Recovering Attorneys’ Fees in Connection with Termination Settlement Proposals
When a government contract is terminated for convenience, contractors may find themselves navigating the complex process of preparing a termination settlement proposal. One critical consideration that often arises is whether the costs associated with hiring legal counsel to assist with the preparation of these proposals are recoverable from the government. The good news for contractors is that, in many cases, attorneys’ fees related to the preparation of a termination settlement proposal are indeed recoverable.
The Legal Basis for Recoverability
The Federal Acquisition Regulation (FAR) provides guidance on cost allowability when it comes to termination settlements. FAR 31.205-42 specifically addresses termination settlement costs, providing that settlement expenses, including the following, are generally allowable:
Accounting, legal, clerical, and similar costs reasonably necessary for –
(A) The preparation and presentation, including supporting data, of settlement claims to the contracting officer; and
(B) The termination and settlement of subcontracts.
Additionally, FAR 31.205-33 addresses the allowability of professional and consultant service costs, including legal fees, and generally allows for the recovery of such fees when they are reasonable and allocable.
The Armed Services Board of Contract Appeals (ASBCA) and the Civilian Board of Contract Appeals (CBCA) have consistently upheld that legal fees incurred in the preparation and negotiation of termination settlement proposals are recoverable, provided they meet the standards of reasonableness and allocability. Courts have recognized that contractors often require the assistance of legal professionals to navigate the intricate requirements associated with settlement proposals, especially when large sums or complex contract terms are involved.
Demonstrating Reasonableness and Allocability
To ensure recovery, contractors generally should demonstrate that attorneys’ fees were both reasonable and necessary for the preparation of the termination settlement proposal. Factors considered in determining reasonableness include the complexity of the proposal, the qualifications of the attorney, and the time spent on the preparation. Allocability requires showing that the costs are directly linked to the contract termination and not for unrelated purposes.
Practical Tips for Contractors
Consult Early – Involve legal counsel early in the process to ensure compliance with FAR requirements and to maximize the likelihood of recovery.
Document Legal Involvement – Maintain detailed records of the attorney’s contributions to the termination settlement proposal to demonstrate their necessity.
Justify the Reasonableness – Be prepared to show that the rates charged, and the hours billed, are customary and appropriate for the services rendered.
Conclusion
Recovering attorneys’ fees related to the preparation of termination settlement proposals is a crucial consideration for contractors facing contract termination. By carefully documenting expenses and demonstrating reasonableness and allocability, contractors can enhance their chances of obtaining reimbursement from the government.
DEI Litigation Whiplash: Appellate Court Allows the Government to Move Forward with Challenged DEI-Related Executive Orders
Uncertainty for companies when making business decisions is a new norm. Tariffs aren’t going to be the only thing that is on again and off again. The same is happening with directives governing diversity, equity, and inclusion (“DEI”) initiatives. In the first two days of President Trump’s second term, he signed two DEI-related executive orders (“EOs”), EO 14151 (Ending Radical And Wasteful Government DEI Programs And Preferencing) and EO 14173 (Ending Illegal Discrimination And Restoring Merit-Based Opportunity). While they were in effect, these EOs caused widespread concern throughout the public and private sector as entities scrambled to understand the implications for their businesses. Approximately a month later, a federal judge in Maryland issued a preliminary injunction that stopped the government from implementing key provisions of the two EOs. However, the tide turned on Friday, March 14, 2025, when a three-judge panel from the U.S. Court of Appeals for the Fourth Circuit granted the government’s motion to stay the injunction pending appeal. This ruling empowers the government to resume the implementation of EO 14151 and EO 14173.
While the preliminary injunction was in effect, the government was precluded from (1) terminating “equity-related” contracts and grants pursuant to EO 14151, (2) requiring that government contractors and grantees sign a DEI certification pursuant to EO 14173, and (3) bringing any False Claims Act (“FCA”) or other enforcement action premised on the DEI certification. (As we have previously explained, the certification requirement in EO 14173 is intended to deter contractor and grantee DEI-programs by invoking the specter of FCA liability.)
Now that the injunction is stayed, an emboldened government will likely move swiftly to terminate contracts and grants that it views as being “equity-related” and to require contractors and grantees to execute the DEI certification. We have previously recommended general steps that contractors and grantees can take as they navigate a rapidly changing environment in which the president signs new EOs almost daily. Below, we offer recommendations specific to the government’s renewed ability to implement the previously enjoined provisions of the DEI-related EOs.
Recommendations for Federal Contractors and Grantees
If not already completed, it is critical to undertake a privileged assessment of your company’s DEI program, including any public-facing content and recently revised program elements that have not yet been reviewed with counsel.
Confer with counsel immediately in the event of an actual or threatened termination. Although the stayed preliminary injunction allows the government to terminate “equity-related” contracts as directed by EO 14151, it remains the case that the government may not terminate contracts in bad faith. In this regard, terminating contracts based on contractor or grantee speech outside of the government-funded scope of work could be subject to legal challenge. (It is also important to avoid signing any documents containing waiver or release language that might preclude recovery of costs in the future.)
Develop a plan for responding to the DEI certification. This includes ensuring that no one in your organization signs the certification without the prior knowledge and approval of relevant company leadership. We have previously recommended potential contractor and grantee responses to the DEI certification.
Understand the legal landscape. First, there are several other lawsuits pending that challenge EO 14151 and EO 14173, and these could bring new preliminary injunctions. These cases include Shapiro et al. v. U.S. Department of the Interior et al., E.D. Pa., Case No. 25-cv-763; National Urban League et al. v. Trump et al., D.D.C., Case No. 25-cv-00471; San Francisco AIDS Foundation et al. v. Trump et al., D.D.C., Case No. 25-cv-1824; and Chicago Women in Trades v. Trump et al., N.D. Ill., Case No. 25-cv-02005. Additionally, two of the three appellate judges who ruled that the government may implement the DEI-related EOs said they consider the EOs to be “of limited scope” because the EOs “do not purport to establish the illegality of all efforts to advance diversity, equity, or inclusion, and they should not be so understood.” Notably, these judges also distanced themselves from the president’s apparent view of DEI, stating that “while history may be static, its effects remain” and that “people of good faith who work to promote diversity, equity, and inclusion deserve praise, not opprobrium.” This signals that having a DEI program is not per se illegal.
