act agreement is fantastic, because it’s finally about us and what we want. We get to choose the technology and expertise we want from the government in order to advance and improve our own space technology.”

The agreements share one thing with typical government contracts though, Jiru said. They allow the government to leverage its weight to get favorable terms; namely insisting on upfront payment for its services.

“It wouldn’t be government contracting if it wasn’t a little contradictory,” Jiru said. “By ‘reimbursable’ Space Act agreement, what the government means is ‘prepaid’ Space Act agreement.”

The increasing mixture of NASA contracts and NASA-supported commercial launches makes it more difficult for the FAA to handle cross-waivers, which essentially prevent any of the parties involved in a space launch from suing each other for damage or liability during a launch or reentry, according to FAA attorney Sabrina Jawed.

It is not uncommon for NASA to contract with a company like SpaceX or Orbital Sciences Corp. to send “a black box of stuff” into space, but NASA’s secrecy about some of its payloads makes it difficult for the contractors to obtain necessary waivers, Jawed said.

“This causes a big issue because we at the FAA have a regulatory requirement that SpaceX or Orbital Sciences gets the signature of every customer on the cross waiver, and they have to do this prior to launch,” Jawed said. “They’re required to do this by law, but how are they going to do this if have no idea what’s in the black box?”

Thus far, the FAA has been issuing waivers to the regulatory requirement since NASA has a similar cross-waiver and can typically assure FAA that it has appropriate waivers in place with the party that is unknown to the launch contractor, Jawed said.

The FAA and NASA must also coordinate with the Air Force, since commercial launches can use Air Force facilities, or the Air Force could put payload on a commercial launch vehicle or possibly share a payload with a commercial launch company. For those launches, the FAA coordinates with the Air Force to ensure that safety is being upheld through a formal Memorandum of Understanding between the agencies.

“Our rules trump, but we defer to the Air Force” as long as any deviations from shared procedures can be looked at and approved by the FAA, Jawed said.

Both NASA and the Air Force use contracts to push companies into the space launch market. NASA has used the COTS program to help develop vehicles that it now hires to deliver cargo to the International Space Station, and the Air Force uses its Orbital/Suborbital Program-3 (OSP-3) to fund less challenging launches while testing companies for riskier work under its Evolved Expendable Launch Vehicle program.

“There’s a real statutory framework and policy framework for supporting the commercial space industry,” said Patricia Ewing, senior counsel for Orbital, which has transitioned to ISS supply contracts along with SpaceX. “Both NASA and DOD have certain contract vehicles that they use that are structured in a way to help support the commercial space industry. The prime example of that is the space station resupply contracts.”

Both Orbital and SpaceX spent a lot of money in getting their space vehicles off the ground, but NASA’s support made the current commercialization possible, Jiru said.

“It’s great to see how the reimbursable Space Act agreements basically work in concert with the government FAR contracts in order to make out industrial base stronger, and that in turn makes the U.S. as a whole stronger in space,” Jiru said. “There was no marketplace or business case for going into ISS resupply, so in order to demonstrate and get that capability, funding from the government was needed in order to help companies start that because that ‘s a very, very expensive endeavor, especially if you didn’t have a client for it.”

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July 16, 2014December 2, 2016 by dietrichknauth

Senators Debate Adding Funds To Accelerate Space Programs

By Dietrich Knauth

Law360, New York (July 16, 2014, 5:33 PM EDT) — Senate Armed Services and Commerce committee members expressed frustration about the U.S.’s continued reliance on Russian rockets for NASA and Air Force space launches Wednesday and debated adding more funds to expedite efforts to build a new generation of American-made launch vehicles.

The Commerce space subcommittee’s chairman, Sen. Bill Nelson, D-Fla., noted that the day’s hearing took place on the 45th anniversary of the Apollo 11 launch that sent the first astronauts to the moon, and emphasized space exploration’s importance to research, commerce and national security. Senators questioned witnesses from the Air Force and NASA, and other government and private sector experts, about challenges raised by reliance on Russian rockets and the slow pace of U.S. entrants into the market for Air Force launch contracts.

