Recent DCSA Updates Regarding Expansion of FOCI Requirements to Unclassified Government Contracts
The Defense Counterintelligence and Security Agency (DCSA) has provided new updates about the highly anticipated changes that will apply foreign ownership, control or influence (FOCI) mitigation requirements to unclassified contracts.
DCSA recently posted updates to a central webpage dedicated to the forthcoming expansion of FOCI reviews to contractors seeking to perform on certain unclassified contracts pursuant to Section 847 of the FY20 National Defense Authorization Act (NDAA) (Section 847). According to the DCSA’s update, Section 847 is likely be implemented in the next 12 to 18 months, following publication of the corresponding Defense Federal Acquisition Regulation Supplement (DFARS) clause.1 The corresponding Department of Defense (DoD) Instruction 5205.87 was published last year – see our client alert from July entitled “Foreign Ownership, Control or Influence (FOCI) Mitigation Specifically for Unclassified Contracts”.
When implemented, Section 847 requires DCSA to assess beneficial ownership (i.e., individuals or entities who ultimately control a contractor, even if indirectly) for FOCI concerns, and mitigate those concerns if deemed necessary by the agency. This assessment will be conducted for contractors prior to contract award (for unclassified contracts), and again post-award if there are material changes to the information originally submitted during this phase or during the contract performance phase. For cases that may require mitigation, DCSA will leverage a commitment letter and interim measures in order to permit contract award, while governance and operational mitigations are negotiated. This is similar to the process for protecting facility security clearances in cases of foreign acquisitions of cleared contractors today.
Notably, the webpage states that classified contractors will still undergo FOCI review and mitigation post-award (versus pre-award).
Section 847 is widely considered to be massive change, not only for industry, but for government acquisition personnel and DCSA. DCSA states that, respecting FOCI matters, it currently processes about 2,000 cases per year. DCSA estimates that, when fully implemented, Section 847 will result in processing approximately 41,000 cases annually (for classified and unclassified contract awards), and adding security requirements for up to US$200 billion worth of acquisitions. To meet this demand, DCSA has been adding and training personnel, who will not only process the cases but also provide training and customer service to contractors.
1 Per the open DFARS cases (as of April 3, 2025), the Defense Acquisition Regulations Council (DARC) Director tasked the Acquisition Technology & Information Team to draft the proposed DFARS rule for “Mitigation Risks Related to Foreign Ownership, Control or Influence.” That report is due on May 14, 2025, but that could be extended by the DARC Director.
Circuit Split on Anti-Kickback Causation Poses Complications for Whistleblowers, But First Circuit Ruling Also Provides a Path Forward
In February, a panel of three judges in the U.S. Court of Appeals for the First Circuit issued a decision in United States v. Regeneron Pharmaceuticals, Inc. ruling that “but-for” causation is the proper standard for False Claims Act (FCA) cases alleging improper kickbacks and referrals in violation of a 2010 amendment to the Anti-Kickback Statute (AKS). This decision deepens a circuit split on the issue, as the Sixth Circuit and Eighth Circuit have adopted a but-for causation standard, while the Third Circuit ruled that the kickback only needs to be a contributing factor.
The circuit split is likely to be resolved by the Supreme Court, but in the meantime, its impact on FCA enforcement poses complications for whistleblowers looking to report kickbacks under the FCA’s qui tam provisions.
However, the First Circuit panel in Regeneron also clarified that there still exists a key route for whistleblowers and the government to pursue AKS-based FCA cases under the implied false certification theory. The court held that there still remains FCA liability when compliance with the AKS is a recognized precondition of payment under a federal healthcare program and a provider falsely certifies compliance with those requirements to get a claim paid by Medicare or Medicaid. Notably, the court held that there is no but for causation required when such an implied false certification claim is pursued under the FCA.
The Anti-Kickback Statute, False Claims Act and Whistleblowers
Dating back to the Civil War, the False Claims Act targets fraud among government contractors. It holds that any person who knowingly submits, or causes to submit, false claims to the government is liable for three times the government’s damages plus a penalty.
A key element of the FCA is its qui tam provisions, which empower whistleblowers with knowledge of FCA violations to come forward and file lawsuits on behalf of the government, which then has the option to intervene and take over the lawsuit. Regardless of whether the government intervenes, whistleblowers whose qui tam suits result in successful cases are eligible to receive between 15-30% of the funds collected in the case.
The Anti-Kickback Statute prohibits the exchange (or the offer to exchange) of any form of remuneration to induce or reward referrals for services or items reimbursable by federal healthcare programs. In violating the AKS, a company or individual can also be liable under the FCA. While the AKS imposes criminal liability on violations, the FCA adds civil liability.
Over the years, the government and whistleblowers have aggressively enforced violations of the AKS and FCA in tandem. For example, in July 2024, the Department of Justice announced that DaVita Inc., a healthcare company providing kidney dialysis services, agreed to pay $34 million to settle allegations that it violated the FCA through the illegal payments of kickbacks to induce referrals to DaVita’s dialysis centers and DaVita Rx, a former subsidiary that provided pharmacy services for dialysis patients. The settlement resolved a qui tam whistleblower suit filed by Dennis Kogod, a former Chief Operating Officer of DaVita Kidney Care, who received a $6,370,000 whistleblower award from the settlement proceeds. Over the years, many of the largest False Claims Act whistleblower recoveries have been based on alleged AKS violations in the health care industry.
First Circuit Ruling and Circuit Split
The First Circuit’s ruling in Regeneron centered around a provision in the 2010 amendments to the AKS which states that “a claim that includes items or services resulting from a violation of [the AKS] constitutes a false or fraudulent claim for purposes of [the FCA].” (Emphasis added)
In Regeneron, the government alleged that drug manufacturer Regeneron Pharmaceuticals paid tens of millions of dollars in kickbacks for its macular degeneration drug Eylea by using a foundation as a conduit to cover Medicare co-pays for Eylea.
The issue before the First Circuit in Regeneron was the level of causation required to satisfy the “resulting from” language. The First Circuit ruled that that “but-for” causation is the proper standard, meaning that there is no FCA liability if the claim would have been submitted regardless of the illegal kickback.
In Regeneron therefore, the Court ruled that Regeneron Pharma was not liable under the FCA because the government could not prove that doctors prescribing Eylea would not have done so “but for” the alleged kickbacks covering the co-pay cost.
According to the First Circuit, “The Supreme Court has held that a phrase like ‘resulting from’ ‘imposes… a requirement of actual causality,’” and “Accordingly, ‘it is one of the traditional background principles ‘against which Congress legislate[s]’ that a phrase such as ‘result[ing] from’ imposes a requirement of but-for causation.” While the Court notes that textual or contextual indications may suggest a different standard of causation, it ruled that none were present in the 2010 AKS amendment.
