I hope you are having a wonderful holiday season thus far and I wish you all a Happy and prosperous New Year!
The Comment of the Week will return on January 4, 2013! As we close the year and move into 2013, the Coalition is set to kick the New Year off with its first forum on Jan. 9th, Planning for GSA Expo 2013. The event will feature a dialogue with Tamela “Tami” Riggs, Assistant Commissioner, Office of Customer Accounts and Research for GSA’s Federal Acquisition Service on what’s new for Expo 2013. Please be sure to view the details for this event and our calendar with additional upcoming events below.
Don’t Miss the GSA Expo Forum Jan 9!
GSA Expo is the signature annual training and marketing event of the General Services Administration. It is the place where industry meets the marketplace to display the incredible array of commercial services and products available through the GSA Schedule program.
Do you want to know GSA’s vision for Expo in May 2013? Should you expect changes in attendees, the theme, or overall logistics of the conference? Join us in a dialogue with Tamela “Tami” Riggs, Assistant Commissioner, Office of Customer Accounts and Research for the Federal Acquisition Service to find out what’s new for Expo 2013. This is a fantastic opportunity to engage in a myth-busting dialogue directly with GSA to ensure that your company has the most cost-effective and engaging plan to market your Schedule services and products.
GSA will begin booth sales in mid-January. At this forum, Tamela “Tami” Riggs and the GSA Expo team will share their plans and answer questions to help you develop your marketing strategies for Expo. Our Myth-Buster Planning Forum is just in time to position your company to get the most out of this year’s GSA Expo.
All GSA Schedule contractors should plan to attend this forum on January 9th at 8:00am at the Crystal Gateway Marriott. We look forward to seeing you there!
To Register, Click Here!
Budget Sequestration, the WARN Act and Compliance Costs—Implications for Contractors
Jim Schweiter, Partner, McKenna Long & Aldridge LLP
Last August, Congress passed the Budget Control Act of 2011 (Pub. L. 112-25). This law authorized raising the debt ceiling, established caps on discretionary spending, and put in place a process known as sequestration to implement a total of $1.2 trillion in automatic spending cuts through fiscal year 2021, unless Congress passes a bill which the president signs to avert such a result. Sequestration is a process of automatic, largely across-the-board spending reductions under which budgetary resources are permanently canceled in order to achieve compulsory deficit reduction.
Much has been written about the draconian effects sequestration will have on the programs, projects and activities of executive branch agencies. Senior executive branch officials, members of Congress and industry leaders all predict catastrophe if sequestration is implemented. In the case of government contractors, the decline in new government work caused by funding reductions, or the truncation of existing government work through contract terminations, changes, or other mechanisms, may cause employers to consider terminating or laying off employees. As a result, it is important for employers to understand their rights and obligations under the Worker Adjustment and Retraining Notification (WARN) Act.
Notification Requirements under the WARN Act
The primary purpose of the WARN Act is to require certain employers to provide at least 60 days advance notice to employees who are impacted by a “plant closing” or “mass layoff.” Each of these terms has a lengthy statutory and regulatory definition but, in brief, a “plant closing” refers to a shutdown of a site of employment resulting in an employment loss for at least 50 employees, while a “mass layoff” means a reduction in force at a single site of employment impacting at least (1) 50 employees and 33 percent of the active employees at that site, or (2) 500 employees.
As a general rule, whenever an employer foresees that 50 or more employees could lose employment at a site of employment within a 90-day period, that employer should carefully analyze whether the definition of a “plant closing” or “mass layoff” may have been met, and thus whether WARN notice requirements have been triggered. If the WARN notice requirements are triggered, the employer must provide written notice of the anticipated employment loss to (1) the affected employees (or to their representative if unionized), (2) a designated state official, and (3) the chief elected official of the unit of local government within which the layoff or plant closing will occur. If the employer provides less than 60 days’ notice before the employment action, it may be subject to paying wages and benefits to the affected employees for the portion of the 60-day period in which notice was not given, in addition to other potential penalties.
The WARN Act recognizes that plant closings and mass layoffs cannot always be anticipated months in advance, and certain exceptions to the 60-day notice requirement exist. The “unforeseeable business circumstances” exception is the relevant exception that would be associated with layoffs or plant closings resulting from the January 2, 2013 onset of sequestration. This exception encompasses a “sudden, dramatic, and unexpected action or condition outside the employer’s control.” The Labor Department’s interpretive guidance noted that although budget sequestration can be seen months in advance, the actual impact on a particular contractor may be unknown until much later. Therefore, an abrupt termination of a particular contract might qualify under the “unforeseeable business circumstances” exception. If contractors must lay off or separate their employees in less than 60 days, such announcements would be sudden and dramatic and therefore consistent with the WARN Act. According to the Labor Department, in such cases employers would not have to provide the full 60-day notice.
Contractor Costs and the WARN Act
The Office of Management and Budget (OMB) just issued new guidance that certain liability and litigation costs associated with WARN Act compliance will be allowable costs under government contracts. Under the OMB memorandum, if sequestration occurs and an agency terminates or modifies a contract which causes the contractor to order a plant closing or layoffs subject to the WARN Act’s notification requirements, and that contractor has followed the Labor Department’s guidance, then any resulting court-determined, WARN Act-based employee compensation costs, attorneys fees and other litigation costs would qualify as allowable costs which would be reimbursable by the contracting agency, regardless of the litigation outcome. Such costs would also have to be both allocable to the contract in question and reasonable in accordance with existing FAR principles.