Gen. William L. Shelton, commander of Air Force Space Command, said that the recent reliance on the Atlas V rocket, which uses Russia’s RD-180 engine as a key component, made sense in the near term, saying that the rocket is “probably the most advanced rocket engine in the world” and has proven both cost-effective and reliable.

“If you look at the Atlas V performance, there’s nothing to complain about,” Shelton said. “But in my opinion it’s time to move on from reliance on that foreign engine.”

Russia’s role in American space programs has become a topic of debate thanks to rising tensions over Russia’s annexation of Crimea and the U.S. sanctions that followed. Russian Deputy Prime Minister Dmitry Rogozin, who heads Russia’s defense industry, has floated the possibility of restricting U.S. access to its engines, and reportedly suggested that the U.S. “use a trampoline” to send astronauts to the International Space Station.

Those remarks have played into the debate over both NASA’s civilian spaceflight programs and the Air Force’s Evolved Expendable Launch Vehicle program, which sends military satellites into space. Space Exploration Technologies Corp., or SpaceX, which is jockeying for the chance to compete with the Air Force’s EELV contractor, United Launch Alliance, has positioned its U.S.-made Falcon rockets as an alternative to the Russian rockets used by ULA.

If tensions worsen and Russia carries out the threat to cut off RD-180 rocket sales, the move would significantly disrupt the Air Force’s national security launches, Shelton said. But both he and RAND Corp. senior engineer Yool Kim said that that is unlikely, because the Russian space industry relies on money from U.S. space launches. And even if Russia stops selling the rockets, the U.S. could use its stockpile of 15 Atlas V rockets to continue with the most significant space launches for at least two years, although it would have to give up some lower-priority launches to make that work, Kim said.

When asked about the ability of SpaceX to pick up the slack, Shelton pointed out that the SpaceX Falcon 9 rocket, used to deliver NASA cargo to the ISS, cannot handle heavier and more sensitive launches, and its Falcon Heavy rocket, which is in the same class as the Atlas V, is not as close to certification for space launches. Under current plans, the Falcon 9 rocket will be certified for Air Force launches by December, Shelton said.

Many senators seemed eager to speed the development and certification of U.S. rockets and space vehicles, asking whether additional funding could accelerate that process. But witnesses said that federal procurements and development of new technology can’t always and shouldn’t always be rushed.

“Part of the issue we’re dealing with is we’re in the middle of a procurement, so we have a procurement right now that we’ll make a selection on later this year,” NASA Associate Administrator Robert M. Lightfoot said. “Having not seen the proposals, I can’t tell you what the acceleration options are, but we’re in 2014 already. When you order a rocket, you typically order them three years in advance, so that’s where we are.”

SpaceX, which has sued the Air Force for entering into a five-year deal with ULA while it was gearing up for launch certification, was a frequent topic of senators’ questions. Senators questioned the Air Force’s claimed $4.4 billion in cost savings for its recent five-year contract, as well as an earlier comment from Shelton that seemed to criticize SpaceX for taking the Air Force to court. Other asked why SpaceX’s rockets were good enough to deliver cargo to the ISS for NASA but not good enough to take military satellites into space.

Lightfoot said that the cargo deliveries were relatively low-priority and low-risk, so NASA accepted some additional risk in starting those deliveries and speeding SpaceX’s certification for future delivery of more sensitive cargo, including high-tech research equipment and, eventually, NASA astronauts. In the process, NASA took SpaceX through very rigorous testing of its ability to navigate in space and safely dock with the ISS, which are less applicable to the Air Force’s launch needs.

Senators also criticized the Air Force for sharply reducing the number of near-future EELV launches that it planned to open up for competition, from 14 to seven in the Air Force’s 2015 budget proposal. Shelton replied that the Air Force, trying to save money, cut five launches of GPS satellites, which are available to competition because they don’t require a rocket as heavy as the Atlas V, because it realized that its GPS networks didn’t require as much maintenance as it had thought. The heavier launches, reserved to ULA, were generally preserved, but one was canceled, which required the Air Force to give them one of the lighter launches from the formerly competitive pool to keep the terms of the five-year contract, Shelton said.