Continue to comply with applicable contract and grant requirements arising under state and local government contracts, seeking the advice of counsel for any perceived conflicts between these requirements and the DEI-related EOs.
DEI Injunction Terminated by Federal Court of Appeals Reinstating DEI Certification Requirement and Civil False Claims Act Risk
As previously reported, one of the first executive orders (EO 14173) issued by President Trump was to rescind Executive Order 11246 issued by President Lyndon B. Johnson, which required federal contractors and subcontractors to engage in affirmative action with respect to women and minorities. In EO 14173, President Trump also directed those federal agencies contracting with all entities to cause the end of all “illegal” DEI and DEIA programs, by — among other things — requiring federal contractors and subcontractors to “certify” that they do “not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.” As also reported, this “certification” requirement gives rise to potentially significant exposure for contractors under the civil False Claims Act if a contractor was later found to have “falsely” submitted its certification — i.e., that it was maintaining an “illegal” DEI or DEIA program.
Not long after issuance of EO 14173, litigation was initiated, challenging the executive order as unconstitutionally vague and a violation of the First Amendment, among other arguments: The DEI-related provisions, including the certification requirement, based on the failure of the executive order to define or provide any guidance as to what would be considered an “illegal” DEI or DEIA program. In essence, the plaintiffs asserted that, without some defining guidance, the executive order was overly broad and could lead to significant exposure for contractors. As we reported, the federal district court agreed and entered a nationwide injunction prohibiting enforcement of the DEI-related provisions with limited exception. Almost immediately thereafter, the Trump administration appealed the entry of the injunction to the Fourth Circuit Court of Appeals.
On March 14, 2025, the Federal Appellate Court stayed the nationwide injunction, finding that the injunction was overly broad and that the executive order itself is likely not unconstitutional as it merely directs agency action. The Appeals Court opined that we must wait to see how the various agencies implement the directives within the executive order, and whether such implementation is done in a constitutional manner. As a result of the most recent court decision, the DEI certification requirement for government contractors and the civil False Claims Act risk is “back in play.”
However, this is likely not the end of the story, as the manner of implementation and enforcement by the various federal agencies is sure to generate questions and challenges. The terminology of the required certifications and the initiation of civil False Claims Act cases on the basis of alleged “illegal” DEI or DEIA programs will lead to legal challenges and a developing body of caselaw.
Appeals Court Lifts Injunction on Pair of DEI-Targeting Executive Orders: What It Means for Federal Contractors and Grantees
A panel of the United States Court of Appeals for the Fourth Circuit lifted a nationwide injunction, allowing the Trump administration to resume implementation of a pair of executive orders targeting diversity, equity, and inclusion (“DEI”) and diversity, equity, inclusion, and accessibility (“DEIA”) programs (the “Challenged Executive Orders”). On their face, the Challenged Executive Orders apply only to undefined DEI- and equity-related programs that violate existing federal anti-discrimination law, and do not purport to establish the illegality of all efforts to promote DEI. Our client alert describing those executive orders may be found here.
By way of background, as we previously wrote, on February 21, 2025, the United States District Court for the District of Maryland enjoined the Trump administration from implementing the Challenged Executive Orders.
In short, the underlying lawsuit sought to enjoin certain provisions of the Challenged Executive Orders including the provisions that: (1) directed executive agencies to terminate “equity-related” grants and contracts; and (2) directed all executive agencies to include within every federal contract or grant award a certification, enforceable through the False Claims Act, that the recipient of federal funding does not operate any programs promoting DEIA or DEI in violation of federal anti-discrimination laws (the “Challenged Provisions”). The lower court found the Challenged Provisions to be unconstitutionally vague, as well as unconstitutional content and viewpoint restrictions on speech.
On March 14, 2025, a three-judge panel of the Court of Appeals for the Fourth Circuit overturned the district court’s preliminary injunction that had enjoined key portions of the Challenged Executive Orders.
The panel all agreed that the injunction should be lifted, at least for now, while litigation over the Challenged Executive Orders’ lawfulness continues. Each member of the three-judge panel wrote a concurring opinion to explain their rationale, with two of the judges also expressing their support for principled efforts to promote diversity, equity, and inclusion. In describing why they agreed with the decision to lift the injunction, each judge noted that the underlying case does not challenge any specific agency action implementing the Challenged Executive Orders.
Accordingly, they wrote, there was not yet any basis to conclude that agencies would do so in an unconstitutional manner.
What does this mean?
Agencies may immediately begin implementing the Challenged Executive Orders. In the near term, this will likely take the form of agencies requiring grant recipients and federal contractors to certify that they do not operate any programs promoting DEIA or DEI that violate any applicable Federal anti-discrimination laws. Importantly, as previously explained, these certifications are a potential source of False Claims Act liability for those who are found to have submitted inaccurate certifications.
It is likely that agencies will seek to penalize federal grantees and contractors who, in the scope of their grant-funded or contract-related activity, engage in discrimination unlawful under current federal anti-discrimination law. Federal anti-discrimination law prohibits the use of preferences, quotas, and set asides, except in very limited circumstances.
If agencies use the Challenged Executive Orders to punish grant recipients and federal contractors for engaging in all DEI or DEIA activities, including well-crafted efforts to promote employee engagement through cultivating a sense of belonging, the Challenged Executive Orders will likely again be challenged as unconstitutional violations of the First and Fifth Amendments.