This new OMB memorandum has prompted several large defense contractors to announce that they will not issue WARN Act notices before January 2, 2013. However, the guidance has exacerbated partisan tensions. Senators Charles Grassley (R-IA) and Kelly Ayotte (R-NH) announced jointly that they had sent a letter of inquiry “asking under what authority the administration is using to say it is okay to disregard the law,” and then promise contractors “a taxpayer funded bailout for their legal expenses if they do so.”
Regardless of the seemingly inevitable partisanship that accompanies the run up to a presidential election, there are several points about the most recent OMB memorandum for contractors to bear in mind. First, the implementation of sequestration alone does not portend layoffs or plant closings triggering WARN Act notice requirements. There must be some adverse contract action flowing from sequestration’s funding reductions which affects an employer. In addition, the OMB guidance clearly contemplates a court determination of both employee compensation costs, as well as attorneys fees and other litigation costs. However, employers may incur substantial costs associated with the publication and dissemination of WARN Act notices or employee negotiations and settlements not resulting in litigation. Under the OMB guidance, these costs would not seem to be allowable. Contractors who anticipate potential WARN Act liability should seek guidance from contracting officers about the extent to which their WARN Act-related costs will be allowable. Awareness of the OMB memorandum by DCAA and DCMA personnel will almost certainly also take time, and ignorance of the OMB guidance could complicate audits. Finally, before allowable costs may be reimbursed, the Government must have funds available to do so. If sequestration occurs, agencies may not have sufficient funding to reimburse WARN Act-related costs. Even if litigation resulted from a WARN Act dispute, the Judgment Fund would not be available for such purposes because the litigation would not involve the United States.
Prudent employers should prepare for various scenarios and have contingency plans in place to provide appropriate notice as soon as it becomes clear that a particular contract action will cause a WARN-triggering employment loss. Some companies are considering “provisional notices,” which communicate to all employees that federal budgetary issues could result in an employment loss. However, because they do not indicate which specific employees will be impacted and the specific date on which the employment loss will occur, such provisional notices may be “better than nothing” (and may show the employer’s good faith efforts to try to comply with WARN) but are still unlikely to fully satisfy the requirements of WARN. Finally, employers should be aware that several states have their own plant closing laws (sometimes referred to as “mini-WARN” statutes), and some of these laws have more stringent requirements that the federal law. Employers should thus analyze relevant state laws in states in which a significant employment loss may occur.
 Pub. L. 100-379, codified at 29 USC 2101 et. seq.
 20 C.F.R. 639.9(b)(1); see also, 29 USC 2102(b)(2).
 Department of Labor, Training and Employment Guidance Letter No. 3-12, July 30, 2012.
 Office of Management and Budget, Guidance on Allowable Contracting Costs Associated with the Worker Adjustment and Retraining Notification (WARN) Act, Memorandum for the Chief Financial Officers and Senior Procurement Executives of Executive Departments and Agencies, Sept. 28, 2012.
 Sara Sorcher, White House Moves to Head Off Sequester Layoffs, National Journal, Sept. 29, 2012, at http://www.nationaljournal.com/nationalsecurity/white-house-moves-to-head-off-sequester-layoffs-20120928.
 Senators John McCain, R-Ariz., and Lindsey Graham, R-S.C., called the guidance “politically motivated” and said they’d block any contractor payments by the Pentagon to cover failure of issuing WARN Act notices. Joyce Tsai, Partisan Debate Deepens over Layoff Notices Before Sequestration, Stars and Stripes, Oct. 5, 2012, at http://www.stripes.com/partisan-debate-deepens-over-layoff-notices-before-sequestration-1.192039.
 Letter from Senators Charles Grassley and Kelly Ayotte to Jeffrey Zients, Acting Director, Office of Management and Budget, (Oct. 1, 2012), at http://www.grassley.senate.gov/about/upload/100220121.pdf.
 31 USC 1304.
Proposed Rewrite of GSAR Withdrawn
The General Services Administration has agreed to withdraw a rewrite of GSAR section 538, which provides requirements for federal supply schedule (FSS) contracting actions. The proposed rule sates that due to the variety of issues addressed in the GSAR Part 538 Rewrite, and strong stakeholder interest, the General Services Administration believes that an agency review of the current implementation plan for this GSAR case is appropriate. For more details, members should link to the proposed rule above.
GSA: Addressing the IFF, Proposed Rule
Today, the General Services Administration (GSA) released a proposed rule to amend the General Services Administration Acquisition Regulation (GSAR) to revise the GSAR clause and to address the use of the Industrial Funding Fee (IFF) under the Multiple Award Schedules (MAS) Program. The proposed revisions will reflect the current use of the IFF to include the ability to offset losses in other Federal Acquisition Service (FAS) programs and fund initiatives that benefit other FAS programs. According to the notice, this change will benefit GSA and the MAS Program by facilitating transparency and open government, and more accurately define the current MAS Program operations while simultaneously complying with the recommendations of the GSA Office of Inspector General (OIG). For more information members should see the link above to the rule. Note that comments should be submitted on or before February 26, 2013.
Jan. 23 webinar – Trade Agreements Act
Mark your calendars for our first webinar of 2013! Join the Coalition and McKenna Long & Aldridge LLP for a one hour lunchtime webinar on Foreign Acquisition and the Trade Agreements Act. Register here! If you would like more information, please contact Athena Oliff at email@example.com or 202-315-1052.