“We didn’t need to procure the GPS launches on the schedule that we thought we needed, so we stretched those launches out. That resulted in the loss of five of the seven launches that we had set aside for competition,” Shelton said. “It really wasn’t an anti-competitive thing.”

While lawmakers were frustrated by the pace of getting new rockets into production, the deputy undersecretary of defense for acquisition, Alan Estevez, said that developing new technology isn’t always as easy as “throwing money at the problem.”

“Without sounding glib, it is rocket science,” Estevez said.

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March 31, 2014January 23, 2017 by dietrichknauth

BP Contracting Ban Reinforces Debarment Misconceptions

Dietrich Knauth, Law360 – March 31, 2014

The unusual timing of BP PLC’s recently resolved suspension from federal contracting has left many experts scratching their heads, with some concerned that the government’s handling of the contracting ban could reinforce misconceptions that suspension and debarment should be used to punish companies rather than, first and foremost, to protect the government.

BP was suspended from competing for contracts or oil drilling leases 16 months ago, when the oil giant pled guilty to felony misconduct in a $4.5 billion settlement related to the Deepwater Horizon explosion and oil spill, which killed 11 people and released an estimated 4.2 million barrels into the water four years ago. The company sued the U.S. Environmental Protection Agency over the suspension in August, arguing that the EPA’s action ignored “the overwhelming evidence and record of BP’s present responsibility as a government contractor” and that the timing of the suspension was both arbitrary and punitive.

Suspension is intended to protect the government from unscrupulous or risky contractors, not to punish companies for previous wrongs — so the suspension of BP two years after the spill seemed strange to some, even within the government’s suspension and debarment community.

That BP was suspended when it was convicted, rather than when it was indicted or when the EPA had enough evidence to make a reasonable business decision, could reinforce the perception among some members of Congress and public interest groups that suspension is a punitive measure, according to Jessica Tillipman, assistant dean of government contracts law at George Washington University law school. It could also validate contractors’ fears about political debarment, she said.

“If you Google BP and its suspension, the word ‘punishment’ is all over the Internet,” Tillipman said. “BP just seems to be a lightning rod for strong feelings in the industry and for a parade of the ill-informed.”

If BP had been suspended earlier, which would have been more consistent with the normal practice of suspension and debarment, both the contracting industry and BP’s most vocal critics would likely have been happier, Tillipman said. Public Citizen slammed the EPA’s decision to lift the suspension after 16 months as premature, saying it “lets a corporate felon and repeat offender off the hook for its crimes against people and the environment.”

“It made it seem like they went to jail for a day,” Tillipman said. “[Suspension and debarment are] a fundamentally misunderstood regime by the media, by many members of Congress and a lot of public interest groups, who see it as punishment.”

On the other hand, the BP suspension is a reminder that even large, important contractors can’t avoid suspension for egregious conduct, according to Charles Tiefer, a University of Baltimore law professor. Before the suspension, BP was the largest supplier of fuel to the U.S. Department of Defense, with about $2 billion in annual contracts, and the DOD, through the Defense Logistics Agency, not only cut off the opportunity for new contracts as required during the suspension, but it also canceled existing contracts for regular fuel purchases, Tiefer said.

“Looking at the suspension as a whole, it has been an impressive success in government agency coordinated effort,” Tiefer said. “The Defense Department, which here principally means the Defense Logistics Agency, deferred to EPA about the seriousness of BP’s problems, and BP was never able to manipulate its ‘customer’ in the Defense Department to free it from EPA’s tough but legitimate scrutiny.”

Tiefer said the suspension would have started earlier in an ideal world but said he didn’t think it lasted too long or was needlessly punitive. Not only was the government wary of compromising its ongoing criminal case against BP with potential litigation over a suspension, but the late date and length of the suspension also gave government regulators more time to ensure that BP’s reforms in the wake of the spill were more than just symbolic gestures, he said.

