Biden’s Buy American Policy & What it Means for Contractors

On January 25, 2021, President Biden signed an Executive Order (EO) “Ensuring the Future is Made in All America by All of America’s Workers”, which seeks to bolster U.S. manufacturing through the federal procurement process. Note that, just six day earlier, on January 18, the Federal Acquisition Regulation (FAR) Counsel issued a final rule implementing former President Trump’s July 2019 EO, titled “Maximizing Use of American-Made Goods, Products, and Materials” (EO No. 13881) on the then-current Buy American standards. For context, Trump’s proposed revisions – adopted and implemented by the FAR Council earlier this year – imposed three (3) significant changes worth noting: (1) increasing the percentage of domestic content (other than iron or steel) from 50% to 55% that an end product must contain in order to qualify as a “domestic end product”; (2) implementing an even higher increase in the domestic content requirement for iron and steel products to at least 95% U.S. “predominately” iron or steel product; and (3) increasing the price evaluation preference for domestic offerors from 6% to 20% (for other than small business) and 30% (for small businesses). The FAR’s rule became effective January 21, 2021, and applies to solicitations issued on or after February 22, 2021, and resulting contracts let. Biden’s EO rescinds Trump’s EO No. 13881 “to the extent inconsistent with [Biden’s] EO.” However, when dissected, it is clear Biden’s Buy American plan does little to modify thresholds inconsistent with the Trump Administration; rather, the White House’s latest EO implements changes in the form of BA administration. Nonetheless, Biden’s EO does expressly note that it supersedes and replaces Trump’s EO on the same issues.

Notably, Biden’s EO creates a Made in America Office (MAO) under the Office of Management and Budget (OMB)1 for the purpose of overseeing domestic preference laws and waivers by federal agencies. The EO, further, directs the FAR Council to consider replacing the component test requirements currently found at FAR Part 25 to ensure that domestic end products contact the requisite domestic content required. Biden’s EO goes on to request that the FAR Council (1) “increase the numerical threshold for domestic content requirements for end products and construction materials” and “increase the price preference for domestic end products and construction materials.” The Biden Administration’s EO, however, does not specify numbers for domestic content requirements or price preferences (i.e. greater than 55% domestic content or more than a 30% price preference for small businesses). It is unclear if – or by how much – these percentages will increase from those adopted by the FAR Council’s latest rule per the Trump administration’s July 2019 EO on these very issues. Biden’s EO also increases transparency in the exemption and waiver process, requiring waivers and their respective justification be available for public view via MAO’s website.

For now, it is clear our new Administration has done little to substantively change Buy American laws, as the EO focuses on waiver oversight, enforcement, and transparency. Government contractors and suppliers should closely monitor formally-approved changes to ensure compliance As the FAR Council may opt to revisit its recently adopted regulations and/or “consider” replacing the component test itself, affected contractors should keep abreast of any component test related revisions.

1 In comparison, the Trump EO “directed each agency to go back and look at their own processes and strengthen them where necessary.”

Identifying “High-Risk” Workers During the Pandemic is Crucial to Continue Essential Construction Business in Washington State

On April 13, 2020, Governor Inslee issued Proclamation 20-46, specifically addressing protections for high-risk employees and worker’s rights1. This Order applies to ongoing construction work deemed essential under the Stay Home, Stay Healthy Proclamation, and includes yet another requirement for employers managing construction companies to be aware of in this ever-changing environment.

High-risk employees are not just found in office jobs, but also in the construction business, as many conditions that are considered “high-risk” in terms of COVID-19, would not preclude individuals from working on construction sites. “High-risk” conditions protected by this Order can be broken down into three main categories affecting employees, they are: (1) employees 65 and older; (2) employees with chronic medical conditions and (3) employees that are immuno-compromised.2 Individuals of any age may have chronic medical conditions, which are allotted special protection during this pandemic. Chronic medical conditions include asthma, chronic lung disease, heart disease, diabetes, severe obesity, high blood pressure (even if controlled by medication), liver disease, kidney disease, COPD and or other conditions identified by the Center for Disease Control as putting someone at higher risk of severe illness from COVID-19. Immuno-compromised individuals may include conditions that are short-term or long-term in nature and may affect people of any age. They include pneumonia, cancer, HIV, auto-immune diseases such as lupus, multiple sclerosis and rheumatoid arthritis, as well as individuals that smoke or are on medication which weakens their immune system, such as corticosteroids.

The Order requires employers to seek out alternative work arrangements, including telework, remote work locations, reassignment and social distancing measures to provide high-risk employees a safer option to their customary in-person jobs. Alternative work arrangements can be difficult, if not impossible on the construction site, therefore, if it is not feasible, the employer must give employees the decision to use accrued leave or unemployment insurance while they remain out of work, while continuing to maintain employees’ health insurance benefits. To ensure that essential construction continues, employers may hire temporary workers to fill jobs of employees that cannot work due to high-risk conditions. However, employers must ensure employees their roles are available when it is safe for them to return to work, without retaliation.