Action items for grant recipients and federal contractors:
Consider embracing a broad definition of “diversity,” to include background (socio-economic and otherwise), experiences, cultures, opinions, and the like, along with race, gender, ethnicity, and other protected characteristics.
Review their diversity, equity, inclusion, accessibility, and belonging programs to ensure they are strategic and well-designed to foster open opportunities and ensure a level playing field for all by creating an environment and culture where everyone is respected and valued.
Examine their diversity, equity, inclusion, accessibility, and belonging programs, including any training or rewards programs, to ensure they comply with current federal anti-discrimination laws. This would include a review to ensure that programs do not provide an advantage or award benefits to an individual based on a specific demographic trait.
Pay close attention to DEI or DEIA-related guidance from agencies regarding how those agencies interpret the executive orders’ DEI and DEIA prohibitions.
Merely changing some words – replacing “diversity” with “inclusivity,” or “equity” with “equality,” for example – will not make a non-compliant program compliant.
If a decision is made to modify existing diversity, equity, inclusion, accessibility, and belonging programs, consider preparing internal communications explaining the changes and their rationale.
The Importance of Bid Protests Amid DOGE’s Reduction Efforts
In light of the Department of Government Efficiency’s (DOGE) recent efforts to reduce the number of federal government contracts and purportedly streamline the procurement process, it has never been more critical for federal contractors to understand the importance of bid protests. These protests can have far-reaching consequences for all parties involved, from the protester to the contract awardee, as well as the procuring agency itself. In this post, we’ll explore why bid protests matter and why both filing them as the protester and intervening in them as the contract awardee are essential in today’s contracting landscape.
Why File a Bid Protest?
For businesses vying for government contracts, a bid protest serves as a mechanism to ensure fairness and accountability in the procurement process. When a company believes that a contract has been awarded unfairly—whether due to an error in the evaluation, the contracting agency’s deviation from the terms of the solicitation, or violations of procurement laws—a bid protest provides an avenue for recourse by allowing review of agency procurement decisions by a neutral third party. Typically, the venues for bid protests are the Government Accountability Office, which is a legislative agency, or the Court of Federal Claims.
With the DOGE working to reduce the number of government contracts overall, sometimes by eliminating entire categories of contracts, according to news reports, the pressure is now mounting for both agencies and contractors to comply with new efficiency goals. Recent anecdotal evidence suggests that agencies are rushing source selection decisions or overlooking details such as regulatory or statutory requirements during the contract awarding process. A well-founded protest, thus, can be a critical check on this trend, ensuring that the contracting process remains fair and transparent and, most importantly, is seen by the public to be fair and transparent.
Filing a bid protest can also protect contractors’ interests and their bottom lines. Protests can force procuring agencies to reassess their award decisions, correct any errors, or even cancel and reissue solicitations, if necessary. This is especially important when the stakes involve large sums of money and long-term business relationships with the government.
Intervening in a Bid Protest as the Contract Awardee
For the business that has been awarded a federal contract, the importance of intervening in a bid protest cannot be overstated. To win a contract, a contract awardee has likely invested significant resources in preparing its proposal and winning the award. A bid protest can be a major disruption, costing time, money, and potentially threatening the award altogether.
As the awardee, it’s crucial to defend the contract award proactively by intervening in the protest process. Protest intervention involves providing evidence and arguments supporting the original decision and ensuring that the contracting agency stands behind the contract award. The ability to intervene and respond to a protest effectively can help prevent unnecessary delays, financial losses, and reputational damage to the awardee’s company.
Moreover, intervening allows the awardee to help the agency maintain the integrity of the award process. Given the DOGE’s emphasis on reducing federal spending and streamlining processes, as well as preventing waste, fraud, and mismanagement, defending a contract award becomes even more critical, as the government may be more inclined to cancel or alter awards in the face of a protest if it perceives the possibility of inefficiencies or errors in the process when there might, in fact, be no such inefficiencies or errors.
The Role of Bid Protests in a Reduced Government Contracting Environment
With the DOGE’s initiatives to reduce government contracts and enhance efficiency, bid protests play a more significant role than ever. While the goal of reducing the number of contracts may be aimed at streamlining government operations and improving efficiency, it also introduces a risk that contract awards could be rushed or mishandled.
Bid protests ensure that the contracting process is not compromised by efficiency measures that do not conform to existing statutory or regulatory requirements. They provide an essential safeguard against arbitrary decision-making and preserve the integrity of the procurement process by guaranteeing the absence of conflicts. By allowing contractors to challenge awards that seem unfair or improperly handled, the protest system upholds transparency and fairness, helping prevent the loss of taxpayer dollars and encouraging healthy competition in government contracting.
Furthermore, protests give agencies a chance to reevaluate their decisions, improving the overall quality of the contracting process. In a time of reduced contracts, when agencies may feel the pressure to limit their procurement activity for political reasons, this reexamination ensures that every contract awarded is justified, fairly assessed, and in the best interest of the government and taxpayers.
Conclusion
Bid protests serve as a critical element of the government procurement process, offering a vital check and balance for both contractors and agencies. Whether filing a protest as the protester or intervening as the contract awardee, these actions are essential in ensuring fairness, transparency, and integrity in the procurement system, particularly as DOGE seeks to streamline and reduce the number of contracts awarded.
In an environment of reduced government contracting, bid protests are more than just a tool for contesting award decisions—they are an opportunity to improve the system, protect businesses, and uphold the principles of fairness and accountability. Contractors must remain vigilant and informed about the bid protest process, whether they are defending their award or challenging one, as it can have significant long-term implications for their business and the government’s contracting landscape as a whole.