The First Circuit ruling deepens a circuit split on the issue. The Sixth and Eighth Circuits had also previously adopted the more stringent “but-for” causation standard for AKS-based FCA claims. The Third Circuit on the other hand has rejected the “but-for” causation standard and instead adopted a broader standard allowing for FCA liability if the kickback was merely a contributing factor to the submission of the claim.
Implications and Routes Forward for Whistleblowers
The circuit split on the causation standard for AKS-based FCA claims poses some complications for whistleblowers looking to hold fraudsters accountable through qui tam lawsuits. Firstly, the split will cause confusion about what standard applies for which justifications. But even more importantly, the “but-for” causation standard will make it much harder for whistleblowers and the government to prove False Claims Act liability in kickback cases.
There still remains a key route for whistleblowers and the government to pursue AKS-based FCA cases: the false certification theory. Under the false certification theory, a violation of the AKS can give rise to FCA liability when compliance with the AKS is a recognized precondition of payment under a federal healthcare program and a provider falsely certifies compliance with the law when it submits a claim, or causes the submission of a false claim.
The false certification theory predates the 2010 amendments at issue and is considered a distinct pathway towards proving FCA liability. In Regeneron, the First Circuit clearly states that “claims under the 2010 amendment run on a separate track than do claims under a false-certification theory” and that “there is nothing in the 2010 amendment that requires proof of but-for causation in a false certification FCA case.”
Barring a Supreme Court decision striking down “but-for” causation or a Congressional amendment clarifying a different standard of causation, FCA whistleblower claims can still survive if they can file qui tam suits based upon the false certification theory. Additionally, many whistleblower qui tam FCA cases alleging illegal kickbacks and violations of the AKS can meet the but for causation test. Consequently, whistleblowers and their counsel will need to evaluate the possible routes available when there are allegations of illegal kickbacks being paid in the context of providing health care that is reimbursed by Medicare, Medicaid or other government healthcare programs.
The government has made AKS enforcement a major FCA priority in recent years and the Deputy Assistant Attorney General Michael Granston recently promised that under the Trump administration the Department of Justice “plans to continue to aggressively enforce the False Claims Act.”
Individuals looking to blow the whistle on illegal kickbacks should contact an experienced False Claims Act whistleblower attorney.
Geoff Schweller also contributed to this article.
Key Legal Issues Facing U.S. Government Contractors in 2025
As the regulatory environment continues to evolve in the new administration, U.S. government contractors are facing an increasingly complex array of legal challenges. Staying compliant and competitive requires close attention to several ongoing legal issues in addition to emerging ones:
1. Cybersecurity Compliance and CMMC Implementation
Cybersecurity remains a top priority for federal agencies, and the rollout of the Cybersecurity Maturity Model Certification (CMMC) 2.0 framework has brought new compliance expectations. Contractors must ensure that their information systems meet required security standards, or risk disqualification from Department of Defense (DoD) contracts. The phased implementation schedule means that affected contractors should act now to assess readiness and begin remediation efforts.
2. False Claims Act (FCA) Enforcement
The Department of Justice continues to actively pursue FCA cases, particularly in areas like procurement fraud, mischarging, and non-compliance with contract terms. Moreover, consistent with DOGE’s stated mandate of combatting fraud in federal contracting and grants, the Trump administration is likely to place additional emphasis on this tool. Contractors should invest in robust internal compliance programs and training to mitigate risks of whistleblower complaints and audits.
3. Supply Chain and Buy American Act Scrutiny
Recent executive orders and proposed regulations are reinforcing domestic sourcing requirements. Contractors must carefully assess their supply chains to ensure compliance with Buy American Act and Trade Agreements Act rules. Non-compliance could lead to severe adverse consequences, such as contract termination or debarment.
4. Labor and Employment Mandates
Despite changes in emphasis from the new administration, government contractors are still subject to a variety of federal labor requirements, including those related to minimum wage, paid leave, and workplace safety. With recent changes from the Department of Labor – such as updates to prevailing wage rules under the Davis-Bacon Act – contractors must remain agile in adapting to new mandates.
5. ESG and DEI Reporting Requirements
Environmental, social, and governance (ESG) initiatives are becoming increasingly important in federal procurement. Contractors may soon face new disclosure obligations related to sustainability and diversity, equity, and inclusion (DEI) practices. Proactively developing transparent ESG and DEI strategies can offer a competitive edge.
6. Bid Protests and Procurement Integrity
With increased competition for contracts, bid protests are becoming more common. Understanding protest procedures, debriefing and intervention rights, and ethical boundaries in the procurement process is crucial to protecting your interests and reputation.
Conclusion
The legal terrain for government contractors is shifting rapidly. A proactive approach to compliance, risk management, and strategic planning is essential for long-term success in this high-stakes sector.
Executive Order Overhauls Foreign Military Sales: Building on Momentum for Reform
On April 9, 2025, President Trump issued an Executive Order titled “Reforming Foreign Defense Sales to Improve Speed and Accountability.” This directive is the first Executive Order ever issued by a U.S. President on the foreign military sales (FMS) process and sets in motion a substantial modernization. The Order aims to strengthen U.S. global competitiveness, advance strategic objectives, and ensure that trusted allies and partners receive American defense systems more swiftly and reliably.
While the Executive Order is historic, it builds on previously proposed reforms from Congress and the Department of Defense (DoD). In 2024, the House Foreign Affairs Committee published a “Foreign Military Sales Tiger Task Force Report,” which offered legislative reforms to the FMS process (Foreign Affairs FMS Report). A 2023 “Tiger Team” report identified chronic inefficiencies in the U.S. arms sales system and laid out comprehensive recommendations for reform (DoD Tiger Team Report). Though not explicitly cited, many elements of the Executive Order reflect the Congressional and DoD findings.
White House Fact Sheet Highlights
According to the White House, the Executive Order will:
Improve accountability and transparency across the foreign defense sales system to ensure predictable and reliable delivery of U.S. products in support of foreign policy objectives.
Reduce regulatory friction in the development and execution of arms transfers to ensure sales advance national interests.
Promote U.S. competitiveness, revitalize the defense industrial base, and deliver cost efficiencies for both the United States and its partners.
Prioritize strategic partnerships by identifying a list of key countries and defense articles that will receive expedited consideration.
Institutionalize exportability early in the acquisition cycle to speed up approvals while protecting sensitive technologies.
