OMB Guidance to Federal Contractors for Performance Issues Associated with COVID-19

On March 20, 2020, the Office of Management and Budget (“OMB”) issued guidance to federal government contractors (“contractors”) for dealing with a myriad of performance issues associated with COVID-19 (“OMB’s Guidance”).

OMB Urges Agencies to Maximize Telework

OMB acknowledged that many contractors ordinarily work side-by-side with the Federal workforce but now be unable to access their Federal work sites as a result of building closures, quarantines or implementation of social distancing practices. OMB urged agencies to “work with the contractors, if they haven’t already to evaluate and maximize telework for contractor employees, wherever possible.” OMB’s Guidance specifically stated, “This includes modifying contracts that do not currently allow for telework.”

OMB Tells Agencies to Provide Extensions to Performance Dates

OMB told agencies to provide extensions to performance dates if telework or other flexible work solutions such as virtual work environments, are not possible, or if a contractor is unable to perform in a timely manner due to quarantining, social distancing or other COVID-19 related interruptions. According to OMB’s Guidance, “Government contracts provide for excusable delays, which may extend to quarantine restrictions due to exposure to COVID-19.” OMB mentioned one specific example of extending a deadline: Current registrants in the U.S. General Services Administration’s System for Award Management with active registrations expiring before May 17, 2020 will be afforded a one-time extension of 60 days.

OMB Requires Agencies to Consider REAs on a Case-by-Case Basis

OMB requires that agencies review requests for equitable adjustments (“REAs”) on a case-by-case basis in accordance with existing agency practices, taking into account, among other factors, whether the requested costs would be allowable and reasonable to protect the health and safety of contract employees as part of the performance of the contract. The standard for what is “reasonable,” according to FAR § 31.201-3, is what a prudent person would do under the circumstances prevailing at the time the decision was made to incur the cost (e.g., did the contractor take actions consistent with Centers for Disease Control and Prevention (“CDC”) guidance; did the contractor reach out to the contracting officer or the contracting officer representative to discuss appropriate actions prior to taking such actions, etc.).

OMB Requests That Agencies Consider Retooling Contracts

OMB told agencies to take into consideration whether it is beneficial to keep skilled professionals or key personnel in a “mobile ready state for activities the agency deems critical to national security or other high priorities” (e.g. , national security professionals, skilled scientists).  OBM recommended that agencies consider whether contracts that possess capabilities for addressing impending requirements such as security, logistics, or other function, may be retooled for pandemic response consistent with the scope of the contract.

OMB Encourages Agencies to Leverage Special Emergency Procurement Authority under the Stafford Act

OMB encouraged agencies to leverage the special emergency procurement authorities authorized in connection with the President’s emergency declaration under the Stafford Act. These flexibilities include increases to the micro-purchase threshold, the simplified acquisition threshold, and the threshold for using simplified procedures for certain commercial items, all of which are designed to reduce friction for contractors, especially small businesses, and the government and enable more rapid response to the many pressing demands agencies face. Specifically, (1) The micro-purchase threshold is raised from $10,0001 to $20,000 for domestic purchases and to $30,000 for purchases outside the U.S.; (2) The simplified acquisition threshold is raised from $250,0002 to $750,000 for domestic purchases and $1.5 million for purchases outside the U.S.; and (3) Agencies may use simplified acquisition procedures up to $13 million for purchases of commercial item buys.  OMB explained that the availability of these flexibilities does not mean they will always be suitable, and agencies should exercise sound fiscal prudence to maximize value for each taxpayer dollar spent. OMB desires that the acquisition workforce feel fully empowered to use the acquisition flexibilities, as needed, consistent with good business judgment in response to this national emergency.