Beltway Buzz, March 14, 2025
Government Shutdown Threat Recedes. Earlier today, the U.S. Senate voted 62–38 to advance a continuing resolution to maintain government funding through September 30, 2025. After House Republicans passed their version of the bill and left town for a weeklong recess, Democrats in the Senate were left with a tough choice: vote to approve a bill that they did not like but keep the government open, or vote “no” and shut down the federal government. Enough Democrats appear to have chosen the former option, which will put the funding issue to bed until at least this summer. The political fallout, however, will be felt immediately and will likely continue to impact legislative debates for the remainder of the 119th Congress.
DOL Personnel Update. Leadership ranks at the U.S. Department of Labor (DOL) are starting to be filled out, as there was significant news this week on the DOL personnel front:
Nominees Confirmed. On March 10, 2025, the U.S. Senate confirmed Lori Chavez-DeRemer as secretary of labor by a vote of 67 to 32. Two days later, Keith Sonderling, nominated to be Chavez-DeRemer’s deputy at the DOL, was confirmed by a vote of 53 to 46. With the top two political officials in place at the DOL, this clears the decks for the Senate to begin considering the nominations of individuals to lead the Occupational Safety and Health Administration (OSHA), the Employee Benefits Security Administration (EBSA), and the Employment Training Administration (ETA). President Donald Trump has not yet announced a nominee to lead the Wage and Hour Division at the DOL.
New OLMS Director. Late last week, President Trump appointed Elisabeth Messenger as director of the DOL’s Office of Labor-Management Standards (OLMS). Most recently, Messenger was CEO of an organization that advises public sector employees about their rights concerning union membership. Not surprisingly, during the Biden administration the OLMS did not focus on labor union activity, but instead advanced a unique interpretation of persuader reporting to target employers. The Buzz is optimistic that under Messenger’s leadership, the OLMS will return to its core mission of promoting labor union democracy and financial integrity.
Employment Policy Vet Tapped to Lead Pension Agency. President Trump nominated Janet Dhillon, former chair of the U.S. Equal Employment Opportunity Commission (EEOC), to lead the Pension Benefit Guaranty Corporation (PBGC). Pursuant to the American Rescue Plan Act of 2021, the PBGC was provided $74 to $91 billion to deliver to critical and declining multiemployer pension plans. Some Republicans have criticized the program for making overpayments to these plans.
POTUS Sends USCIS Nominee to Senate. This week, President Trump nominated Joseph Edlow to be director of U.S. Citizenship and Immigration Services (USCIS). During President Trump’s first term, Edlow served in several positions at USCIS, including as acting director from February 2020 to January 2021. If confirmed, Edlow will play a significant role in advancing employment-based immigration policy for the Trump administration.
Bipartisan Child Labor Bill Introduced. Senators Josh Hawley (R-MO) and Cory Booker (D-NJ) have reintroduced an updated version of their child labor bill, “Preventing Child Labor Exploitation in Federal Contracting Act.’’ If enacted, the bill would:
require federal contractors and subcontractors to represent whether “within the preceding 3-year period, any final administrative merits determination, arbitral award or decision, or civil judgment” has been issued against the employer relating to child labor violations;
prohibit federal government agencies from entering into contracts with entities that make such disclosures but fail to implement corrective measures as negotiated with the secretary of labor;
increase penalties from $11,000 to $100,000 for each employee who was the subject of a child labor violation and from $50,000 to $500,000 for each violation that causes the death or serious injury of any employee under the age of eighteen years; and
subject an entity that knowingly fails to report or certify to suspension, debarment, and False Claims Act proceedings.
A previous version of the bill passed out of the U.S. Senate Homeland Security and Governmental Affairs Committee in the 118th Congress, but was never voted on by the full Senate. While the bipartisan nature of the bill helps its chances to advance, the Buzz wonders if a federal contractor reporting scheme that is borrowed directly from President Barack Obama’s “Fair Pay and Safe Workplaces” executive order will turn off many Republican legislators.
Federal Mediator No Longer Facilitating Union Card Check. According to media reports, the Federal Mediation and Conciliation Service (FMCS) will no longer help employers and unions facilitate unionization via card check (as opposed to secret ballot). The about face rescinds an agency policy that was adopted during the Biden administration “to promote the development of sound and stable labor management relationships.”
Twice Is Nice in the Motor City. On March 14, 1904, the U.S. House of Representatives voted for the first time to reauthorize the printing of a Congressional Gold Medal that had been previously awarded. Traditionally awarded to members of the armed services, in the mid-1800s the U.S. Congress began expanding the scope of award recipients to include “individuals recognized for nonmilitary heroic activities or their work in specific fields.” Once such recipient was John Horn Jr., of Detroit, Michigan, who in 1874 was awarded the Congressional Gold Medal “in recognition and in commemoration of his heroic and humane exploits in rescuing men, women, and children from drowning in the Detroit River.” From his family’s restaurant located on the dock at the end of Woodward Avenue, Horn rescued more than one hundred individuals who found themselves in the river “either by falling in while going upon or coming off ferry-boats, while intoxicated, or by falling into the river soberly but accidentally.” Unfortunately, the medal was stolen from Horn in 1901, and an act of Congress was necessary to reprint a new one. When he died in 1920, Horn was credited with saving 135 people from drowning.
Nevada Government Contract Protests: Considerations for Bidders
Nevada governments award major contracts worth potentially billions of dollars. Successful and unsuccessful bidders should know their options under Nevada law, as a contract award is often just the beginning. Bidders should know how to (1) defend a successful government bid and (2) protest an unsuccessful bid. Both are important.
Background on Nevada Government Contracts
State and local governments regularly award contracts to businesses. These contracts span from the ordinary and mundane, like office supplies, to contracts running entire government programs. For major contracts, Nevada governments must follow stringent legal requirements, and they must often request proposals to fulfill these contracts. These contracts can get quite large, and in some cases, may be worth billions of dollars. Given these stakes, Nevada governments must follow state and local purchasing rules. These rules ensure, in a perfect world, that the most qualified contractor wins this government work. These procedures also help limit graft in the purchasing process. Nevada law fixes both state purchasing rules, in NRS 333, and local government purchasing rules, in NRS 332.