Create a digital tracking and accountability system that allows real-time visibility into the status of FMS and Direct Commercial Sales (DCS) approvals.
Streamline and consolidate the approval process to reduce delays, facilitate joint operations, and improve burden-sharing with allies.
Alignment with Tiger Team and Industry Reform Demands
The Executive Order responds to long-standing frustrations voiced by both industry stakeholders and foreign governments regarding the slow, opaque, and risk-averse nature of the current U.S. arms transfer process. In particular, it echoes recommendations made by the DoD 2023 Tiger Team, including:
Accelerating acquisition and release timelines for key technologies;
Focusing FMS resources on the most strategically significant partners;
Enhancing workforce expertise and coordination across agencies.
Together, these reforms aim to bolster U.S. credibility as a security partner while helping trusted allies access advanced capabilities amid growing regional threats.
Congressional Support and Competitive Implications
Senator Jim Risch (R-Idaho), Chairman of the Senate Foreign Relations Committee, welcomed the Executive Order, stating that “our current system suffocates our ability to support our partners” and praising the new directive for its potential to “unclog the system” and push back against Russian and Chinese influence (Risch Statement).
Industry voices echoed this sentiment. As reported by Breaking Defense, defense firms see the order as a major opportunity to improve predictability, increase deal flow, and adapt to a changing security landscape in which U.S. competitors often outpace Washington on speed and flexibility (Breaking Defense).
Strategic Takeaways
For Defense Contractors: The EO signals that the U.S. government is serious about streamlining sales pathways. Firms should prepare to engage early on exportability design and prioritize systems likely to appear on the upcoming “priority end-item” list.
For Foreign Partners: Allied nations should expect greater clarity and speed in the sales process. Those with longstanding requests may see movement in the near term as agencies implement new tracking and prioritization tools.
For Policymakers: The order raises important policy tradeoffs between speed and oversight, especially in transactions involving sensitive technologies or countries in volatile regions.
What Comes Next?
Within the next 60–120 days, the Departments of State and Defense are required to deliver:
A list of priority defense partners;
A list of priority end-items for expedited review;
A plan to integrate exportability into the defense acquisition cycle;
A prototype for a unified FMS and DCS digital tracking system.
Stakeholders should actively monitor implementation guidance and identify ways to influence agency priorities, program selections, and regulatory interpretations.
False Claims Act Settlements in Q1 Shows Scope of Frauds Targeted by Government as DOJ Official Promises “Aggressive” Enforcement
During the first quarter of 2025, the U.S. Department of Justice (DOJ) announced a number of False Claims Act (FCA) settlements and judgements, many of which resolved qui tam lawsuits filed by whistleblowers. The settlements and judgements showcase the variety of frauds which the government is pursuing and which False Claims Act whistleblowers can report.
Under the False Claims Act’s qui tam provisions, whistleblowers can file a qui tam lawsuit alleging violations of the FCA on behalf of the government, which then has the option to intervene and take over the lawsuit. Regardless of whether the government intervenes, whistleblowers whose qui tam suits result in successful cases are eligible to receive between 15-30% of the funds collected in the case.
The types of fraud targeted in settlements and judgments announced in the first quarter of 2025 include Medicare Part C fraud, cybersecurity fraud, illegal kickbacks and defense contract fraud.
In a keynote address at the Federal Bar Association’s annual qui tam conference in February, Deputy Assistant Attorney General Michael Granston promised that moving forward the Department of Justice “plans to continue to aggressively enforce the False Claims Act.”
$62 Million Settlement Over Medicare Part C Fraud Allegations
On March 26, the DOJ announced that Seoul Medical Group Inc., its subsidiary and majority owner, and Renaissance Imaging Medical Associates Inc., a radiology group that worked with Seoul Medical, agreed to pay a total of $62 million to resolve False Claims Act allegations relating to the submission of false diagnosis codes for two spinal conditions to increase payments from the Medicare Advantage program (Medicare Part C).
According to the DOJ, Seoul Medical and its owner “submitted diagnoses for two severe spinal conditions, spinal enthesopathy and sacroiliitis, for patients who did not suffer from either of these conditions” and “enlisted the assistance of Renaissance Imaging Medical Associates to create radiology reports that appeared to support the spinal enthesopathy diagnosis.”
These diagnoses allegedly led to the increased payment to Seoul Medical under Medicare Part C.
“Medicare Advantage is a vital program for our seniors and the government expects healthcare providers who participate in the program to provide truthful and accurate information,” said Acting Assistant Attorney General Yaakov M. Roth of the Justice Department’s Civil Division. “Today’s result sends a clear message to the Medicare Advantage community that the United States will zealously pursue appropriate action against those who knowingly submit false claims for taxpayer funds.”
The settlement resolved a qui tam whistleblower suit filed by Paul Pew, the former Vice President and Chief Financial Officer of Advanced Medical Management. Pew’s share of the recovery had not been determined at the time of the settlement.
$4.6 Million Settlement Over Cybersecurity Fraud Allegations
On March 26, the DOJ also announced a $4.6 million settlement MORSECORP Inc. resolving allegations that MORES violated the FCA by failing to comply with cybersecurity requirements in its contracts with the Departments of the Army and Air Force.
According to the DOJ, MORSE “submitted false or fraudulent claims for payment on contracts with the Departments of the Army and Air Force” and “those claims were false or fraudulent because Morse knew it had not complied with those contracts’ cybersecurity requirements.”
Among other things, the DOJ accused MORSE of “use[ing] a third-party company to host MORSE’s emails without requiring and ensuring that the third party met security requirements equivalent to the Federal Risk and Authorization Management Program Moderate baseline and complied with the Department of Defense’s requirements for cyber incident reporting, malicious software, media preservation and protection, access to additional information and equipment necessary for forensic analysis and cyber incident damage assessment.”
“Federal contractors must fulfill their obligations to protect sensitive government information from cyber threats,” said U.S. Attorney Leah B. Foley for the District of Massachusetts. “We will continue to hold contractors to their commitments to follow cybersecurity standards to ensure that federal agencies and taxpayers get what they paid for, and make sure that contractors who follow the rules are not at a competitive disadvantage.”
The settlement stemmed from a qui tam lawsuit filed by a whistleblower who is set to receive an $851,000 share of the settlement amount.
$15 Million Settlement Over Defense Contract Fraud Allegations
On April 1, the DOJ announced that DRI Relays Inc. agreed to pay $15.7 million to resolve allegations that it violated the FCA by supplying military parts that did not meet military specifications.
