DOJ Issues FCPA Investigations and Enforcement Guidelines
On February 10, 2025, President Donald J. Trump signed Executive Order 14209, titled “Pausing Foreign Corrupt Practices Act Enforcement to Further American Economic and National Security.” That order marked a major shift in the federal government’s approach to Foreign Corrupt Practices Act (FCPA) enforcement, pausing most new FCPA actions for 180 days and directing the Department of Justice (DOJ) to align enforcement priorities with broader national interests, including economic competitiveness, foreign policy prerogatives, and the dismantling of transnational criminal organizations.
Key Objectives of Executive Order 14209
The order seeks to prevent what it characterizes as the overreach of FCPA enforcement and reduce unnecessary burdens on American companies engaged in overseas business. Specifically, it directs the DOJ to:
Cease all new FCPA investigations or enforcement actions, unless an exception is granted by the attorney general.
Review all existing FCPA cases to determine whether they align with the revised enforcement priorities.
Issue updated enforcement guidelines that prioritize cases implicating national security, economic harm to U.S. interests, and serious criminal misconduct.
The administration’s position is that misuse of the FCPA may unfairly penalize American businesses for customary commercial practices abroad and inadvertently harm U.S. strategic interests.
New DOJ Guidelines for FCPA Investigations
In response to the order, the DOJ has released a memorandum setting forth new prosecutorial guidelines, with a clear emphasis on three overarching principles:
Targeting Criminal Misconduct by Individuals – Enforcement efforts should focus on individuals engaged in clear, corrupt behavior – not on diffuse or vaguely attributed corporate liability.
Considering Collateral Consequences Early – DOJ attorneys must consider the broader economic and operational impacts of an investigation on a U.S. business, including the potential harm to employees and lawful operations, throughout the lifecycle of a case –not only at resolution.
Streamlining Investigations – FCPA inquiries are expected to proceed expeditiously, avoiding drawn-out reviews that could unnecessarily burden U.S. companies.
Importantly, authorization for any new investigation must now come from the assistant attorney general for the Criminal Division or higher, a significant procedural gatekeeping measure.
Substantive Priorities for FCPA Enforcement
The DOJ’s new criteria for evaluating whether to pursue an FCPA investigation or prosecution are broken down into four key focus areas:
1. Targeting Cartels and Transnational Criminal Organizations (TCOs)
The administration has linked corruption enforcement to its broader strategy of dismantling international cartels and TCOs, now designated in many cases as foreign terrorist organizations. According to the DOJ, FCPA resources should prioritize cases involving:
Bribery that facilitates the operations of cartels or TCOs;
Shell companies or financial vehicles tied to money laundering for these organizations; and
Public officials corrupted by these groups to further criminal enterprise.
This pivot frames corruption as a facilitator of organized crime and national security threats.
2. Safeguarding Fair Competition for U.S. Companies
The DOJ will now give heightened attention to FCPA violations that have caused identifiable harm to U.S. businesses, including the loss of contracts or market access due to corrupt foreign competitors. This approach aims to rebalance enforcement to protect U.S. economic interests rather than penalize routine interactions in countries with different legal or cultural standards.
3. Advancing U.S. National Security Objectives
FCPA cases that implicate U.S. national security – especially those involving bribery in connection with critical infrastructure, defense, intelligence, or strategic resources – will receive top priority. Misconduct that compromises American access to vital resources or technologies will be treated as a serious threat.
4. Avoiding Enforcement Against Routine Business Practices
Citing statutory exceptions under the FCPA for facilitating payments and local lawful conduct (15 U.S.C. § 78dd-1(b), (c)), the DOJ is instructed to deprioritize minor or de minimis violations, especially where foreign law explicitly permits the conduct or where the value involved is low. Focus should instead remain on serious violations involving:
Substantial or repeated bribes;
Sophisticated concealment schemes; and
Fraud and obstruction of justice.
Ongoing Review and Next Steps
The executive order requires the DOJ to complete its review of all ongoing FCPA matters by August 2025. In evaluating current enforcement actions, the department will consider both prosecutorial discretion and whether continuing such cases aligns with the new priorities.
Notably, this policy is non-binding on the public and does not create enforceable rights. It is a guidance document for federal prosecutors, reflecting the administration’s evolving approach to international anti-corruption enforcement.
What This Means for Government Contractors and Multinational Companies
For U.S. businesses – particularly government contractors and multinational enterprises – the current pause in FCPA enforcement presents a strategic opportunity to:
Reevaluate internal compliance programs to ensure alignment with the DOJ’s new priorities;
Identify any ongoing investigations and assess whether they fall within the deprioritized categories; and
Use the 180-day review window to proactively engage with DOJ officials, if appropriate, regarding the status of existing matters.
Companies operating in high-risk regions or industries should remain vigilant. While enforcement may slow or shift in focus, conduct that implicates national security, economic harm to U.S. businesses, or criminal links to TCOs will remain a serious liability.
Conclusion
Executive Order 14209 signals a significant recalibration of U.S. anti-corruption policy. While some view this pause as a necessary check on regulatory overreach, others warn it may weaken global anti-bribery standards. Regardless, for the next several months, FCPA enforcement will be filtered through a new lens – one that prioritizes national security, economic competitiveness, and prosecutorial discretion over strict liability.
Companies with cross-border operations should remain engaged and informed as this new enforcement landscape takes shape.
SBA OHA: Compliance with Limitations on Subcontracting Can Rebut Ostensible Subcontractor Affiliation
On May 2, 2025, the U.S. Small Business Administration (SBA) Office of Hearings and Appeals (OHA) issued a significant decision in Size Appeal of Bowhead Enterprise, Science, and Technology, LLC, SBA No. SIZ-6352. The decision reinforces a critical defense against ostensible subcontractor affiliation allegations: demonstrating compliance with the SBA’s limitation on subcontracting requirements.