Governments sometimes fall short when awarding contracts. When they do, Nevada law allows businesses who do not win, i.e., disappointed, or unsuccessful bidders, to “protest” a recommended contract award. An unsuccessful bidder must generally follow certain requirements, including deadlines and bonds.
Generally speaking, the grounds to protest are limited and focused on purchasing procedures. This process may be a multi-step process, depending on how far an unsuccessful bidder wants to push a protest. Proceedings would take place administratively, and possibly in court. Throughout this process, the successful bidder may ordinarily participate, too.
Considerations for Nevada Government Contractors
With major contracts, businesses should have a plan to either (1) protest an award or (2) defend a successful award. Going into any bid process, businesses should think about these matters and consider contacting specialized counsel, as there are detailed procedural requirements in both NRS 333 and NRS 233B to consider.
MS-ISAC Loses Funding and Cooperative Agreement with CIS
The Cybersecurity and Infrastructure Security Agency (CISA) confirmed on Tuesday, March 11, 2025, that the Multi-State Information Sharing and Analysis Center (MS-ISAC) will lose its federal funding and cooperative agreement with the Center for Internet Security. MS-ISAC’s mission “is to improve the overall cybersecurity posture of U.S. State, Local, Tribal, and Territorial (SLTT) government organizations through coordination, collaboration, cooperation, and increased communication.”
According to its website, MS-ISAC is a cybersecurity partner for 17,000 State, Local, Tribal, and Territorial (SLTT) government organizations, and offers its “members incident response and remediation support through our team of security experts” and develops “tactical, strategic, and operational intelligence, and advisories that offer actionable information for improving cyber maturity.” The services also include a Security Operations Center, webinars addressing recent threats, evaluations of cybersecurity maturity, advisories and notifications, and weekly top malicious domain reports.
All of these services assist governmental organizations that do not have adequate resources to respond to cybersecurity threats. Information sharing has been essential to prevent government entities from becoming victims. State and local governments have relied on this information sharing for resilience. Dismantling MS-ISAC will make it harder for governmental entities to obtain timely information about cybersecurity threats for preparedness. It is an organized place for governmental entities to share information about cyber threats and attacks and to learn from others’ experiences.
According to CISA, the dismantling of MS-ISAC will save $10 million. State representatives rely on the information shared by MS-ISAC. It may save the federal government minimal dollars, but when state and local governments are adversely affected and become victims of cyberattacks, this savings will be dwarfed by the amount spent on future attacks without MS-ISAC’s assistance. Responding to state and local government cyberattacks still expends taxpayer dollars. This shift is an unhelpful one that will leave state and local governments in the dark and at increased risk. This is a short-sighted strategy by the administration.
60-Second Sustains: TISTA Science and Technology Corporation
Protest of: TISTA Science and Technology CorporationB-422891.2; .3; .4
TISTA challenged the issuance of a task order by the National Institutes of Health to Tantus Technologies, alleging the agency engaged in unequal treatment of the offerors.
The Agency assessed a strength to the awardee for proposing to maintain a “warm bench” of candidates to meet potential surge staffing needs. On the other hand, it assessed a weakness to TISTA for proposing to maintain bench strength with a pool of pre-vetted candidates.
The Agency argued there was a distinction in the proposals in that the awardee’s “warm bench” was made up exclusively of existing employees, while TISTA’s would need to hire surge candidates.
The Government Accountability Office (“GAO”) rejected the Agency’s argument, finding that both quotations provided for surge staffing with a mix of existing and yet-to-be-hired employees, and sustained the protester’s allegation of disparate treatment.
GAO similarly found unequal treatment in the Agency’s decision to assign a strength to the awardee for its use of a “master schedule,” when it did not assign a strength to the protester for proposing use of a “master tracker.”
Five Practical Tips for Government Contractors Navigating the Executive Order Chaos
Federal government contractors are living in a climate of uncertainty. Executive orders affecting government contracts are being issued at a rapid pace. The executive orders tend to be broad and high-level with regulatory guidance to follow. This is not abnormal. However, the sheer number of executive orders and the magnitude of the regulatory changes they seek to impose is a new phenomenon. Contractors are left to determine what they should be doing, if anything, and when. Set forth below are practical suggestions for contractors to consider during this unsettling time.[1]
Communicate with your Contracting Officer
During the chaos, it is important to communicate with your contracting officer. Only contracting officers are authorized to modify contracts. Do not blindly accept direction from contract specialists or others who purport to be speaking on behalf of the government. Direction received from anyone other than a contracting officer should be immediately relayed to your contracting officer with a request for clarification or guidance.
Also, be prepared for unclear responses from your contracting officer. Like you, contracting officers also are living through this chaos. They may not have received clear direction to pass on to contractors. Aim to keep your communications with your contracting officer respectful.
Executive Orders are not Contract Modifications
Remember that executive orders are not contract modifications. Contractors should not change their contract performance or their compliance with, for example, socioeconomic programs unless or until a contract modification signed by a contracting officer. This may be difficult for contractors when they think they can see the writing on the wall. But regulatory and policy changes can occur and, thus, even well-intentioned contractors might make changes they did not need to make or that are different from what is required from a formal contract modification.
Continue Contract Performance
Along the same lines, contractors need to continue contract performance in accordance with the four corners of the contract unless or until a contract is modified. Failure to do so could be considered breach of contract. With the plethora of contract terminations being reported, contractors should not put themselves in the crosshairs by failing to comply with the terms and conditions of their contract, thereby giving the government a basis to terminate for default. And remember, if you believe the government has breached or improperly changed a contract, a contractor is required to continue performance and seek relief in accordance with the FAR Disputes clause.