According to the DOJ, “between 2015 and 2021, under various Department of Defense (DoD) contracts and subcontracts, DRI invoiced for military grade electrical relays and sockets when it knew those parts had not met the testing requirements to be deemed military grade.”
“It is essential to the safety and operational readiness of our military that contractors comply with applicable military specifications,” said Acting Assistant Attorney General Yaakov M. Roth of the Justice Department’s Civil Division. “We will continue to hold accountable those who knowingly supply equipment to the U.S. military that fails to meet their contract obligations.”
$1.9 Million Settlement Over Kickback Allegations
On March 6, the DOJ announced that a group of health care providers and laboratory marketers agreed to pay a total of $1.9 million to resolve FCA allegations arising from their involvement in laboratory kickback schemes.
According to the DOJ, “health care providers received kickbacks in return for their referrals to a laboratory in Anderson, South Carolina” and “a marketer and his marketing company received kickbacks from that South Carolina laboratory to arrange for laboratory testing referrals.”
For example, according to the DOJ, one doctor and his medical practices “agreed to pay $400,000 to resolve allegations that from May 2016 to November 2021, they received thousands of dollars in remuneration disguised as purported office space rental and phlebotomy payments from the South Carolina laboratory in return for ordering testing.”
These alleged kickbacks were in violation of the Anti-Kickback Statute.
“Integrity must be the standard in our health care system,” said Acting U.S. Attorney Brook B. Andrews for the District of South Carolina. “Kickback schemes divert funds and focus away from patients and their medical needs.”
Conclusion
As these settlements show, the False Claims Act remains America’s number one anti-fraud law, covering a wide range of fraud affecting the federal government. Since 1986, the FCA has allowed the government to recover over $78 billion, with more than $55 billion stemming from qui tam whistleblower lawsuits.
Individuals looking to file a qui tam lawsuit alleging False Claims Act violations should consult an experienced whistleblower attorney.
Geoff Schweller also contributed to this article.
Replacement Cost Insurance Coverage in Turbulent Times
After the wildfires in Los Angeles, extreme weather events throughout the United States, and recently enacted tariffs, it seemed like a good time to revisit the calculation of replacement cost under policies insuring against loss or damage to property. The concept of replacement cost — sometimes referred to as “new for old” — seems simple, but issues often arise over the calculation and various policy terms and conditions. So, let’s dig in.
What Is Replacement Cost Coverage?
Replacement cost coverage is the most common type of insurance found in first-party property insurance policies, including standard business property policies and builder’s risk policies (for property in the course of construction). It usually applies to both “building” coverage and to business personal property (BPP) coverage, with some exceptions. It is referred to as “new for old” because it pays to replace lost or damaged property with new property of the same type.
Insurance companies frequently argue that because they cover only loss or damage to covered property, policyholders must prove that a particular item of covered property was damaged before the insurance company has an obligation to repair or replace it. Insurance policies, however, rarely are specific on this point. In Windridge of Naperville Condo. Ass’n v. Philadelphia Indem. Ins. Co., 932 F.3d 1035, 1040 (7th Cir. 2019), for example, the court held that “the unit of covered property to consider under the policy (each panel of siding vs. each side vs. the buildings as a whole) is ambiguous.” Thus, the court construed the policy in favor of the policyholder under the well-settled rule that ambiguous language in an insurance policy must be construed in favor of coverage and strictly against the insurance company.
The Windridge court also examined the so-called “matching” issue that often arises with partial damage. Specifically, where new materials will not match the existing undamaged materials, does the insurer have an obligation to pay for changes in the undamaged portions of a building so that the new and old will match? The court noted that the case law is “mixed” in answering this question. The court followed the case law holding that the insurer must account for matching, noting that “buildings with mismatched siding are not a post-storm outcome that the insured was required to accept under this replacement-cost policy.” Id. at 1041.
What Is “Like Kind and Quality”?
“New for old” is usually not difficult when property is a total loss, but it becomes a challenge when property is only damaged or partly destroyed. It can often be difficult, if not impossible, to replace only part of a damaged structure. Issues like tying the new into the old, matching the new and the old, material and technology changes, and code requirements for new versus old often arise.
Most policies require replacement of lost or damaged property with property of “like kind and quality,” or similar words. The standard ISO form uses the phrases “comparable material and quality…used for the same purpose.” These words usually are not further defined.
As discussed above, several courts and/or state statutes provide that replacement materials must match the undamaged portions of the property to qualify as like kind or comparable. For other issues, whether replacement materials are “comparable” often involves expert testimony. In Republic Underwriters Ins. Co. v. Mex-Tex, Inc., 150 S.W.3d 423 (Tex. 2004), for example, the court held that “comparable” does not mean “identical” and affirmed the trial court’s ruling finding coverage for a different type of roof based on expert testimony that the replacement roof was comparable, even though it was different from the damaged roof and cost more to replace.
What if Building Codes Have Changed?
The standard ISO replacement cost form states that the “cost of building repairs or replacement does not include the increased cost attributable to enforcement of or compliance with any ordinance or law regulating the construction, use or repair of any property.” However, some coverage is available for “Increased Cost of Construction,” which includes coverage for the increased cost necessary to comply with the minimum costs of complying with building codes or ordinances, subject to certain conditions. This additional coverage also is sometimes referred to as “Ordinance or Law” coverage. It is limited to certain amounts in the standard ISO form ($10,000 or 5% of the applicable limit), but additional coverage can be purchased.
How Is My Value Determined?
At a high level, replacement cost valuation is straightforward — it is cost to repair or replace the lost or damaged property with comparable property. The standard ISO form limits recovery to the maximum of “the amount actually spent that is necessary to repair or replace the lost or damaged property.” But the total replacement cost can be affected by the issues discussed above (e.g., matching or whether the replacement property is “comparable”), as well as a host of other issues.
The number of factors that can affect replacement cost vary based on the type and age of construction, materials, geography, and macroeconomic events like weather, tariffs and the labor market. These factors affect things like:
The availability of replacement materials
The cost of replacement materials
Alternatives to the damaged property
Lead times for materials
Labor rates and intensity of different repair options
Market or aesthetic changes
The schedule for repairs or replacement
Most insurance companies and their experts use software programs to calculate replacement costs. These programs contain regularly updated labor and materials costs by geographical regions. In calculating replacement cost estimates, they also consider additional costs, such as overhead, profit, permitting, and other costs that may be included in a general contractor’s “general conditions.”
While these programs are the insurance industry’s standard for calculating replacement cost, they are the map and not the territory. Nothing in the policy requires the use of estimates to calculate replacement cost, and recovery ultimately is based on the actual costs of repairs or replacement, subject to the policy’s terms and conditions, such as those discussed above.