“I couldn’t disagree more with those who wanted BP to get away early from the suspension,” Tiefer said. “First of all, the harm in the Gulf from BP’s spill was on a scale that just had never been seen before from a government contractor. The government legitimately took time not just to create some mechanisms on paper for ethics monitoring but to see BP go beyond a willingness to talk the talk and actually demonstrate it would walk the walk.”

Jay Devecchio, a partner at Jenner & Block LLP, said that he couldn’t fault the EPA for taking the time to sort through the facts and reach the right decision.

“I would have been more concerned it the EPA had suspended BP immediately after the spill,” DeVecchio said. “That would have suggested more of a punitive or PR reaction rather than a measured consideration of the facts. One certainly wouldn’t want SDOs to suspend contractors — particularly large, multifaceted companies — based upon isolated mistakes, accidents or localized errors in judgment. If that were the standard, no one would be in government business.”

The timing of the EPA’s decision to lift the suspension also raised questions, since the administrative agreement that ended the suspension didn’t contain any particularly tough or unusual provisions and essentially mirrored the additional monitoring and auditing agreements that BP had included in its guilty plea.

With the new provisions in place, BP will be able to seek new leases in the Gulf of Mexico. The EPA has called the Deepwater Horizon incident the largest environmental disaster in U.S. history.

BP’s active litigation against its suspension may have influenced the timing — courts have shown themselves willing to closely examine suspension and debarment decisions as in a recent case involving Inchcape Shipping, which, like BP, involved “stale facts” by the time the suspension was eventually carried out by the Navy, Tillipman said.

While some in the legal community had hoped that the EPA lawsuit could set clearer guidelines for agencies’ ability to suspend companies long after the facts underpinning the suspension are laid out, the administrative agreement takes that possibility off the table and leaves some uncertainty about how much precedential weight the BP suspension will carry.

“I have a hard time understanding why a suspension was issued here given the timing (as opposed to a proposed debarment), but I don’t think there is broader meaning of this action beyond EPA,” said David Robbins, a former Air Force debarment attorney who now heads the government contracts group at Shulman Rogers Gandal Pordy & Ecker PA.

While Tiefer said that the length of the suspension sent a message that the EPA would not let companies get away with extreme environmental violations, Robbins cautioned that suspensions should follow the rules and not be used politically.

“I’m sorry to say I don’t agree that suspensions are tools to show tough enforcement,” Robbins said.

Because of the unusual nature of the case, it may be hard for contractors to draw many lessons from the lengthy and late suspension, unless the EPA is handling their case, according to Robbins.

“Contractors should be vigilant, especially when the EPA is their debarring agency, and do all they can to mitigate risk of debarments, from enhanced ethics and compliance programs to early and voluntary reporting and engagement with the government,” Robbins said. “Early disclosure and cooperation, in many cases, goes a long way.”

Published by Law360

March 24, 2014January 23, 2017 by dietrichknauth

5 Tips For Federal Contractors Facing New Hiring Rules

By Dietrich Knauth

Law360, New York (March 24, 2014, 9:13 PM EDT) — With new rules for contractors’ affirmative action responsibilities taking effect Monday, companies have a lot of work to do to ensure they meet the U.S. Department of Labor’s goals for hiring veterans and people with disabilities, and attorneys are preparing to get their clients in shape for DOL audits.

The DOL’s Office of Federal Contract Compliance Programs, which audits the nondiscrimination and affirmative action responsibilities of federal contractors, finalized two rules in August that aim to revamp the enforcement of affirmative action goals for veterans and people with disabilities. The game-changing rules require contractors to set hiring goals for veterans and disabled employees, invite job applicants to self-identify as veterans or disabled, compile additional data on hiring decisions, periodically survey their employees for disability status, and keep relevant records for three years.

Keeping up with the regulations, which took effect 180 days after their formal publication in the Federal Register, will likely require significant investments in human resources departments, such as hiring additional staff to conduct outreach efforts and updating online job applications and information technology systems to help capture the newly required hiring data, experts say.