Background of the Appeal
The case arose from a size protest filed by Bowhead Enterprise, Science, and Technology, LLC challenging the eligibility of a competitor for a small business set-aside contract awarded by the U.S. Army. The protest alleged that the competitor was affiliated with its subcontractor under the “ostensible subcontractor” rule and thus exceeded the applicable size standard.
Specifically, the protestor argued that the competitor’s subcontractor would be performing the primary and vital requirements of the contract and that the competitor was unusually reliant on the subcontractor, a larger business entity.
The SBA Area Office denied the protest, finding that the competitor was not unusually reliant on its subcontractor and had demonstrated that it would independently perform the primary and vital portions of the contract.
Bowhead appealed the decision to OHA.
OHA’s Analysis
OHA affirmed the SBA Area Office’s decision, holding that the SBA Area Office gave appropriate weight to the competitor’s demonstrated compliance with the limitation on subcontracting requirements under 13 C.F.R. § 125.6.
OHA explained that compliance with the limitation on subcontracting is highly probative of whether the prime contractor is performing the primary and vital contract requirements. Specifically, the record showed that:
The competitor would self-perform well over 50% of the contract value, as required by 13 C.F.R. § 125.6(a)(1);
The competitor would employ the majority of the personnel performing the contract;
The competitor — not the subcontractor — would be responsible for contract management, reporting, and interface with the government; and
The competitor would perform the majority of the substantive work, particularly in the core areas of the contract’s performance work statement (PWS).
Notably, OHA went on to state:
[T]he standard is now that of a brightline rule, where in respect to a services, specialty trade construction, or supply contract: “SBA will find that a small business prime contractor is performing the primary and vital requirements of the contract or order, and is not unduly reliant on one or more subcontractors that are not small businesses, where the prime contractor can demonstrate that it, together with any subcontractors that qualify as small businesses, will meet the limitations on subcontracting provisions set forth in § 125.6 of this chapter.” 13 C.F.R. § 121.103(h)(3)(iii), (emphasis supplied). SBA itself also noted during the issuance of the rule that it “believe[d] that meeting the applicable limitation on subcontracting requirement is sufficient to overcome any claim of the existence of an ostensible subcontractor.” 88 Fed. Reg. 26,164, 26,166 (Apr. 27, 2023), (emphasis supplied).
When the subject procurement is viewed in the aggregate — between the engineering, the program managements, and all other requirements — DNI is performing a majority of the total work required by the contract. The specific methods and mechanisms through which a proposal seeks to comply with the pertinent regulations are irrelevant so long as they are being complied with. After comprehensive review — especially in light of the recent revisions — the record strongly indicates that DNI is compliant with the limitations on subcontracting. That DNI is meeting the applicable limitations on subcontracting, in turn, provides sufficient evidence to overcome Appellant’s claim — indeed, any claim — regarding the existence of an ostensible subcontractor.
In light of these facts, OHA concluded that the competitor was not unusually reliant on its subcontractor. While the subcontractor would perform some technical support tasks, OHA emphasized that this alone does not constitute performance of the “primary and vital” requirements unless those tasks constitute the central purpose of the contract.
Key Takeaways for Government Contractors
Limitation on Subcontracting as a Shield – This case makes clear that demonstrating compliance with the limitation on subcontracting is strong evidence that the small business will perform the “primary and vital” portions of a contract. Contractors should carefully document and be prepared to show how they will meet the self-performance thresholds.
Holistic Review of Responsibilities – OHA reaffirmed that affiliation under the ostensible subcontractor rule requires a holistic review, including an analysis of which party will manage the contract, employ the personnel, and perform the substantive tasks.
Avoiding Undue Reliance – Small businesses must avoid contractual structures or proposal narratives that suggest dependence on a subcontractor for key personnel, technical approach, or overall performance responsibility.
Proposal Documentation Matters – Contractors should ensure that proposals clearly articulate the prime contractor’s role in executing the PWS, managing the team, and interfacing with the government.
Conclusion
The Bowhead case provides a valuable precedent for small business contractors seeking to defend against ostensible subcontractor affiliation allegations. The decision underscores that compliance with the SBA’s limitation on subcontracting regulations is not just a requirement for contract eligibility — it can also serve as compelling evidence that a small business is truly the one performing the core functions of the contract.
Small businesses should proactively structure their proposals and teaming agreements with these principles in mind to minimize affiliation risk and preserve their eligibility for small business set-aside contracts.
Not All Construction Performance Bonds Are Created Equally
The Oklahoma Supreme Court has rejected a contractor’s performance bond claim due to the lack of adequate notice to the subcontractor’s surety (see Flintco LLC v. Total Installation Management Specialists, Inc., No. 120,100 (Okla. May 28, 2025)). The case involves the construction of three student housing buildings on the campus of Oklahoma State in Stillwater. During construction the flooring subcontractor fell behind schedule. The general contractor communicated its concerns to the subcontractor but not to the subcontractor’s surety. The general contractor ultimately decided to supplement the flooring subcontractor’s work but did so without first giving notice of the subcontractor’s default to the subcontractor’s surety. Five weeks after supplementing the subcontractor’s work, the general contractor gave notice to the subcontractor’s surety that it was making a claim on the subcontractor’s performance bond for costs incurred supplementing the subcontractor’s work. The trial court ruled in favor of the general contractor, but the Oklahoma Court of Civil Appeals reversed, concluding that the bond required the contractor to provide prior notice of default to the surety as a mandatory condition precedent to recovery of supplementation costs. The Oklahoma Supreme Court agreed with that conclusion.