Contractors and builders generally do not use the same programs that insurance companies use — they base their cost estimates on sub-contractor bids and their general knowledge about the costs and time involved in a potential job. In tight labor markets or times of rapidly rising or fluctuating prices, the replacement cost estimates in an insurance company’s software program may not reflect the events on the ground.
The numbers in the estimating software used by insurance companies also necessarily reflect figures among a range of possible costs a policyholder might receive from a contractor in an estimate for actual repair or replacement work. The costs of the most available or desirable contractor may be higher than the cost reflected in an insurance company’s insurance program. In addition, the accuracy of an estimate will only be as good as the information entered into the program. If the details of the loss are entered incorrectly, or if the scope changes as additional work becomes necessary or additional damage is uncovered during demolition, the estimate will need to be corrected or updated.
Policyholders should not accept software driven estimates as final costs, but as useful tools for receiving early partial payments on a claim and for setting a general framework for replacement costs. Policyholders should not settle claims until after they fully understand the scope of their loss and the actual costs they will incur in repairing or replacing damaged or destroyed property.
Do I Get Replacement Cost if I Don’t Rebuild or Rebuild Something Different?
Many policy forms state that the insurer will pay only the “actual cash value” or “ACV” of property damage until after repairs are made. Some courts have held that this condition may be waived by an insurer’s handling of a claim. In Rockford Mut. Ins. Co. v. Pirtle, 911 N.E.2d 60 (Ind. Ct. App. 2009), for example, the court held that this condition was waived where the insurer waited six months and until after foreclosure proceedings were initiated to offer an ACV payment.
Most insurers define ACV as replacement cost less depreciation, and some policies define the term in this way. But many policies do not define ACV. In the absence of a policy definition of ACV, or where the policy language allows, many states use the “broad evidence rule” for calculating ACV. This rule is a “flexible rule” that permits consideration of “any relevant factor” in determining ACV. Travelers Indem. Co. v. Armstrong, 442 N.E.2d 349, 356 (Ind. 1982).
Some policies allow recovery of replacement cost where the policyholder rebuilds at another location, or even if the policyholder rebuilds something different from the damaged or destroyed property. Other policies go so far as to allow a replacement cost recovery where the policyholder does not rebuild, if the proceeds are used elsewhere in the policyholder’s business. These provisions often also require that the proceeds are used on unplanned expenses. In these situations, disputes center on the “hypothetical” replacement cost of repairing or rebuilding with like kind or comparable property, given that no actual costs are incurred for that work.
Who Decides What I Get?
There are three ways disputes over replacement cost may be decided. If the dispute involves a question of what the insurance policy language means, then the issue is usually decided by a court. But courts only decide what the law mandates or what the insurance policy language means. Juries typically decide factual disputes or issues that turn on experts’ credibility.
In the case of disputes over the amount of replacement cost, property insurance policies usually contain a third remedy, called appraisal. The appraisal process involves each side choosing an appraiser and those appraisers choosing an umpire. The appraisers and the umpire then evaluate the differences in replacement cost calculations and the umpire’s agreement with one of the party’s appraisers is binding. Appraisals too can be fraught with issues, which is discussed in a prior article linked here.
Conclusion
Disputes over replacement cost raise legal and factual issues in normal times, but they present enhanced challenges when costs, climate, and market forces are changing and uncertain. Policyholders should navigate those challenges thoughtfully to ensure they obtain the benefits they paid for under their property insurance policies.
White House Unveils Government-Wide Plan to Streamline AI Integration
On April 7, the White House issued a fact sheet outlining new steps to support the responsible use and procurement of AI across federal agencies. The initiative builds on the Biden Administration’s 2023 Executive Order on AI and is intended to reduce administrative hurdles, improve interagency coordination, and expand access to commercially available AI tools.
The announcement requires the Office of Management and Budget, the Office of Federal Procurement Policy, and the General Services Administration to issue updated guidance and provide centralized tools to support implementation. Key measures of the guidance include:
Appointing Chief AI Officers. Each agency must designate a senior official responsible for overseeing AI governance and compliance.
Developing AI Strategies. Agencies are required to submit AI implementation plans within 180 days, identifying operational uses, risk mitigation strategies, and workforce needs.
Removing procurement barriers. Agencies must streamline acquisition processes that may hinder the timely adoption of AI systems, including by adopting performance-based procurement approaches.
Standardizing commercial AI guidance. OMB will release uniform guidance to support the responsible procurement and deployment of off-the-shelf AI tools, with a focus on privacy, equity, and safety.
Expanding Shared Tools and Expertise. The Administration will centralize technical resources to help agencies evaluate AI systems and manage associated risks.
Increasing Access for Small Businesses. The initiative aims to ensure that small and disadvantaged businesses can compete for AI-related government contracts.
Putting It Into Practice: The directive highlights the federal government’s commitment to institutionalizing responsible AI use across sectors while promoting innovation (previously discussed here). Similar momentum is building at the state level, where we expect to see continued parallel developments (previously discussed here and here).
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Unwinding Executive Order 11246: What Federal Contractors Need to Know [Podcast]
In this podcast, shareholders Chris Near (Columbia) and Lauren Hicks (Indianapolis, Atlanta) discuss federal contractors’ and subcontractors’ obligations in unwinding Executive Order (EO) 11246, which mandates affirmative action programs for women and minorities. Lauren and Chris focus on the new administration’s EO 14173, the ongoing requirements for affirmative action programs for veterans and individuals with disabilities, and the necessary adjustments contractors must make to their policies, self-identification processes, and internal communications.
Diversity, Equity and Inclusion: Under Scrutiny, But Still Viable
Diversity, Equity, and Inclusion (DEI) initiatives have been a cornerstone of workplace culture for many organizations, developed in response to historic and ongoing patterns of exclusion, and have been linked to better profits and improved work environments. But under the current administration, these programs are facing increased legal and political scrutiny. Recent executive orders, federal guidance, and high-profile lawsuits have significantly altered the landscape for DEI, especially for companies that rely on federal funding or government contracts.
While most DEI programs remain legal, employers must now be more cautious than ever about how they structure and communicate their inclusion efforts. A misstep in this evolving environment can trigger not just reputational damage, but also serious legal consequences.
The Legal Framework: What Still Stands
The foundational legal standards for workplace discrimination remain protected by Title VII of the Civil Rights Act of 1964, which prohibits employers from discriminating based on race, color, religion, sex, or national origin. Courts interpreting Title VII have made clear that DEI programs must avoid certain practices—specifically, using race or other protected traits as a basis for hiring, promotion, or termination, or instituting race-based quotas or preferences.