“This is the first time that affirmative action programs for veterans and persons with disabilities have any statistical component,” said Valerie Hoffman, head of the affirmative action and OFCCP compliance practice at Seyfarth Shaw LLP. “This effort to collect data is a major undertaking because of the need to modify applicant tracking systems and human resources information systems. Systems changes don’t happen overnight, and most companies’ IT budgets are already strained — this is a significant undertaking by every contractor.”

Now that the rules are in effect, here are five tips to help employers manage their new responsibilities.

Update your subcontracts and equal employment materials immediately.

Some of the rules’ requirements won’t actually hit home until contractors update their annual affirmative action programs, which could start as late as Jan. 1, 2015, for the many companies that update their plans at the start of a calendar year. But while some companies will have additional time to revamp their hiring, outreach and applicant tracking systems, all contractors must immediately update language used in subcontracts and equal employment opportunity materials.

The rules require contractors to “flow down” the new affirmative action responsibilities to their subcontractors and suppliers who meet certain thresholds of business — $10,000 for the disability rule and $100,000 for the veterans rule. To comply with the rules, all new subcontracts and purchase orders must include a specific paragraph highlighting the veteran and disability hiring responsibilities in bold text.

“If you haven’t yet, inventory all of your internal and external communications that make reference to EEO and make sue that they’re compliant with these new regulations,” said Mickey Silberman, head of the affirmative action compliance and OFCCP practice at Jackson Lewis LLP. “Everywhere that an employer makes references to EEO or affirmative action compliance in internal or external communications, that needs to be reviewed, and in all likelihood, needs to be changed as of this March deadline.”

External communications and subcontracts are particularly important because they leave a paper trail that could get a company into trouble during future OFCCP audits if they don’t include the new references to hiring veterans and people with disabilities, Silberman said.

Companies’ equal opportunity tag lines will also need to be updated immediately. It’s no longer enough to merely state “this company is an equal opportunity employer” — the new rules require specific references to veterans and people with with disabilities, a change that will likely lead to more comprehensive listings in order to ward off misconceptions that only veterans and people with disabilities are protected.

“Now that you’re required to make specific references to veterans and the disabled, do you have to make references to other protected classes?” Silberman said. “Might that indicate, incorrectly, that you’re only extending those protections or that consideration to veterans and the disabled?”

Educate managers and employees about the new rules.

The rules require employers to ask applicants and employees to self-identify as veterans or disabled, and the disability question in particular could cause consternation for employees. The disability regulation requires companies to ask for disability status before a job offer, after a job offer, as well as a survey of employees within a year of the regulation’s start date and an additional employee survey every five years.

“It’s very important for employers to think about how these changed requirements might be perceived or misperceived by applicants and employees,” Silberman said. “Reasonably enough, an applicant or employee can perceive this as an employer being obsessed with their disability, asking them for the same information over and over again.”

Setting the right tone with employees is an important step towards ensuring employee participation in the self-surveys. Since the OFCCP will count the number of employees who self-identify as disabled against the entire company, rather than the portion who participated in surveys, low participation could make a company seem like it has a smaller percentage of employees with disability than it truly does.

“One of the most challenging aspects is for companies to administer this all-employee survey and the communications that are likely to preceed that,” said Alissa Horvitz, a shareholder with Littler Mendelsson. “If a company doesn’t spend a little bit of time explaining why this survey is being taken and why it is required, it’s not going to get a very high response rate.”

Companies should also train their managers to look out for ways to classify employees as disabled even if they don’t self-identify, such as listing employees who seek leave under the Family and Medical Leave Act for chronic conditions or employees who seek accommodation for a disability under the Americans with Disabilities Act, according to Connie Bertram, a partner in Proskauer’s employment group. Those kinds of decisions will be sensitive, and managers should be sure not to create the impression that they are discriminating against such employees, she said.

With the increased focus on employees with disabilities, managers should also be prepared for an uptick in employee requests for a reasonable accommodation of their disabilities, Hoffman said.

“Contractors should do some significant training, especially regarding ensuring that their managers know how to handle the interactive process for people who request a reasonable accommodation,” Hoffman said. “It’s essential that contractors be ready for that and ensure that managers can follow the law.”