Most importantly, Governor Inslee’s Order supersedes all employee and labor union contracts that would obstruct the protections set forth in Proclamation 20-46. This proclamation is in effect until June 12, 2020 and may extend beyond that date by order of the Governor. Any person found in willful violation of the Order, may be guilty of a gross misdemeanor, punishable by one year in jail and/or $5,000 fine3. If you don’t have that kind of money, consider getting arrest bail bonds from a reliable bail bond agent or bail bonds crow. Given the serious nature of this Order and since these conditions affect people of any age and may not be obvious to employers, it is imperative that construction companies ensure that their workers understand their rights under this Proclamation and follow the guidelines as set forth in the Order.

Visit our COVID-19 Hub for ongoing updates.

1 Proclamation by the Governor Amending Proclamation 20-05: 20-46 High-Risk Employees – Workers’ Rights
2 Center for Disease Control and Prevention: Coronavirus Disease 2019 “People Who Are at Higher Risk for Severe Illness”
3 RCW 43.06.220(5)

Idaho’s Stay Home Order Extended: What this Means for Construction

On March 25, Governor Little issued an Order to Self-Isolate for the State of Idaho.1 On Wednesday, April 15, Governor Little extended Idaho’s stay-at-home order through April 30. The Order directs all individuals living within the State of Idaho to self-isolate at their place of residence. Individuals may only leave their place of residence for “Essential Activities”, “Essential Government Functions”, or to operate “Essential Businesses”.2 Relevant, particularly, to contractors is the following:

  • Idaho’s Order permits individuals to leave their residence to provide any services or perform any work necessary to the operation and maintenance of “Essential Infrastructure”, including, but not limited to, according to a lanarkshire specialist public works construction, commercial construction, construction of housing (particularly [but not limited to] affordable housing or housing for individuals experiencing homelessness), water, sewer, gas, electrical, oil, refining, mining, roads and highways, provided that Social Distancing Requirements3 as further defined by the Order are followed to the extent possible .
  • The Order goes on to expressly provide that “Essential Businesses” is defined to include “Essential Infrastructure,” i.e. construction activities.4
  • Further, incorporated into Idaho’s Order is the Cybersecurity and Infrastructure Security Agency of the United States Homeland Security’s March 19 Memorandum on Identification of Essential Critical Infrastructure Workers relative to the Country’s COVID-19 response. The memorandum provides that workers, such as plumbers, electricians, exterminators, builders, contractors, HVAC technicians, landscapers, and other service providers necessary to maintain the safety, sanitation and essential operation of residences, businesses, and buildings such as hospitals, senior living facilities, and any temporary construction required to support the COVID-19 response are defined as “Essential” Workers.5

The federal guidance comes with the caveat that construction-related activities may continue to the extent they are related to our Nation’s fight against the COVID-19 pandemic. Idaho’s Order is much broader. In Idaho, it is clear that construction services and work is deemed “Essential” and may continue, including public works and both commercial and residential construction. The Order expressly provides that “[a]ll Essential Businesses are strongly encouraged to remain open.”6

Failure to comply with Governor Little’s Order through the end of April exposes you to a misdemeanor, punishable by fine, imprisonment or both.7

Note that, under the extended directive, out-of-state people visiting Idaho for non-essential travel will need to self-quarantine for 14 days. “We don’t need people coming here from a place with a high community spread,” Governor Little said.

In summary, the following guidance is offered:

  • In-state and out-of-state contractors should clearly identify their essential activity-related purpose to any law enforcement officer when not self-isolating in their residence. For example, if you are driving to a job site for work, make sure to identify this purpose to law enforcement if questioned.
  • Social Distancing should be practiced to the extent possible. Again, this may be easier to do for, say, a landscape sub on a small residential project. This may be more difficult for other trades that normally work in closer proximity. General contractors should manage their schedule and subs to practice Social Distancing to the fullest extent possible.
  • Minimize on-site project staffing to the extent possible.
  • Enable employees to practice additional sanitation efforts, including self-care and the project environment (i.e. provide hand-washing stations, hand sanitizer, wipe down project surfaces, including small handheld tools and equipment).
  • Provide masks and gloves to employees (i.e. Personal Protection Equipment or “PPE”).
  • Do not share water or other PPE.

The construction attorneys at Gordon & Rees are here to help you navigate this unprecedented time. Let us assist you take the necessary steps to protect yourself now, including a review of your contracts and applicable law. COVID-19 is effecting the supply chain, workforce, and other project delays and impacts across the construction industry. Contact our office to understand your rights and potential remedies for the impacts you are encountering on the job site.

Visit our COVID-19 Hub for ongoing updates.