Categorizing employees by race or creating benefits that are only available to particular demographic groups may violate Title VII’s equal treatment principles. However, participating in a race-conscious training program does not by itself constitute an “adverse employment action,” which is a necessary element of a discrimination claim.
Two additional statutes are relevant for organizations receiving government funds or operating in regulated sectors. Title VI of the Civil Rights Act of 1964 (42 U.S.C. § 2000d) prohibits discrimination on the basis of race, color, or national origin in programs receiving federal financial assistance. Title IX of the Education Amendments of 1972 (20 U.S.C. § 1681) prohibits sex-based discrimination in educational programs and activities.
The Ripple Effect of the Harvard Case
In Students for Fair Admissions, Inc. v. President & Fellows of Harvard College, the U.S. Supreme Court held that race-conscious admissions policies at Harvard and the University of North Carolina violated the Equal Protection Clause and Title VI, which now impacts all college and university admissions. While the decision directly applies to educational institutions, its reasoning has clear implications for employment under Title VII. The Court rejected the use of race as a categorical factor in decision-making but allowed for its consideration within the context of a personal narrative. Employers should heed this logic: considering race explicitly in hiring decisions is likely unlawful, even if well-intentioned.
Executive Orders under the Trump Administration
Two executive orders signed under the Trump Administration have intensified compliance obligations for government entities and contractors. Executive Order 14151 directs all federal agencies to terminate existing DEI programs. Executive Order 14173 requires federal contractors to certify they do not maintain “illegal DEI programs,” with the threat of False Claims Act liability (31 U.S.C. §§ 3729–3733) for misrepresentation.
Under EO 14173, each federal agency may nominate up to nine contractors for compliance review. The Department of Justice is scheduled to begin prosecuting non-compliant contractors beginning May 21, 2025. The Equal Employment Opportunity Commission (EEOC) issued clarifying guidance on March 19, 2025, addressing permissible DEI practices and identifying potential areas of legal exposure. Companies engaged in federal contracting should review this guidance closely.
What’s Still Permissible?
Despite these constraints, employers still have room to foster inclusive workplaces—if they do so carefully and in compliance with federal law. For example, outreach and recruitment efforts aimed at underrepresented communities remain permissible, so long as employers do not use race or sex as decision-making criteria.
Employee Resource Groups (ERGs) and affinity networks can continue to exist and serve important cultural roles, provided they are open to all employees and do not grant or restrict access based on protected characteristics. The content and focus of these groups may center on shared identities or experiences, but eligibility must remain non-discriminatory.
With respect to DEI training programs, employers should avoid separating employees by race or tailoring content based on demographic traits. These practices could be viewed as discriminatory under Title VII. Training should emphasize respectful communication, bias awareness, and inclusion principles—without suggesting that any racial or identity group is inherently privileged or deficient.
Messaging Matters
Optics and tone are increasingly important in managing DEI risk. Companies do not need to eliminate all references to DEI in their public-facing materials, but careful messaging can help mitigate scrutiny. Legal counsel should review websites, social impact statements, and recruitment materials to ensure they reflect the company’s commitment to equal opportunity and inclusion—without suggesting preferential treatment.
Many organizations are shifting from terminology like “diversity,” “equity,” and “DEI” toward softer framing such as “belonging,” “community values,” and “inclusive culture.” These alternatives often better capture the intent of such programs while lowering the risk of being perceived as discriminatory or exclusionary.
Lessons from the Courts
Several recent cases illustrate how DEI-related policies can give rise to litigation—and how courts are approaching these claims.
In Herrera v. New York City Department of Education (S.D.N.Y. 2021), several white executives alleged they were demoted and replaced as part of a discriminatory push against “toxic whiteness.” The case settled for $2.1 million, underscoring the risk of implementing perceived race-based personnel decisions.
In Duvall v. Novant Health, Inc. (4th Cir. 2024), a jury awarded $3.4 million to a white male executive who alleged his termination was driven by the company’s diversity goals. The jury found that race and sex were impermissible factors in the decision, reinforcing that DEI initiatives must not violate anti-discrimination laws.
In contrast, the court in Young v. Colorado Department of Corrections (D. Colo. 2022), dismissed a claim that DEI training created a hostile work environment, emphasizing that discomfort with DEI content does not meet the legal threshold for harassment.
Finally, in Diemert v. City of Seattle (W.D. Wash. 2022), a white male employee challenged the city’s Race and Social Justice Initiative. While some of his claims were dismissed, others survived early motions, indicating how DEI efforts, if seen as exclusionary or coercive, can be vulnerable to legal challenges.
Proceed with Purpose
Despite the legal and political headwinds, DEI is not dead—but it is evolving. Employers should avoid the temptation to abandon inclusion initiatives entirely. Instead, they should take this moment as an opportunity to reassess, refine, and reframe.
In the rush to reduce legal exposure, some employers are choosing to rapidly scale back or entirely eliminate their DEI initiatives. A growing number of companies have quietly scrubbed DEI language from their websites, renamed employee groups, or disbanded inclusion committees altogether. While these changes may be intended to align with new federal directives or to preempt political scrutiny, they carry their own set of legal risks.
As recent coverage has tracked (HR Brew DEI Tracker), this trend is becoming increasingly visible—and potentially problematic. From a litigation standpoint, an abrupt reversal of DEI commitments could be cited as evidence of a company’s shifting culture or intent. In the context of a hostile work environment or disparate treatment claim, particularly one involving race or gender, the removal of DEI programs could be used to support an inference of discriminatory motive or tolerance of bias.
Put simply, if a plaintiff alleges that their employer fostered or ignored a toxic or exclusionary workplace, the dismantling of programs designed to promote inclusion may undermine the employer’s defense. Employers should therefore proceed thoughtfully, ensuring that any changes are rooted in legal compliance and sound business judgment—not in fear or political reaction.
A careful review of training programs, ERGs, recruitment policies, and public messaging can go a long way in ensuring that DEI efforts are both legally compliant and culturally meaningful. In this environment, thoughtful recalibration—not retreat—is the key to continuing to build inclusive workplaces without exposing the company to unnecessary legal risk.