Communicate with your Subcontractors
Just as a prime contractor craves concrete guidance from a contracting officer regarding what to do, subcontractors also need guidance and oftentimes more so, because they are unable to communicate directly with the government. Thus, a good practice for prime contractors is to pass along any guidance received from a contracting officer to its subcontractors. Prime contractors also should remind their subcontractors about their obligations to continue contract performance.
Prepare to Defend Your Contract
Contractors also should be prepared to explain the importance of their contracts to the government. To be proactive, contractors should draft narratives explaining the importance of their work and how their performance exceeds contract requirements. Contracts that are considered to “add value” are less likely to be found on the so-called “chopping block.” If appropriate, a contractor should consider including recommendations, for example, regarding how its work can be performed more effectively or efficiently.
We hope this practical advice will help you navigate the government contracting chaos until the dust settles.
[1] See our previous related blog posts: Understanding President Trump’s Executive Orders on DEI: Implications for Federal Contractors; What Contractors Facing Terminations, Stop-Work Orders, and Suspension of Work Orders Directed by the Trump Administration Need to Know; Fixed Price Contracts: Government Contractors Beware; What GSA Contractors Need to Know About the New FAR Deviation for Revoked Executive Order 11246, Equal Employment Opportunity; Preliminary Injunction Granted Related to DEI-Related Executive Orders—Takeaways for Government Contractors; President Trump Signs New Executive Order: “Implementing the President’s ‘Department of Government Efficiency’ Cost Efficiency Initiative”—What Federal Contractors Need to Know.
USTR Seeks Public Comment on Proposed Action in Section 301 Investigation of China’s Targeting of the Maritime, Logistics, and Shipbuilding Sectors
The Office of the United States Trade Representative (“USTR”) announced its proposed actions under Section 301 of the Trade Act of 1974 (“Section 301”), in connection with its Investigation of China’s Targeting of the Maritime, Logistics, and Shipbuilding Sectors for Dominance (the “Proposed Action”) on February 21, 2025.
In short, the Proposed Action includes a variety of recommended remedies, including (1) imposing significant port fees on Chinese vessel operators and other operators of Chinese-built vessels, and operators with orders for new vessels being built in Chinese yards, and (2) implementing requirements for mandatory use of U.S.-flag and U.S.-built vessels to carry fixed percentages (increased annually) of U.S. exports.
At this time, the Proposed Action is not final and USTR is seeking public comment by March 24, 2025, as discussed further below. Given the role that ocean transportation plays in the economy, the Proposed Action would have far-reaching effects to the extent it is adopted. Accordingly, vessel owners and operators and other interested parties in the industry should consider commenting on the Proposed Action and/or appearing at the upcoming hearing with respect to how the Proposed Action may affect them and their industry. In addition, at a minimum, shipowners, operators, charterers, and shippers should start considering their operations, contracts, and how the Proposed Action may affect them.
It is worth noting that in the days since USTR released its Proposed Action, the Trump administration has taken several significant steps focused on promotion of the U.S. shipbuilding and maritime industry, including measures drawing revenue from the proposed Section 301 fees:
Creation of a Shipbuilding Office: President Trump announced plans to establish a new office of shipbuilding within the White House. The Office of Maritime and National Capacity is organized within the National Security Council and aims to revitalize domestic ship production.
Tax Incentives: The administration plans to offer special tax incentives to encourage investment in both military and commercial shipbuilding.
Executive Order Under Consideration: An executive order (“EO”) is under consideration that includes measures to support U.S. shipbuilders. A draft order, which has been circulated in recent days throughout the maritime industry, reportedly includes a directive that USTR impose, through the ongoing 301 investigation, tonnage-based fees on Chinese-built and Chinese-flagged ships (or vessels in fleets that contain such ships) entering the United States. However, at this point, the EO is still in draft form and has not been signed or released to the public.
Background
Section 301 authorizes USTR to investigate foreign trade practices and impose measures on foreign countries found to violate U.S. trade agreements or engage in acts that are “unjustifiable,” “unreasonable,” or “discriminatory” in ways that burden U.S. commerce. USTR’s powers under Section 301 are quite broad.
In March 12, 2024, five major U.S. labor unions filed a Section 301 petition regarding alleged acts, policies, and practices of China to dominate the maritime, logistics, and shipbuilding sector. The petition was accepted, and on April 17, 2024, USTR initiated an investigation. Following its investigation, on January 16, 2025, in the last days of the Biden Administration, USTR published its report and determined that China’s practices were “actionable”.[1]
In connection therewith, USTR published the Proposed Action and is now seeking public comments from interested parties. Comments must be submitted via USTR’s online portal (https://comments.ustr.gov/s/) no later than March 24, 2025. USTR has also scheduled a public hearing on the proposed actions on March 24, 2025, in the main hearing room of the U.S. International Trade Commission located at 500 E Street S.W., Washington, D.C. 20436. Interested parties may request to appear at the hearing no later than March 10, 2025, and the request should include a summary of the proposed testimony and may be accompanied by a pre-hearing submission. Remarks at the hearing are limited to five minutes.
Proposed Action
The Proposed Action includes the following fees and service restrictions:
Fees
Chinese maritime transport operators will be charged a fee:
up to U.S. $1,000,000 per vessel entrance to a U.S. port; or
up to U.S. $1,000 per net ton of the vessel’s capacity per entrance to a U.S. port.