1 Idaho Department of Health and Welfare Order of the Director, Order to Self-Isolate, dated March 25, 2020 (the “Order”).
2 As defined by Section 8 of the Order.
3 See Order, at Paragraph 8(j) (defining “Social Distancing Requirements” as “maintaining at least six-foot social distancing from other individuals, washing hands with soap and water for at least twenty (20) seconds as frequently as possible or using hand sanitizer, covering coughs and sneezes (into the sleeve or elbow, not hands), regularly cleaning high-touch surfaces, and not shaking hands.”).
4 See Order, at Paragraph 8(f)(i).
5 Memorandum on Identification of Essential Critical Infrastructure Workers During Covid-19 Response issued by the Cybersecurity and Infrastructure Agency of the United States Homeland Security, dated March 19, 2020.
6 See Order, at Paragraph 5.
7 See Order (citing Idaho Code § 56-1003(7)(c) (“[A]ny person who violates an order of isolation or quarantine shall be guilty of a misdemeanor.”).

Ninth Circuit Rules Supreme Court’s Two-Part Test of Implied Certification under the False Claims Act Mandatory

For those contractors in the government arena, read on.

The False Claims Act (“FCA”) was enacted to deter knowingly fraudulent actions by contractors which resulted in a loss of property to the Government. Intent to defraud with resulting financial hardship was required. Contrary to popular misconception, the statute was not designed to punish all false submissions to the Government simply because those submissions, or claims, are later found to be false. The statute’s inclusion of the requisite element of knowledge is consistent with this notion:

(1) A defendant must submit a claim for payment to the Government;

(2) the claim must be false or fraudulent;

(3) the defendant must have known the claim was fraudulent when it was submitted (also known as scienter); and

(4) the claim must have caused the Government to pay out money.

See 31 U.S.C. § 3729(a).

Despite these explicit elements (in addition to common law elements of fraud), over the last two decades, contractors have seen ever-expanding theories of FCA recovery presented by qui tam plaintiffs and the Government. For example, under the FCA, the false “claim” evolved over time: the claim no longer needs to be an express false claim (i.e. the truthfulness of the claim is a direct condition of payment); the claim can be “implied” misrepresentation or “half-truth”.

The United States Supreme Court in its paramount 2016 Escobar decision dealt squarely with the issue and interpretation of “implied” false certifications. The High Court, in pertinent part, ruled that implied certification is a viable theory of FCA liability at least where two conditions are met: (1) first, the claim does not merely request payment, but also makes specific representations about the goods or services provided, and (2) second, the defendant’s failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations “misleading half-truths.” Escobar went on to provide an exact test for the FCA’s materiality requirement, clarifying that, even when a provision is labeled an express “condition of payment”, not every violation of that requirement will give rise to liability. Instead, materiality looks to the effect on the likely or actual recipient of the alleged misrepresentation; i.e. the Government. Put another way, the Government’s designation of compliance with a particular statutory, regulatory, or contractual requirement is not dispositive on the issue of materiality.

On August 27, 2018, the U.S. Court of Appeals for the Ninth Circuit, in U.S. ex rel. Scott Rose, et al., v. Stephens Institute, No. 17-15111 (9th Cir. August 24, 2018), affirmed both express and implied certification theories under the FCA, finding that falsity can be had by (1) an express certification; i.e. where the contractor seeking payment falsely certifies compliance with a law, rule, or regulation as part of the process for which its claim for payment is made/submitted, or (2) an implied false certification; i.e. the contractor has previously undertaken to expressly comply with a law, rule, or regulation (but does not do so as to the instant claim), and that obligation is implicated by submitting a claim for payment even though a certification of compliance is not required as part of the process in submitting the claim in question.

With respect to the later, the Ninth Circuit mandated Escobar’s two-part test for implied certification, but only where the two conditions enumerated in Escobar are satisfied: again, (1) the claim makes specific representations about the goods or services provided, and (2) the defendant’s failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations “misleading half-truths.”1

The take away: the Ninth Circuit’s latest opinion is generally helpful for some defendant contractors: in cases where the now-mandatory two-part test is not met, absent appeal, the defendant may be absolved of FCA liability. That being said, government contractors and others participating in federally-funded programs must be prepared to defend against FCA suits based on an implied certification theory, which still very must exists.

The opinion in U.S. ex rel. Scott Rose, et al. v. Stephens Institute was issued by a three-judge panel. The Ninth Circuit left open the possibility that the issue may be revisited en banc.

1 Although beyond the scope of this article, “misleading half-truths” are often found when the withholding of certain data by the defendant from the Government caused, or was material to, the Government’s decision to purchase the goods or services; i.e. the data was a condition of payment even if not designated an express condition of payment. For example, when the defendants had knowledge that the degradation of bullet-proof vests which they sold to the Government contradicted the defendants’ misrepresentations about the superiority of those vests. Note, the inquiry is highly factual and must be analyzed on a case-by-case basis.