All-Points Bulletin for Defense Contractors: If You’re 15% Behind Schedule or 15% Over Budget, You Need a Strategy
On April 9, 2025, President Trump signed an Executive Order (“EO”) titled Modernizing Defense Acquisitions and Spurring Innovation in the Defense Industrial Base. This EO seeks to overhaul many aspects of defense acquisition in order to enhance the military capabilities and streamline the Department of Defense’s (“DOD”) procurement processes. While every presidential administration seeks to streamline and facilitate defense procurement, this EO contains noteworthy approaches that defense contractors should be aware of. For instance, the EO suggests that the government has an appetite for “risk” when it comes to DOD procurements: “We will also modernize the duties and composition of the defense acquisition workforce, as well as incentivize and reward risk-taking and innovation from these personnel.”
Who Does the EO Apply To?
The EO is directed at the DOD and its various branches, including the Army, Navy, and Air Force. But it will potentially have considerable impacts on defense contractors, particularly those who are behind schedule or over budget.
What Are the Key Provisions of the EO?
The EO is focused on making DOD acquisitions speedier from start to finish. Accordingly, the EO directs the Secretary of Defense to utilize existing authorities to expedite acquisitions and to “require” a general preference for commercial solutions and Other Transactions Authority for “all” DOD contracting actions.
The EO requires a detailed review of each functional support role within the acquisition workforce to eliminate unnecessary tasks and centralize decision-making.
The EO requires DOD to establish a Configuration Steering Board to manage risk across all acquisition programs.
The EO requires that that DOD eliminate 10 existing regulations for every new one proposed.
The EO requires creating performance evaluation metrics for acquisition workforce members that incentivize them to look first to commercial solutions and adaptive acquisition pathways. The EO also contemplates that acquisition personnel should “in good faith, utilize innovative acquisition authorities and take measured and calculated risks.” The EO also requires assessing whether the acquisition workforce is rightsized.
The EO requires the establishment of field training teams to provide hands-on guidance and assistance to acquisition personnel in implementing innovative acquisition authorities.
Most notably for DOD contractors, the EO requires a review of all major defense acquisition programs (“MDAPs”) to identify those that are more than 15 percent behind schedule or more than 15 percent over cost so that such programs can be considered for cancellation.
In fact, the EO requires Secretary Hegseth to submit a list of all MDAPs contracts, along with information about performance against original and approved government cost estimates, to the Director of the Office of Management and Budget for review within 90 days from the date of the EO (i.e., July 8, 2025).
What Should Defense Contractors Do?
DOD contractors should be prepared to make a persuasive case as to the value and criticality they deliver, in order to protect their work from possible termination.
If a DOD contractor’s performance is behind schedule or over budget, the contractor should develop a plan to address these issues promptly to its customer’s satisfaction and with its customer’s buy-in.
DOD contractors should develop a sophisticated understanding of Other Transactions Authority, the Rapid Capabilities Office, rapid commercial solutions, and other ways by which the government could seek to accelerate the pace of DOD acquisitions.
Relatedly, to the extent the government begins to view bid protests as a cog in the wheel of speedy defense procurements, DOD contractors should prepare for a future characterized by new or increased barriers to bid protest review. DOD contractors should make sure they are getting the most out of things like Industry Days, Requests for Information, solicitation Q&As, and bringing their very best efforts to final proposal revisions.
This EO represents the start of what may be a significant shift in defense acquisition policy. Blank Rome is continuing to monitor breaking developments in this space.
Privacy Tip #439 – Government Officials’ Venmo Accounts Publicly Accessible
Wired has reported that several government officials involved in the Signal chat exposing sensitive national security plans have also exposed their Venmo accounts by not adjusting their account privacy settings to prohibit the information from being publicly accessible. This means that they “left not only their contact lists publicly visible but also their transactions, which are as recent as last autumn. These records reveal specific information” about who they paid, how much they paid, the date of the payment, and the reason for the payment.
According to Tara Lemieux, a veteran of the U.S. intelligence community, “When you post anything in those third-party applications, and you don’t understand how that information can be shared or exploited, you are taking a risk for our nation—and that’s not acceptable.”
The risk of public officials not setting their Venmo accounts to private provides insight into their contacts and services provided to them and offers threat actors insight into strategies to use that information to commence attacks against both the contacts and the account owner.
Mike Yeagley, a specialist in commercial data and its security risks, outlines the risk: “What’s the risk of someone at the Cabinet level using Venmo to pay their personal trainer? On the surface, it doesn’t look like much. But now I know who that trainer is—or the gardener, or whoever—and suddenly I’ve expanded my ability to target by identifying the people around that official.” Threat actors use this intimate insight to gather more information to target both the official and the official’s contacts.
Not only have Trump administration officials allowed their Venmo accounts to be public, but so have members of Congress.
According to NOTUS, which first reported the ability to access government officials’ Venmo details, it “easily identified Venmo accounts tied to more than three dozen Trump administration officials and more than 50 current members of Congress. Their transactions are revealing — as are their friends lists.” All of this is quite concerning for national security. It is also a reminder to be aware of privacy settings in all applications, including Venmo. You may not want the world to see the details of who you are paying and why. If so, go to your Venmo app, make privacy choices, and confirm them in the settings. To hide your connections, go to Settings > Privacy > Friends List and select Private. You will be protecting yourself as well as your friends and family.
Executive Order To Restore America’s Maritime Dominance
On April 9, 2025, President Trump issued an Executive Order (EO) entitled “Restoring America’s Maritime Dominance.” This EO recognizes the urgent need to revitalize and rebuild the domestic maritime industry and the strategic importance of commercial shipbuilding capacity and the maritime workforce to the national and economic security of the United States.
The EO references decades of neglect for the declining U.S. flag fleet and sets forth a comprehensive agenda of legislative and governmental initiatives to bolster the United States as a maritime nation. The EO recognizes the need for consistent predictable federal funding to support shipbuilding, to make U.S. flag vessels competitive in international commerce, and to expand and strengthen the maritime workforce. The EO notes that the United States constructs less than one percent of commercial ships globally while China produces approximately half of the world’s commercial ships.
The EO directs the National Security Advisor, in consultation with various Cabinet level officials, to prepare and submit to the President within 210 days a Maritime Action Plan (MAP). The overarching goal of the MAP is to enhance the maritime infrastructure of the United States, to promote the construction of commercial vessels in the United States, and to have trained workforces of mariners and shipyard workers to support the construction and operation of a diversified fleet of commercial and military vessels that will be available to the Government during a war or national emergency.
The MAP will incorporate specific objectives within the timelines set out in the EO, including legislative proposals and recommendations as to any Congressional appropriations necessary to carry out the policy objectives of the EO. The EO is 15 pages in length and is divided into discrete topics that are summarized below on a section-by-section basis.
1. Policy — The EO broadly states that “[it] is the policy of the United States to revitalize and rebuild domestic maritime industries and workforce to promote national security and economic prosperity.”