In reaching that decision, the Supreme Court helpfully clarified the different types of performance bonds, which are not all created equally:
In the construction industry, various types of bonds are commonly included under the heading of “performance bond” including: 1) the traditional performance bond; 2) the indemnity bond; 3) the completion bond; and 4) the manuscript bond. Each of these bonds has as its objective the protection of the obligee against contractor default. Under an indemnity bond, the surety’s performance obligation is limited to reimbursing the obligee for the costs of completion of the project, but generally does not expressly give the surety the right to cure a default by takeover and completion. Under a completion bond, the surety’s performance obligation is generally limited to the single option of taking over the work and completing the contract at the sole expense of the surety. The manuscript bond combines performance, completion, and indemnity obligations, and is often tailored and negotiated in projects where large owners are intent on shifting to the surety and contractor as much risk as possible.
The Bond involved in the present case is a traditional performance bond, modeled after a standardized contract form developed and published by the American Institute of Architects (AIA) — the A311 Performance Bond. This type of bond form provides several performance options to the surety, including remedying the default or arranging for performance. These options contemplate that the surety has a variety of choices, such as assisting the principal contractor with labor or materials or engaging a replacement contractor to complete the work. The Bond also permits the obligee, after reasonable notice to the surety, to arrange for performance of the work, in which case the surety is required to provide financial compensation for the cost of completing the project.
The Flintco court recognized a split of authority among courts interpreting similar performance bonds based on the AIA A-311 form. While some courts have concluded that prior notice to the surety is indeed a condition precedent to recovery, others have disagreed. Applying traditional rules of contract interpretation, the Flintco court ruled that the performance bond at issue did require prior notice to the surety as a condition precedent to recovery of supplementation costs. Having failed to give prior notice to the surety, the contractor’s performance bond claim was rejected.
A copy of the court’s decision is available here. It is a good reminder to pay close attention to the wording of your bonds, which are not all created equally but can have differing notice requirements and provide different forms of relief.
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DOL Restructures: OFCCP on the Chopping Block as Opinion Letters Expand [VIDEO, PODCAST]
This week, we discuss the U.S. Department of Labor’s (DOL’s) plan to eliminate the Office of Federal Contract Compliance Programs (OFCCP) and the DOL’s new opinion letter program.
DOL Restructures: OFCCP on the Chopping Block as Opinion Letters Expand
On May 30, 2025, the DOL moved to eliminate the OFCCP, shifting key enforcement duties to other agencies. At the same time, the DOL has launched a new opinion letter program, expanding access beyond the Wage and Hour Division.
Employers must navigate these changes while maintaining compliance with federal, state, and local anti-discrimination laws. Epstein Becker Green attorneys Kim Carter and Paul DeCamp provide their insights into these shifts and their likely future impact on employers.
The Bottom Line: Cost and Pricing Updates | Act of God or Compensable Delay?
Appeal of Gideon Contracting, LLC, ASBCA No. 63561 (May 12, 2025)
The Bottom Line:
When the Government orders a suspension of work due to an “act of God,” it may still be on the hook for the resulting increased costs under the Suspension of Work clause if it proximately causes an unreasonable delay. Here, the Government proximately caused the delay at issue through its management of water drainage through a lake and dam, including through controlled releases of water, and the Armed Services Board of Contract Appeals (“ASBCA” or “the Board”) found a portion of the delay to be unreasonable.
Key points of interest:
Generally, “acts of God” entitle contractors to additional time, but not additional compensation. However, the distinguishing feature entitling Gideon to additional compensation here was that the Government controlled the release of floodwaters via a drainage management system. Thus, the flooding was not caused solely by rainfall, as the Government argued, but rather, by the Government’s release of floodwater.
Gideon was not entitled to damages for the entire suspension period, however, because the contract specified when and how water releases would occur. Therefore, Gideon was only entitled to compensation for portions of the suspension that were found to be “unreasonable” (or as described by the Board, inexplicable).
Contractors facing suspensions of work should carefully evaluate whether their contracts may entitle them to relief where at least a portion of such suspensions are “unreasonable.”
Best Practices for Due Diligence in Government Contractor M&A Transactions
Mergers and acquisitions (M&A) involving government contractors present unique challenges and considerations that require meticulous due diligence. Unlike purely commercial deals, government contracts introduce layers of regulatory compliance, security requirements, and approval processes that can significantly affect deal structure, valuation, and risk. This blog post outlines some of the basic best practices for due diligence when acquiring or selling a business that performs U.S. government contracts.
Assess Government Contracting Status Early
Early in the due diligence process, buyers should determine whether the target is a prime contractor, subcontractor, or both, and identify all relevant contracts, subcontracts, and task orders. It is important to understand the customer base — whether it’s DoD, civilian agencies, or state/local governments — as each target presents different risks and obligations.
Review Contract Performance and Compliance History
Key questions to answer during due diligence include:
Has the contractor met performance milestones and delivery requirements?
Are there any pending or past disputes, cure notices, terminations for default, or performance issues?
Are there any audit findings or noncompliance issues reported by the Defense Contract Audit Agency (DCAA) or inspector general?
Moreover, understanding the target’s history with compliance — including adherence to the Federal Acquisition Regulation (FAR), Cost Accounting Standards (CAS), and agency supplements (like DFARS) — is essential.
Analyze Past Performance
The target company’s past performance record is a key asset in government contracting. However, an acquiring company must ensure that this past performance will be recognized in future bids. The FAR allows agencies discretion in considering the past performance of predecessor companies (FAR 15.305(a)(2)(iii)).
Evaluate Representations, Certifications, and Registrations
Ensure that all representations and certifications made in the System for Award Management (SAM) and on contract solicitations are accurate and current. Check for proper registrations, including:
SAM.gov
NAICS code alignment
Small business or socioeconomic certifications (e.g., 8(a), HUBZone, SDVOSB, WOSB, etc.)
Misrepresentations can lead to False Claims Act liability and/or suspension or debarment.
Identify Organizational Conflicts of Interest (OCI)
Conduct a thorough analysis of potential OCIs that could impair objectivity or create unfair competitive advantages post-closing. This is especially important if the buyer already holds government contracts that could overlap with the target’s portfolio.
