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Government contractors, like most businesses, have faced difficult operational and financial challenges since the emergence of the COVID-19 pandemic in March 2020. Quick federal legislation with contractor relief mechanisms followed with the $2.2 trillion CARES Act, enacted on March 27, 2020, which included Section 3610, “Federal Contractor Authority,”[1] and the more widely applicable and used Paycheck Protection Program (PPP).[2]

In the last eighteen months, significant ink has since been spilled about these contract recovery mechanisms in the form of class deviations, draft guidance, OMB memorandums, and updated FAQ releases. Now, as contractors move to close out contracts and mitigate financial impacts of COVID-related disruptions, many contractors are reexamining recovery methods and evaluating related guidance. For government contractors, Section 3610 and associated class deviations are the starting roadmaps for such contract recoveries.

For example, Sec. 3610 DOD class deviations revisions discuss the continuing interplay between Section 3610 relief and other COVID-19 contractor relief methods. This client alert provides summaries of the most recent updates with a focus on the interplay among alternative contractor relief mechanisms.

In January 2021, the DOD issued two class deviation revisions: Class Deviation—CARES Act Section 3610 Implementation[3] (“Sec. 3610 Implementation Rev. 4” or “Rev. 4”) and Class Deviation—Section 3610 Reimbursement Requests Rev 3[4] (“Sec. 3610 Reimbursement Requests Rev. 3”); and an updated FAQ on Sec. 3610 Implementation Guidance. All three releases make prominent references to the need for contractors requesting reimbursement through Sec. 3610 to accurately track, report, and credit alternative COVID-19 relief mechanisms for the government.

CARES Act Sec. 3610 Implementation Revision 4

Issued March 23, 2021, Sec. 3610 Implementation Rev. 4 replaced the January 13, 2021, Rev. 3 and provides DOD contracting officers with an updated framework for Sec. 3610 implementation.[5] It also extended the date range that paid leave may be taken from March 27, 2020, to September 30, 2021.[6] Along with the framework, Rev 4 provides a list of authorized actions COs may take to provide the maximum amount of flexibility to both contractors and contracting officers, including:

  • Enable contractors to remain in a “ready state” by treating paid leave costs as allowable
  • Use available agency funds for the reimbursement of contractors for workers’ lost time related to COVID-19–related interruptions
  • Modify contracts to provide reimbursement of allowable paid leave costs, not otherwise reimbursable, without obtaining additional consideration
  • Provide reimbursement to contractors regardless of the contract type

Sec. 3610 Implementation Rev. 4 acknowledges that many small businesses may have sought relief through other COVID-19-related mechanisms, such as the PPP, and reminds COs to avoid authorization of duplicate payments. Small businesses and contractors with forgiven PPP loans are prohibited from seeking Sec. 3610 relief for the same expended funds. Rev. 4 also references credits received from the Families First Coronavirus Response Act (Pub. L. 116–127) as an additional prohibited duplicate reimbursement when considering Sec. 3610 relief. Finally, Rev. 4 encourages contracting officers to consider the types of services a particular contractor provides and its individual circumstances when allocating relief funds made available to an agency. DOD recognizes the urgency of contractor relief in some cases and prioritizing relief where necessary. For example, the impact of COVID-19 on a contractor providing labor services could be far more severe than a contractor developing information systems for the government.

Sec. 3610 Reimbursement Requests Revision 3

Issued on March 23, 2021, Sec. 3610 Reimbursement Requests Rev. 3 replaces the January 15, 2021, Class Deviation 2020-O0021 Revision 2; extends the eligibility period to September 30, 2021; and provides detailed guidance for COs when responding to contractors’ requests for reimbursement. The revised detailed guidance explains the follows aspects of reimbursement:

  • The importance of early engagement
  • Submission of requests for reimbursement under Section 3610, including three checklists to assist contractors:
  1. An abbreviated checklist for contractors applying for reimbursement for a single contract, and the amount of reimbursement sought is below $2 million
  2. A multipurpose checklist for contractors applying for relief for multiple “homogenous groups” of separate contracts, such as for the same program
  3. A global checklist for contractors seeking reimbursement at a business-unit level
  • Defining an affected contractor’s status
  • Determining reimbursement amounts
  • Availability of funds for reimbursement under Section 3610
  • Contract modifications
  • Duplicate reimbursements related to COVID-19 as described

Other important CO guidance clarifies that contractors may seek reimbursement more than once as long as the requests comply with the stipulated time period, and COs should engage early with contractors seeking reimbursement. Notably, Sec. 3610 Reimbursement Requests also explicitly requires contractors to notify COs within thirty days of receiving any credits or loan forgiveness that are duplicate reimbursements related to COVID-19.

Takeaways

Despite the rollout of Sec. 3610 in March 2020 and significant regulatory and guidance publications, contractors were initially slow to seek recoveries under Sec. 3610; due in no small part to confusion among the contractor community and contracting agencies. Early Sec. 3610 guidance was at times confusing to contractors, especially with regard to the interplay between various relief mechanisms like Sec. 3610 and PPP.

Despite the slow start to Sec. 3610 through the first seventeen months of its existence, its wide application to differing contracting circumstances, specific use for government contracts, and relatively lenient rules for paid leave reimbursement bode well for its use in the future. Guidance has progressively become more detailed and clearer; for example, Sec. 3610 Reimbursement Requests Rev 3, at 31 pages, is now significantly longer than its prior version. Contractors should carefully study and adhere to the more recent Sec. 3610 guidance and track costs on completed and current contracts carefully in order to maximize Sec. 3610 relief.


[1] For full Text of Sec. 3610, see Sec. 3610 of ‘Coronavirus Aid, Relief, and Economic Security Act (CARES Act) at https://www.congress.gov/116/bills/hr748/BILLS-116hr748enr.pdf

[2] Sections 1102 and 1106 of the CARES Act.

[3] DARS Tracking Number: 2020-O0013, available at: https://www.acq.osd.mil/dpap/policy/policyvault/USA000594-21-DPC.pdf

[4] DARS Tracking Number: 2020-O0021 , Revision 3, available at: https://www.acq.osd.mil/dpap/policy/policyvault/USA000595-21-DPC.pdf

[5] Issued October 14, 2020; framework is DFARS 231.205-79, CARES Act Section 3610 Implementation.

[6] Pursuant to section 4015 of the American Rescue Plan Act of 2021 (Pub. L. 117-2), enacted on March 11, 2021.