Chinese maritime transport operators with fleets comprised of Chinese-built vessels will be charged:
up to U.S. $1,500,000 per vessel entrance to a U.S. port;
fees based on the percentage of Chinese-built vessels in the operator’s fleet:
up to U.S. $1,000,000 per vessel entrance at a U.S. port if greater than 50 percent of the fleet;
up to U.S. $750,000 per vessel entrance at a U.S. port if between 25 percent and 50 percent of the fleet; or
up to U.S. $500,000 per vessel entrance at a U.S. port if between 0 percent and 25 percent of the fleet; or
an “additional” fee up to U.S. $1,000,000 per vessel entrance to a U.S. port if the number of Chinese-built vessels in the operators fleet is equal to or greater than 25 percent.
Maritime transport operators with prospective orders for Chinese vessels:
an “additional fee” based on the percentage of vessels ordered from Chinese shipyards:
up to U.S. $1,000,000 per vessel entrance at a U.S. port if greater than 50 percent of their vessel orders in Chinese shipyard or vessels expected to be delivered by Chinese shipyards over the next 24 months;
up to U.S. $750,000 per vessel entrance at a U.S. port if between 25 percent and 50 percent of their vessel orders in Chinese shipyard or vessels expected to be delivered by Chinese shipyards over the next 24 months; or
up to U.S. $500,000 per vessel entrance at a U.S. port if between 0 percent and 25 percent of their vessel orders in Chinese shipyard or vessels expected to be delivered by Chinese shipyards over the next 24 months; or
a fee up to U.S. $1,000,000 per vessel entrance at a U.S. port if 25 percent or more of the total number of vessels ordered by an operator, or expected to be delivered to the operator, are ordered or expected to the delivered by Chinese shipyards over the next 24 months.
The Proposed Action also includes a proposed “refund” for additional fees, on a calendar year basis, up to U.S. $1,000,000 per entry into a U.S. port of a U.S.-built vessel through which the operator is providing international maritime transport services. However, the Proposed Action does not include any further details as to the timing of refunds or the process to obtain a refund.
Service Restrictions
In addition to the above fees, the Proposed Action includes restrictions on services aimed at promoting the transport of U.S. goods on U.S. vessels. In that regard, the international maritime transport of all U.S. goods (e.g., capital goods, consumer goods, agricultural products, and chemical, petroleum, or gas products), must comply with the following schedule:
“As of” Effective Date
Effective Date of Action
Two Years Following Effective Date of Action
Three Years Following Effective Date of Action
Seven Years Following Effective Date of Action
Percentage of U.S. Products, Per Calendar Year, Exported by Vessel, Restricted to Export on U.S.-Flagged Vessels by U.S. Operators
At least 1 percent
At least 3 percent
At least 5 percent (at 3 percent of which must be U.S.-flagged, U.S.-built, by U.S. Operators)
At least 15 percent (at 5 percent of which must be U.S.-flagged, U.S.-built, by U.S. Operators)
The Proposed Action also includes a requirement that U.S. goods are to be exported on U.S.-flagged, U.S. built vessels, but may be approved for export on a non-U.S.-built vessel provided the operator providing international maritime transport services demonstrates that at least 20 percent of the U.S. products, per calendar year, that the operator will transport by vessel, will be transported on U.S.-flagged, U.S.-built ships.
Other Actions
In addition, the Proposed Action included a recommendation that relevant U.S. agencies take actions to reduce exposure to and risk from China’s promotion of the National Transportation and Logistics Public Information Platform (“LOGINK”) or other similar platforms, including investigating alleged anticompetitive practices from Chinese shipping companies, restricting LOGINK access to U.S. shipping data, or banning or continuing to ban terminals at U.S. ports and U.S. ports from using LOGINK software.
Key Takeaways
Open Issues: While the Proposed Action listed a number of proposed fees and restrictions, the descriptions are generally vague and include no regulatory details or necessary definitions for implementation. For effective implementation, many of the proposals will need to be fleshed out further before a final rule is adopted.
For example, many requirements are based on who the vessel “operator” is, but that term is not defined, and there is no standard definition of “vessel operator” in U.S. law; it can vary depending on the particular legal or regulatory requirements at issue. There is also no indication how affiliated companies would be treated in the fleet-wide analysis of the origin of vessels or newbuilds.
In addition, the Proposed Action sets maximum fees (“at a rate of up to $1,000,000 per entrance”) but does not include any analytical principles, policies, or procedures to determine how the U.S. government would set the actual fees for specific vessels (e.g., how will fees be adjusted based on vessel type, cargo type, trade, volume, export status, and/or other factors, etc.).
Status of the Proposed Action: The Proposed Action is only a set of proposals at this stage and the various fees and service restrictions are not yet final. At this time, it is unclear whether USTR will ultimately impose all, some, or any of the proposals included in the Proposed Action. However, given the lack of specificity and open issues, public comment and testimony at the public hearing by interest parties may help shape what form the final rules takes.
Timeline: The public hearing is scheduled for March 24, 2025, and the deadline for public comments also closes on March 24, 2025. Section 301 cases are supposed to be completed within one year, which would require the rule to be finalized by April 17, 2025, and then implemented 30 days after. However, the White House may extend that period up to 180 days.
Given the lack of specificity in the Proposed Action and the anticipated wide-ranging opposition from inside the United States (from importer, exporters, manufacturers, retailers, etc.) and also outside the United States (shipowners, shippers, associations, governments, etc.), it will be challenging for USTR to finish this process and publish a workable final regulation within the one-year timeframe. However, given the velocity of other recent administration trade actions, an implementation of some or all proposed measures in April cannot be ruled out.
Contract Review: In the interim, vessel owner and operators and other actors in the industry should review their existing and prospective contracts and consider how the Proposed Action may affect them and whether they may have any applicable relief. For example:
Which party is responsible for port fees (typically the charterers) and are there any exceptions or restrictions that may be applicable;
Does the contract include tariff or sanction provisions that may be applicable; or
Would the Proposed Action constitute a force majeure event, a change in law, or a material adverse change such that certain rights such as suspension of performance, substitution of vessel, or termination may be applicable?