Understand Novation Requirements
Government contracts are not automatically assignable. If the transaction constitutes a change of ownership requiring a novation agreement under FAR 42.1204, the buyer must:
Notify the relevant contracting officer(s)
Prepare a novation package, including the purchase agreement and corporate documentation
Be aware that novation approval is discretionary and can delay closing or transition
Some buyers structure transactions to avoid novation altogether, such as through equity purchases.
Review Security Clearances and Facility Requirements
If the target holds facility security clearances (FCLs) or performs classified work, due diligence must verify:
That the clearances are active and match the scope of work
Personnel clearances (PCLs) and any foreign ownership, control, or influence (FOCI) mitigation plans
Compliance with the National Industrial Security Program Operating Manual (NISPOM)
Post-closing, the Defense Counterintelligence and Security Agency (DCSA) will review the transaction to ensure continued eligibility for classified contracts.
Scrutinize Pricing and Cost Accounting Practices
For cost-reimbursable and time-and-materials contracts, buyers must understand the target’s accounting systems, indirect cost rates, and billing practices. Ensure systems are compliant with government standards and validated by relevant audits.
Additionally, evaluate potential exposure to cost disallowances, overbillings, or defective pricing under the Truthful Cost or Pricing Data statute (formerly TINA).
Analyze Paycheck Protection Program (PPP) Loans
PPP loans, forgiveness applications, and supporting documentation should also be analyzed.
Analyze Subcontracting Plans and Flowdowns
Examine the target’s subcontracting compliance, especially for large businesses with small business subcontracting plans. Confirm that required FAR clauses have been flowed down to subcontractors and that appropriate monitoring systems are in place.
Assess Export Control and ITAR Compliance
If the target deals with defense articles or technical data, review its compliance with:
International Traffic in Arms Regulations (ITAR)
Export Administration Regulations (EAR)
Export licenses and technology control plans
Violations may not only carry penalties but also restrict post-acquisition operations.
Assess False Claims Act and Compliance Risks
M&A due diligence for government contractors should include a rigorous review of compliance with the False Claims Act (FCA) (31 U.S.C. §§ 3729–3733), the Procurement Integrity Act, and other federal statutes. Undisclosed compliance violations or internal investigations can result in successor liability or post-closing enforcement actions.
Tailor the Purchase Agreement to Government Contract Risks
The purchase agreement should include:
Robust representations and warranties regarding government contracts
Indemnities for known risks (e.g., outstanding investigations, pending audits)
Covenants related to novation, change-of-control notifications, and post-closing cooperation
Conclusion
Government contractor M&A requires far more than standard commercial diligence. By proactively identifying regulatory risks, understanding contract transfer limitations, and ensuring compliance, parties can better structure the transaction, protect value, and avoid costly surprises. Buyers and sellers alike should involve counsel with deep experience in government contracts early in the process to guide these critical due diligence steps.
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The Ever-Changing Independent Contractor Classification in the U.S.
The classification of independent contractors tends to cause employers of all sizes concern and confusion. For years, businesses have relied on flexible, non-employee labor to meet changing demands. But in 2025, the legal framework that governs who qualifies as an independent contractor is more uncertain than ever.
Employees v. Independent Contractors
In today’s ever-changing workforce, businesses often rely on a mix of employees and independent contractors. But knowing the difference between the two is not just a matter of terminology, it is a legal necessity. Misclassifying a worker can lead to serious financial and legal outcomes.
Key factors to consider differentiating between employees and independent contractors are control, financial independence, duration, and nature of relationships. Employees typically work under the direction of their employer. The company decides when, where, and how the work is done. Independent contractors, on the other hand, operate with a high degree of autonomy. They set their own schedules, use their own tools, and often work for multiple clients. Another important difference is financial independence. Employees are paid a regular wage or salary and do not bear the risk of profit or loss. Independent contractors, however, can make or lose money depending on how efficiently they manage their work. They often invest in their own equipment and cover their own business expenses. Lastly, the duration and nature of the relationship also matters. Employees usually have an ongoing relationship with their employer, while contractors are typically hired for specific projects or time-limited projects. And while employees perform work that is central to the business, contractors are often brought in for specialized tasks that fall outside a company’s central operations.
The Not So New Rule
In early 2024, the U.S. Department of Labor (DOL) introduced a new rule under the Fair Labor Standards Act (FLSA), aiming to clarify the distinction between employees and independent contractors. The rule emphasized a “totality of the circumstances” test, weighing six factors such as the level of control a business has over the worker, the worker’s opportunity for profit or loss, and whether the work is integral to the business. However, just over a year later, in May 2025, the DOL announced it would no longer enforce this rule in its investigations. The rule technically is still in effect, but primarily in private litigation rather than a tool for federal enforcement. This sudden shift leaves employers in a legal gray zone, in particular, those operating across multiple states.
The States Step In
While federal enforcement has softened, many states have moved in the opposite direction. California, for example, continues to apply its stringent ABC test under Assembly Bill 5 (AB5), which presumes a worker is an employee unless the employer can prove three specific conditions. Under AB5, which presumes a worker is an employee unless the employer proves: (A) the worker is free from control, (B) performs work outside the usual course of business, and (C) is engaged in an independently established trade. Massachusetts and New Jersey have adopted similar standards, making it significantly harder to classify workers as independent contractors.
This divergence means that a worker classified as an independent contractor under federal law might still be considered an employee under state law which makes matters more complex for, they trigger employers obligations for minimum wage, overtime, unemployment insurance, and similar employer responsibilities. Misclassifying a worker is not just a technical error, it could hurt the bottom line of businesses. Employers found to have misclassified workers may be liable for back wages, unpaid taxes, penalties, and even class-action lawsuits. In some cases, the reputational damage can be just as severe as the financial hit.