Budget time and money for an HR overhaul.

For companies with annual affirmative action plans that won’t be updated for months, it is important to invest the time and money needed to get human resources information systems into shape.

“Some of the biggest that we’re seeing from our clients right now is the obligation to solicit and collect veterans and disability status from applicants and from current employees,” Springer said. “It is a big change to your applicant tracking system and your HRIS system to collect that information and put the necessary controls in place to ensure that that information remains confidential.”

Many contractors use third-party vendors and suppliers for their HR information systems, and those companies are already preparing solutions that will help contractors meet the OFCCP’s data requirements, Bertram said.

“That might ease the burden on some of the contractors,” Bertram said. “You can find some fairly efficient and cost effective vendors to handle applicant tracking, even if you’re a small contractor with limited resources.”

The specifics of the rule have created some kinks that are more expensive to iron out than initially predicted, Springer said. For example, the OFCCP requires a very specific form for employees to self-identify as disabled and requires that any electronic survey of employees use a form that looks exactly like the one provided by OFCCP and requires that employees check the boxed for disabled, not disabled, or no answer on the same place in the electronic form as it would be on a printed form — a requirement that isn’t quite so easy to drop into existing electronic systems, she said.

“It’s very difficult to recreate that form exactly and have that technology so that an applicant that can check the box that’s in that form,” Springer said. “In some ways, that’s a win of form over substance, unfortunately.”

Still, for all the concerns about the burden of the rules, companies with good lawyers should be able to navigate the new regulations without too much difficulty, Bertram said.

“I think there’s been a lot of unnecessary hysteria by some of the outside counsel and outside sources,” Bertram said. “I think for a company that’s already in compliance with existing requirements, this is not a Herculean task. It’s [achievable] as long as you take it step by step and work with experienced outside counsel.”

Get a head start on evaluating your recruitment sources.

While companies won’t be audited under the new rules until they revamp their annual affirmative action programs, they should start laying the groundwork for audits that focus more and more on the effectiveness of their outreach efforts. Based on OFCCP scrutiny and a simple desire to ensure that they aren’t throwing good money away, companies should examine their outreach and advertising efforts to see which ones actually net qualified job applicants.

“In the past employers typically considered success to be the ‘push out’ element of outreach, simply getting your jobs out there,” Silberman said. “What most employers have not thought of traditionally, and what OFCCP is compelling them to think about differently, is the ‘pull in’ aspect of outreach. You might have 20 recruitment sources, but if 10 of them don’t send you any applicants, those are not effective recruitment sources.”

The OFCCP focus on effectiveness could carry some short-term research and assessment costs but should help companies improve their affirmative action hiring in the long run, Silberman said.

“The silver lining that can come out of this requirement is that employers will have a better handle than ever before on their return on investment regarding their outreach and recruiting efforts,” Silberman said.

Keep in touch with OFCCP.

OFCCP, recognizing the game-changing nature of the new rules, has offered contractors help in complying with the regulations. It has posted a series of Frequently Asked Questions on its website to address common concerns about the rules and created a new directory of government and nonprofit groups that can serve as possible sources of referrals for veterans and disabled job applicants.

The OFCCP recently told contractors in an FAQ that their subcontracts and purchase orders can combine the new required text for the veteran and disability rules, reducing the chance that companies would waste time and paper printing separate clauses that contain duplicative language, for example.

“There’s quite a bit of vagueness in the regulations and how they’re being interpreted, so the OFCCP is using FAQs to address some of the questions that contractors have,” said Rebecca Springer, a counsel in Crowell & Moring LLP’s labor and employment group. “The downside is that it’s just an FAQ. It’s not written into the regulation, and the OFCCP could change those FAQs at any time.”

The OFCCP’s directory of possible recruitment sources, while helpful, should not be seen as the final word, Springer said. The information collected by OFCCP may be out of date or incomplete, and the agency will likely want to see more proactive efforts by contractors, she said.

Published by Law360

Dietrich Knauth

Writer and Reporter

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