2. Maritime Action Plan (MAP) — The National Security Advisor, in coordination with various Cabinet level officials, shall submit a MAP to the President within 210 days of the issuance of the EO that shall incorporate the following 18 action items:
a. Maritime Industrial Base — Within 180 days, the Secretary of Defense, in coordination with the Secretary of Commerce, the Secretary of Transportation, and the Secretary of Homeland Security shall provide for inclusion in the MAP an assessment of options and authorities, such as Title III of the Defense Production Act and use of private capital to the maximum extent possible, to invest in and expand the “Maritime Industrial Base,” including expansion of commercial and defense shipbuilding capabilities, ship repair and marine transportation capabilities, port infrastructure and the maritime workforce. The Secretary of Defense is to pursue using the Office of Strategic Capital loan program to improve the shipbuilding industrial base.
b. China’s Unfair Trading Practices — The EO references the United States Trade Representative’s (USTR) recent public hearing and proposed actions regarding Section 301 of the Trade Act of 1974. USTR is directed to coordinate with other agencies to collect additional information in support of administering proposed actions and to coordinate with the Attorney General and Secretary of Homeland Security to take steps to impose any restriction, fee, penalty, or duty that might be imposed. This includes possible tonnage-based fees on Chinese built or flagged vessels that dock in U.S. ports and tariffs on ship-to-shore cranes and other port cargo-handling equipment of Chinese origin.
c. Harbor Maintenance Fee (HMF) — The EO directs U.S. Customs and Border Protection (CBP) to assess applicable customs duties, taxes and fees, including enforcement of the collection of the federal Harbor Maintenance Fee (HMF), on all cargo of foreign origin, including cargo that is offloaded by carriers in Mexico or Canada and transported by land into the United States. CBP is directed to charge a 10% service fee for additional costs to CBP.
d. Engagement and Coordination with Allies — Within 90 days, the Secretary of State, together with the USTR, is directed to engage U.S. treaty allies and other like-minded countries to impose similar measures to those described in items b and c above in order to counter China’s unfair trade practices.
e. Shipbuilding Financial Incentives Program to Reduce Dependence on Adversaries through Allies and Partners — Within 90 days, the Secretary of Commerce, in coordination with the President’s Assistant for Economic Policy, shall deliver a proposal for inclusion in the MAP to establish financial incentives to assist shipbuilders based in allied nations to undertake capital investment in the United States to strengthen its shipbuilding capacity.
f. Legislative Proposal to Establish a Maritime Security Trust Fund — In conjunction with formulation of the President’s Budget, OMB and the Secretary of Transportation are to develop a legislative proposal to establish a “Maritime Security Trust Fund” to serve as a reliable funding source for MAP programs. In crafting this legislative proposal, OMB and the Secretary of Transportation shall consider how new or existing tariffs, taxes, or fees could further the goal of establishing a dedicated funding source for programs supported by the MAP.
g. Shipbuilding Financial Incentives Program — In conjunction with formulation of the President’s Budget, OMB and the Secretary of Transportation are to develop a legislative proposal to establish financial incentives to incentivize private investment in the construction of commercial shipyards and repair facilities, including grants and loan guarantees.
h. Maritime Prosperity Zones — Within 90 days, the Secretary of Commerce, in coordination with the Secretary of Transportation, shall develop a plan that identifies opportunities to incentivize investment in U.S. maritime industries and waterfront communities through newly created maritime prosperity zones. These maritime prosperity zones are to be geographically diverse and are to include river regions and the Great Lakes.
i. Report on Maritime Industry Needs — Within 90 days, the Secretary of Transportation, in coordination with the Secretary of Homeland Security, shall deliver a report to OMB that inventories Federal programs that can be used to grow and sustain the supply and demand for the U.S. maritime industry. The report shall include Maritime Administration programs (including the Maritime Security Program, the Tanker Security Program, the Cable Security Program, the Title XI shipbuilding loan guarantee program, and the Port Infrastructure Development Program (PIDP)), existing cargo preference programs and a review of the waiver process to ensure that such programs support American domestic shipping.
j. Mariner Training and Education — Within 90 days, numerous Cabinet-level officials are directed to prepare a report to address maritime workforce challenges. The report shall determine the number of credentialed mariners that are required to support the more robust maritime industry that is outlined in the EO. Among other things, the report shall review the U.S. Coast Guard’s credentialing program and identify steps necessary to expand maritime education and technical training.
k. Modernization of the United States Merchant Marine Academy (USMMA) — Within 30 days, the Secretary Transportation is to take action to hire the necessary facilities staff and execute deferred maintenance projects at the USMMA. Additionally, a long-term master facility and capital improvement plan is to be developed for the USMMA.
l. Improve Procurement Efficiency — Numerous Cabinet-level officials are directed to develop an improved contract solicitation process for the procurement of U.S. government vessels. Additionally, reforms are recommended to execute, build, and improve the vessel acquisition process.
m. Improve Government Efficiency — The Department of Government Efficiency (DOGE) shall undertake a separate review of the Department of Defense (DOD) and the Department of Homeland Security (DHS) procurement processes and make recommendations to the President to improve the efficiency of these processes.
n. Increase the Fleet of U.S. Flag Vessels Trading Internationally — Within 180 days, the Secretary of Transportation, in coordination with the Secretary of Defense, shall deliver to OMB a legislative proposal to ensure the availability of U.S. flag commercial vessels that participate in international commerce. The proposal shall enhance existing subsidies to cover construction and operational costs and incentivize the commercial shipping industry to operate militarily useful vessels. The goal is to ensure adequate capacity of U.S. flag commercial vessels that can be called upon in times of war or national emergency.
o. Arctic Waterways — Within 90 days, the Secretary of Defense, in consultation with other Department and agency heads, shall develop a strategy to secure arctic waterways.
p. Shipbuilding Review — Within 45 days, the Secretaries of Defense, Commerce, Transportation, and Homeland Security shall conduct a shipbuilding review and submit a report to the President with recommendations for increasing competition within the U.S. shipbuilding industry with the goal of reducing cost overruns and production delays.
q. Deregulatory Initiatives — Within 30 days, the Secretaries of Defense, Transportation and Homeland Security are to review their regulations pertaining to the domestic commercial maritime fleet and maritime port access and identify areas to deregulate.
r. Inactive Reserve Fleet — Within 90 days the Secretary of Defense is to review and issue guidance related to the retention, support, and mobilization of a robust inactive reserve fleet.
Read the full Executive Order here.
Read the White House Fact Sheet here.