Employers Finding Their Way
So what should employers do in this uncertain environment? First, do not assume that federal non-enforcement means you are in the clear. State laws may still appl and in many cases, they are more stringent than federal standards. Second, review your current contractor relationships to determine if the workers are truly independent, or if they function more like employees. Finally, employers should ensure sure contracts are clear, documentation is thorough, and HR teams are trained in the latest developments. As the workforce continues to evolve and remote work becomes more prevalent, lawmakers and regulators will keep refining the rules in regard to all areas of employment. For now, the best defense is to be initiative-taking, and informed. The only thing that is more expensive than compliance is non-compliance.
FAR 2.0 Rollout Begins
We recently wrote about the Trump administration’s efforts to streamline the Federal Acquisition Regulation (“FAR”). The FAR contains approximately 2,000 pages of regulations that guide hundreds of billions of dollars in acquisitions each year. Some clauses in the FAR are mandated by a statute while others have been adopted over time to fix a problem, institute an Executive Order or because regulators thought it would be a best practice. As detailed in a recent blog, the administration’s current effort is aimed at confining the FAR to provisions mandated by statute “or essential to sound procurement.”
The FAR Council, in coordination with the Office of Management and Budget, is expected to release revisions of each FAR Part as proposals, but effectively require agencies to issue class deviations and adopt each section before the revisions become final. This means contractors may see dramatic change in short order. It is important to remember, however, that updated FAR sections do not immediately require compliance; that only occurs when a solicitation is issued with an updated provision or a contracting officer successfully modifies a contract to include them.
To start, the administration has released proposed revisions to FAR Parts 1 and 34.
FAR Part 1, entitled, “The Federal Acquisition System,” lays out fundamentals of the FAR and how it works. Some important changes include:
Elimination of language surrounding the purpose and goals for the FAR such as “to deliver on a timely basis the best value product or service to the customer, while maintaining the public’s trust and fulfilling public policy objectives.” FAR 1.102(a).
Deletion of nearly the entire “performance standards” clause. This includes language that “[t]he System must be responsive and adaptive to customer needs, concerns, and feedback. Implementation of acquisition policies and procedures, as well as consideration of timeliness, quality and cost throughout the process, must take into account the perspective of the user of the product or service.” FAR 1.102-2(a)(2). Also, “[w]hen selecting contractors to provide products or perform services the Government will use contractors who have a track record of successful past performance or who demonstrate a current superior ability to perform” and “[t]he Government will maximize its use of commercial products and commercial services in meeting Government requirements” and “[i]t is the policy of the System to promote competition in the acquisition process.” FAR 1.102(a).
Other deleted provisions talk to minimizing administrative costs and conducting business “with integrity, fairness, and openness.” FAR 1.102(c).
FAR applicability language deleted. Elimination of the language regarding the applicability of the FAR: “[t]he FAR applies to all acquisitions as defined in part 2 of the FAR, except where expressly excluded.” FAR 1.104.
Potential increase in agency-specific regulations. The allowances for agencies to issue their own supplemental regulations was left largely untouched, but limitations on those regulations in FAR 1.302 have been proposed for deletion. This may allow agencies more flexibility to issue supplemental regulations, potentially at the expense of regulatory consistency across agencies.
Elimination of the requirement for public comment. The provisions requiring public comment for “significant” FAR revisions has been deleted. FAR 1.501-2.
Contracts may be entered into by individuals other than contracting officers. Part of FAR, Section 1.601, is being proposed for deletion: “[c]ontracts may be entered into and signed on behalf of the Government only by contracting officers.”
The content of Determinations and Findings are no longer required to clearly and convincingly justify the specific determination made under FAR 1.704. The requirement for expiration dates was also deleted.
It is altogether possible that the deletions will be moved to guidance, but it is an open question whether that guidance will be as enforceable as a FAR provision where these requirements previously resided.
We will continue to monitor changes to the FAR and provide updates as warranted.
Attempts to Silence VA Scientists Would Violate the First Amendment
On June 2, 2025, MSNBC reported that politically appointed officials of the Department of Veteran Affairs (VA) lashed out against two VA scientists for authoring a report that, according to the officials, painted the Administration in a bad light. The report, published in the New England Journal of Medicine, voiced that federal cuts to the VA could negatively impact veterans’ respiratory health.
According to internal emails obtained by The Guardian, the senior officials claimed that the scientists had violated VA policy by not getting their article pre-approved before publication. While VA officials argue that they are simply requiring coordination between scientists and public affairs staff, the swift response to the critical article strongly suggests that the Administration is sending a message that could result in the suppression of viewpoints critical of the current VA leadership.
The current Administration is not the first to attempt to stifle government scientists who, on their own time, publish information critical of their employers. Legal precedent from cases dating back to the 1990s, litigated under the administrations of both President George Bush and William Clinton, demonstrate that attempts to “chill” constitutionally protected speech by federal employees can be successfully challenged in federal court.
Sanjour v. EPA
The 1995 case Sanjour v. EPA is a prime example of a landmark suit that established the First Amendment rights of federal employees to criticize their agencies. In that case, the U.S. Court of Appeals for the District of Columbia Circuit ruled in favor of William Sanjour, an EPA employee who challenged federal rules that restricted federal employees’ right to explicitly criticize the policies of the EPA in presentations sponsored by environmental community groups.
The EPA “chilled” Sanjour’s speech by warning him that his acceptance of a cost reimbursement for travelling to North Carolina to give his presentation opposing EPA’s waste incineration policies could lead to disciplinary action (which could include termination). Based on these warnings Sanjour challenged the restrictive regulation, claiming that the rule had a chilling effect on his Constitutional right to publicly criticize EPA policy.
The Court ruled in favor of Sanjour. Its holding applied “black letter” law governing freedom of speech in the context of public employment: “Government employee speech is protected by the First Amendment, and can only be infringed when the government demonstrates that the burden on such speech is ‘outweighed by [its] necessary impact on the actual operation of the government.’”
The precedent in Sanjour v. EPA allows for federal employees who plan on making public statements to seek federal court injunctions preventing future retaliation based on their First Amendment protected speech. The court’s decision safeguards the employees’ rights to speak on matters of public concern, including speech that criticizes the government.