[1] The full 182-page report titled Section 301 Investigation: Report on China’s Targeting of the Maritime, Logistics, and Shipbuilding Sectors for Dominance, may be found here: https://ustr.gov/sites/default/files/enforcement/301Investigations/USTRReportChinaTargetingMaritime.pdf
Proposed FAR CUI Rulemaking Nears Comment Deadline
Go-To Guide:
The comment period on the proposed FAR Controlled Unclassified Information (CUI) Rule closes Monday, March 17, 2025.
To date, filed comments demonstrate core concerns, including the difficulty of complying with the eight-hour incident reporting requirement for potential CUI incidents or mismarked CUI.
The FAR Council may issue the final rule later this year after adjudicating submitted comments and a 90-day Office of Information and Regulatory Affairs review period.
Once the rule is finalized, government contractors performing work for any government agency who receive CUI must implement the security controls in NIST SP 800-171.
Despite the potentially sweeping impact of the proposed FAR CUI Rule (Proposed Rule), less than 30 comments have been filed to date during the comment period, which ends March 17, 2025. The FAR Council will adjudicate each of these comments, and any additional ones submitted by the deadline, before issuing the final rule, which may be expedited given the relatively low number of submissions.
The long-awaited Proposed Rule, published on Jan. 15, 2025, would implement the final piece of the National Archives and Records Administration (NARA)’s Federal Controlled Unclassified Information (CUI) Program, which dates back to 2010.
As we previously covered in a January 2025 GT Alert, the Proposed Rule would standardize cybersecurity requirements for all federal contractors and subcontractors and implement NARA’s policies under 32 CFR part 2002. The Proposed Rule would also introduce new procedures, including reporting and compliance obligations, and define roles and responsibilities for both the government and contractors who handle CUI.
Commenters Express Common Concerns and Themes
Commenters expressed many of the same concerns, and the submitted comments correspond to common themes.
The Eight-Hour Incident Reporting Timeframe Is Unreasonable. A key requirement under the Proposed Rule is to report a suspected or confirmed CUI incident within eight hours of discovery. This obligation also flows down to subcontractors and requires them to notify the prime or next higher tier subcontractor within the same eight-hour timeframe. Many commenters appear concerned about the potential burden and cost impact of this requirement, especially for small businesses. Commenters seek to align the reporting timeframe with other existing federal frameworks, such as the Cyber Incident Reporting for Critical Infrastructure Act (CIRCIA), which calls for a 72-hour timeframe to report qualifying incidents to the Cybersecurity and Infrastructure Security Agency. Similarly, DFARS 252.204-7012 (Safeguarding Covered Defense Information and Cyber Incident Reporting) also requires defense contractors to “rapidly report” cyber incidents to the Department of Defense within 72 hours of discovery. Notably, the Proposed Rule does not attribute this eight-hour reporting requirement to defense contractors due to their existing obligations under DFARS 252.204-7012. Accordingly, maintaining the current expedited timeframe structure has potential to further complicate federal contractor and subcontractor obligations under the Proposed Rule, depending on which agency they are working with.
The Definition and Scope of “CUI incident” Require Clarification. Under the Proposed Rule, FAR 2.101 would be amended to add “CUI incident,” which shall be defined as “suspected or confirmed improper access, use, disclosure, modification, or destruction of CUI, in any form or medium.” In response, several commenters have noted that this term is poorly defined and overly broad. Core to these commenters’ concern is the related obligation for contractors to expeditiously report a suspected or confirmed CUI incident—a vaguely and broadly defined term would be potentially burdensome and drastically increase the number of reported events to the government. Given the breadth of the definition, the FAR Council’s estimate of 580 incident reports annually might be a significant underestimation.
Small Business Contractors Would Incur High Compliance Costs. The FAR Council estimates that non-defense contractors and subcontractors would incur labor, hardware, and software costs in order to comply with the Proposed Rule. For small businesses, the total initial year cost estimate is $175,700, with recurring annual costs expected to be $103,800. The Proposed Rule recognizes this impact and has engaged in a Regulatory Impact Analysis (RIA) that considers specific business concerns. In response, one commenter has detailed the potential outsized impact of the Proposed Rule on small businesses, which do not have dedicated compliance teams or the built-in expertise to continuously monitor their systems with in-house resources, structure incident reporting chains, or implement training programs. This commenter suggests that the FAR Council’s estimate for training costs is underestimated. Such comments align with the FAR Council’s express invitation for feedback from small entities on any RIA assumptions or other expected burdens that may help inform the final rule. However, to date, small business concerns and other interested parties have largely been absent from the public comment efforts. Such entities should consider submitting comments to provide additional detail around the anticipated costs and considerations the RIA may have missed.
Other Concerns Raised
Some commenters have requested further guidance on how to handle legacy records and information that might have been previously designated as For Official Use Only (FOUO), a designation that is no longer utilized, and how those records would be marked under the CUI framework. Other comments request more guidance on how CUI would be identified, especially for small business concerns. While these are important considerations, they are likely outside of the current rulemaking’s scope, which arises under Title 48 of the CFR (the acquisition regulation). The Proposed Rule implements NARA’s CUI Program, which is separately described under 32 CFR part 2002, and which codified a standardized approach to designating, handling, and safeguarding CUI.
Additionally, some comments seek an extension of the public comment period. Given that the comment period remained in effect during the new administration’s regulatory freeze pending review, it appears unlikely that a continuance will be granted, and the 60-day comment period may close as scheduled.
Interested contractors should submit their comments on the Proposed Rule by March 17, 2025. Given the relatively few comments received, the adjudication process may be quicker than originally anticipated. The FAR Council may issue the final rule in 2025, with standardized cybersecurity standards for all federal contractors and subcontractors going into effect and the clauses included in contracts by year end or early 2026.