As the Circuit Court concluded, “It is perhaps the most fundamental principle of First Amendment jurisprudence that the government may not regulate speech on the ground that it expresses a dissenting viewpoint.” Moreover, the court emphasized the importance of public learning from federal employees who can offer valuable insights on government workings. These insights are vital for informed decision-making by the electorate – upholding our democracy.
Weaver v. United States Information Agency
In a similar 1996 case, Weaver v. United States Information Agency, the D.C. Circuit established a clear precedent that federal employees can seek pre-enforcement injunctive relief to prohibit federal agencies from improperly using preclearance procedures to suppress the publication of information critical of a sitting-administration.
The case involved Carolyn Weaver, a part-time employee of the United States Information Agency (USIA). She published an article in the Columbia Journalism Review critical of Voice of America (VOA) editorial policies. The VOA is a unit of USIA/Department of State. Weaver had submitted the article without pre-publication review and was consequently admonished by the agency.
Weaver challenged the pre-publication review procedure on the grounds of the First Amendment. Significantly, the D.C. Circuit recognized that the “circuit’s law affords employees in Weaver’s position a right to federal court review of their constitutional claims.”
In Weaver the Court held that an employee may be required to submit an article for review, but only for legitimate purposes (such as ensuring that classified information is not revealed). But of critical importance, it also held that federal agencies were prohibited from preventing the publication of articles simply because they were critical of the government. The court upheld the VOA procedures in large part because the agency explained that an employee could not be disciplined for publishing articles based on its content or viewpoint being critical of their agency, even if the agency failed to approve the article for publication.
Of course, an employee could still be disciplined for not providing a required “disclaimer” stating that the views in the article were his or her personal opinions, or if the article in fact illegally revealed classified information. But articles like those published by the VOA employee in Weaver or the VA employees in the New England Journal of Medicine would unquestionably be exempt from any such limitations. Moreover, any threat to take disciplinary action against employees who published articles that were disapproved for release could have a chilling effect on federal workers’ rights to freedom of speech. Consequently, these types of threats could also be subject to challenge in federal court.
In other words, the key finding in Weaver is that public servants can seek pre-enforcement injunctive relief in the federal court based on the potential chilling effect of the government’s pre-publication regulations, or for threatening adverse actions, or for taking action against an employee who published an article despite the government’s decision to disapprove publication.
Applying the Pickering Standard
Both the Sanjour and Weaver cases reaffirmed the landmark public employee free speech case of Pickering v. Board of Education. In that case, a teacher was fired for publishing a letter to the editor critical of his school board’s funding priorities. The Supreme Court ordered that the teacher be reinstated and affirmed the rights of public employees to engage in Constitutionally protected speech.
The Pickering Court explained that public employees, such as the VA scientists, are in a critical position to inform the public of information vital to an informed electorate and the functioning of a democracy. The Court held:
[T]he question whether . . . additional funds [are needed] is a matter of legitimate public concern on which the judgment of the . . . administration, cannot, in a society that leaves such questions to popular vote, be taken as conclusive. On such a question free and open debate is vital to informed decision-making by the electorate. [Public employees] are, as a class, the members of a community most likely to have informed and definite opinions as to how funds allotted to the operation of [government programs] should be spent. Accordingly, it is essential that they be able to speak out freely on such questions without fear of retaliatory dismissal.
The circumstances the VA employees found themselves in bear a striking resemblance to those that faced the school teacher in Pickering. If tested in court the outcome of these two cases should be the same: vindication of the First Amendment and the public’s right to know.
Conclusion
The cases from the 1990s highlight the importance of freedom of speech protections for federal employees. A public employer cannot threaten constitutionally protected speech of a government employee, if that speech is given on their own time, and relates to matters of “public concern.” Such threats may indeed be unconstitutional and can be challenged for injunctive relief.
Federal employees, including VA scientists, are protected by the First Amendment, and any rule, regulation, or threat by the government to stifle their report may violate their Constitutional rights. Employees who work for the federal government do not surrender their First Amendment rights when they take a government job.
Employees who seek to speak or publish articles critical of their federal agency should carefully review the Sanjour and Weaver cases (and other similar cases). They should also seek counsel to ensure that they comply with rules that do not violate their Constitutional rights.
The American people have a right to hear from federal employees. They have a right to learn about problems within the federal government that impact the health and safety of the American people. Veterans have a right to learn from employees working for the VA if they are being harmed by government practices or policies.
Minnesota State Contractors Must Use New MDHR Two-Part Annual Compliance Report Beginning July 1
In March 2025, the Minnesota Department of Human Rights (MDHR) updated its annual compliance report (ACR) without substantive changes. Two months later, the MDHR has issued a new two-part ACR with significant updates. The new ACR now includes two parts: “Part 1: Year in Review Narrative,” and “Part 2: Data Analysis.” Minnesota contractors must begin using the new two-part ACR effective July 1, 2025. Additionally, the ACR reporting period options now differ based on the date the contractor’s MDHR workforce certificate of compliance was approved.
Quick Hits
Starting July 1, 2025, Minnesota contractors must use the updated two-part annual compliance report (ACR) which includes a year in review narrative and data analysis sections.
The new ACR requires contractors to provide detailed narratives on their compliance efforts and corrective actions, along with structured data reporting on employee movements and training.
Contractors with workforce certificates issued on or after July 1, 2025, can choose from four different reporting periods for their ACR, ending up to three months prior to the certificate approval date.
Part 1: Year in Review Narrative
Section 1: Company Information
This section basically solicits the same information as was requested in the previous ACR. The differences include:
Clarification that the company name must be the name as registered with the Minnesota secretary of state.
The mailing address (if different from physical address) is now also requested.
The job title and email address of the person who prepared the ACR is now requested.
The email address of the senior management official who reviewed the ACR is now requested.
Section 2: Narrative on Good Faith Efforts
In the previous ACR, contractors were required to complete an affirmative action plan (AAP) progress report narrative where they would explain their good faith efforts and action steps taken to address areas of minority and/or female underutilization or ensure continued utilization levels. The new narrative section is more structured and requires the contractor to answer two questions:
“In the past year, we meaningfully implemented our company’s Compliance Plan in the following ways:
In the past year, we meaningfully implemented our company’s Equal Opportunity Statement in the following ways:”
Section 3: Good Faith Efforts for All Companies
In this section, contractors are required to identify the areas in which they determined they were not in compliance with MDHR requirements and detail the corrective action taken in the prior year with respect to their hiring process, current employees, and workplace.
Section 4: Additional Good Faith Efforts for Construction Contractors Only
Construction contractors are required to answer additional questions concerning prime contracts awarded in the prior twelve months and whether timely preconstruction and/or monthly reports were submitted to MDHR. They must also identify areas where they were out of compliance concerning their hiring process, current employees, and workplace, and the corrective action taken to address identified deficiencies.
Part 2: Data Analysis
Contractors still report:
“Total Employees – Beginning of Reporting Period
Total Applicants
Total Hires
Applicants Interviewed
Applicants Tested
Employees Promoted – From
Employees Promoted – To
Employees Demoted – From
Employees Demoted – To
Employees Terminated
Total Current Employees”
The differences involve the definitions of employees transferred out and in, and employees trained. In the prior ACR, transfers were defined as movements out of and into job groups. In the new ACR, the definition of transfers is clarified to include movements out of or into the company’s facilities that are included in the ACR.
The old ACR requested data on all employees who received company-sponsored training. The new ACR clarifies that contractors are to report all employees who received company-sponsored equal employment opportunity (EEO) training during the reporting period.
Contractors are still required to complete an availability and underutilization analysis (AUA). The instructions for the new AUA require contractors to use 2018 census data and emphasize that contractors are not to adopt quotas. Likewise, the new AUA form no longer includes annual percentage goals.
Change to ACR Reporting Period
Contractors whose workforce certificates are issued before July 1, 2025, may use data up to two months prior to their certificate approval date to complete their ACRs. For example, if a contractor’s certificate was issued on June 1, 2024, the ACR reporting period may be one of the following three periods:
June 1, 2024 – May 31, 2025
May 1, 2024 – April 30, 2025
April 1, 2024 – March 31, 2025
Contractors whose certificate is issued July 1, 2025, or later, may use reporting periods that end up to three months prior to their certificate approval date. For example, a contractor whose certificate is issued July 15, 2025, may use the following four reporting periods to complete the ACR:
July 15, 2025 – July 14, 2026
June 15, 2025 – June 14, 2026
May 15, 2025 – May 14, 2026
April 15, 2025 – April 14, 2026
Conclusion
Beginning July 1, 2025, Minnesota contractors holding an active workforce certificate of compliance must begin using MDHR’s new two-part annual compliance report, which requires a more comprehensive narrative to identify and address compliance deficiencies. Likewise, the definitions and instructions included in the data analysis section of the new ACR help to clarify contractors’ reporting obligations with respect to employee transfers and employees trained, and now require use of 2018 census data for the preparation of the availability and underutilization analysis. Finally, when completing the ACR, contractors whose certificate is issued July 1, 2025, or later, may use a twelve-month reporting period that matches the certification period dates or ends exactly one, two, or three months before the certificate approval date.
CFPB and Pawn Store Operator to Settle MLA Suit
On May 30, the CFPB and a national pawn store operator filed a joint status report in the U.S. District Court for the Northern District of Texas announcing that they have reached an agreement to resolve a 2021 Bureau lawsuit alleging violations of the Military Lending Act (MLA) and a 2013 CFPB consent order. The suit alleged that the pawn store operator and its subsidiary issued thousands of high-interest loans to active-duty servicemembers and their families in violation of federal law.
In its complaint, the CFPB alleges that the company:
Charged servicemembers unlawful interest rates. The company allegedly made over 3,600 pawn loans to covered borrowers with MAPRs exceeding the MLA’s 36% cap, in some cases reaching over 200%.
Imposed prohibited arbitration clauses. Loan agreements allegedly included mandatory arbitration clauses, in violation of the MLA’s express restrictions.
Failed to provide required loan disclosures. The company allegedly failed to deliver required MLA disclosures, including MAPR statements, at the time of the transaction.
Violated a 2013 CFPB consent order. The company, as a successor to a previously sanctioned entity, allegedly continued making illegal loans in violation of the 2013 consent order. The order required more than $14 million in consumer refunds and a $5 million civil penalty, and mandated that the company cease alleged misconduct targeting military families and improve MLA compliance.
While the exact terms of the new settlement have not yet been disclosed, the CFPB had previously sought injunctive relief, rescission of void contracts, consumer redress, civil money penalties, and corrections to consumer credit reports.
Putting It Into Practice: Although the Bureau has scaled back certain enforcement actions in recent months, enforcement of MLA violations continues to be a priority for the current administration (previously discussed here and here). Lenders offering consumer credit to servicemembers should continue to review and strengthen their MLA compliance protocols to ensure compliance.
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By Any Other Name: Rules Limiting Alternative Pleading in Professional Liability Actions
Most states allow former clients to assert claims against a licensed professional in either tort or contract. The stereotypical tort claim alleges that the professional failed to act in accordance with the standards expected by members of the profession, resulting in damages to the client. The stereotypical contract claim alleges that the professional was given a specific instruction and their failure to act in accordance with that instruction resulted in damages to the client. In a professional liability claim, it is not unusual to see multiple causes of action pleading professional failures, but in many circumstances case law has concluded that there is only one “real” appropriate claim.
In the majority of U.S. jurisdictions, the statute of limitations period for a contract claim is longer than the period for a tort claim. Former clients who fail to file a timely malpractice case, or those wishing to supplement a claim of delay in discovering an allegedly negligent act, will often allege a contract claim in the alternative. Often the allegation is a purported failure to conform to a professional standard of care, which constitutes a breach of the contract for professional services. In this way, a former client-plaintiff will try to avail themselves of a longer statute of limitations to assert a claim.
The ability of a plaintiff to allege a professional negligence claim as a contract (or vice-versa) may be limited by state-specific doctrines that seek to preserve the separation between tort and contract theories. These doctrines vary in both name and application but share a common goal of differentiating between tort and contract by examining the nature of the claim and the source of the duties giving rise to the claim. This distinction can be the difference between a malpractice claim going to trial or being dismissed as a matter of law. It is therefore important to be aware of whether and how your particular jurisdiction draws the line between claims of professional negligence, claims for breach of a contract, and various alternative legal bases to recover damages from a professional for services rendered.
Montana’s Gravamen Test
In Montana, the statute of limitations for a breach of a written contract is eight (8) years while a breach of an oral contract must be commenced within five (5) years. MCA §27-2-202(1); MCA §27-2-202(2). By contrast, the statute of limitations for a negligence claim in Montana is three (3) years. MCA §27-2-204(1). Montana recognizes a case may involve both breach of contract and negligence claims, but plaintiffs are prohibited from recasting a tort claim into a contract claim solely to take advantage of the longer statute of limitations. Instead, Montana has adopted the Gravamen Test to determine the nature of the claim.
In Montana, the label given to the claim by the plaintiff does not control which statute of limitations applies. Northern Montana Hosp. v. Knight, 248 Mont. 310, 315, 811 P.2d 1276, 1278-79 (1991); Billings Clinic v. Peat Marwick Main & Co., 244 Mont. 324, 341, 797 P.2d 899, 910 (1990). The statute of limitations for contract claims applies only if the alleged breach of a specific provision in a contract provides the basis of the plaintiff’s claims. Collection Professionals, Inc. v. Halpin, 2009 Mont. Dist. LEXIS 688, 3-5. If the plaintiff claims breach of a legal duty imposed by law that arises during the performance of the contract, the claim is governed by the three-year statute of limitations applicable to negligence actions. Northern Montana, 248 Mont. at 315, 811 P.2d at 1278-79. If doubt exists as to the gravamen of the action, the longer statute of limitations will apply. Billings Clinic., 244 Mont. at 341.
Pennsylvania’s Gist of the Action Doctrine
In Pennsylvania, the statute of limitations for a breach of contract action is four (4) years. 42 Pa.C.S.A. § 5525(a)(1). The statute of limitations for a claim sounding in professional negligence is two (2) years. 42 Pa.C.S.A. § 5524(7). Under Pennsylvania’s “gist of the action” doctrine, a party is precluded from recasting breach of contract claims as actions sounding in tort. Bruno v. Erie Ins. Co., 106A.3d 48, 60 (Pa.2014); Etoll, Inc. v. Elias/Savion Advertising, Inc., 811 A.2d 10, 14 (Pa. Super. Ct. 2002).
The Pennsylvania Supreme Court has clarified this doctrine, holding that the label placed on the claim does not control – the operative question is whether the duty breached is one created by the parties in contract (as in a specific instruction from the client to the professional) or a broader social duty imposed on all practitioners (a standard of care). Bruno, 106 A.3d at 68; Norfolk So. Ry. Co. v. Pittsburgh & West Va. R.R., 101 F.Supp.3d. 497, 534 (W.D. Pa. 2015); see also Phico Ins. Co. v. Presbyterian Med. Servs. Corp., 444 Pa. Super. 221, 663 A.2d 753, 757 (1995) (citing Bash v. Bell Telephone Co., 411 Pa. Super. 347, 601 A.2d 830 (Pa. Super. 1992) (“the important difference between contract and tort actions is that the latter lies from the breach of duties imposed as a matter of social policy while the former lie for the breach of duties imposed by mutual consensus.”); accord Simons v. Royer Cooper Cohen Braunfeld, LLC, 587 F.Supp.3d 209 E.D.Pa. 2022) (gist of the action doctrine prohibits contract claim based upon alleged failure to comport to professional standard of care).
The Texas Anti-Fracturing Rule
In Texas the statute of limitations for a claim for professional negligence is two (2) years and the statute of limitations for claims of breach of contract, breach of fiduciary duty, and fraud is four (4) years. Tex. Civ. Prac. & Rem. Code §§16.003 [2 year]; §§16.004 [4 year].
In a recent suit against an accounting firm, the Texas Supreme Court agreed that the state’s courts of appeals’ application of the Anti-Fracturing Rule applied. The Anti-Fracturing Rule limits plaintiffs’ attempts “to artfully recast a professional negligence allegation as something more – such as fraud or breach of fiduciary duty – to avoid a litigation hurdle such as the statute of limitations.” Pitts v Rivas, 2025 Tex. LEXIS 131 1 (Tex. Feb. 21, 2025). The Court cautioned that it is the “gravamen of the facts alleged” that must be examined closely rather than the “labels chosen by the plaintiff.” Id. at 7. If the essence, “crux or gravamen of the plaintiff’s claim is a complaint about the quality of professional services provided by a defendant, then the claim will be treated as one for professional negligence even if the petition also attempts to repackage the allegations under the banner of additional claims.” Id. To survive application of the rule, a plaintiff needs to plead facts that extend beyond the scope of what has traditionally been considered a professional negligence claim. Id. at 7.
Conclusion
The question of whether a case involves an allegation of a failure to observe a general professional duty or a specific instruction can control whether or not a case is time-barred. Many courts apply the same analysis to determine the “gravamen” of a claim and the applicable statute of limitations, though they refer to this test by different names. It is important to look beyond the text of an opposing party’s pleadings and examine the nature of the claims asserted. Failing to do so may leave you litigating claims that are otherwise time-barred and that may be removable from suit under proper motions to dismiss.