Page 20 - COVID Executive Order Survival Guide Brochure

Do I Have To Flow The -99 Clause Down To My Indirect Vendors, Like My Utilities?
The EO makes clear the -99 clause must be flowed down to subcontractors at all tiers until you get to the tier where the vendor is providing exclusively products. Unfortunately, this rule fails to answer one very important question: What is a subcontractor? The FAR defines subcontract and subcontractor very broadly. (It also has about two dozen slightly different definitions for each term.) Consequently, one of the most frequent questions we get is this: “Is vendor X or Y a subcontractor within the meaning of the rule?”
OMB and GSA apparently have heard similar questions. According to GSA, contractors should flow down the 14042 clause just as they would any other mandatory clause. While sound advice, it may not be as helpful as it sounds. Contractors struggle all the time over flow down questions; so looking at prior decisions may not be the best guide for future actions. According to OMB, to help make these determinations, contractors should view the term “subcontractor” broadly to include not only direct subcontractors, but subcontractors that perform “in connection with” a federal award. This would mean, we think, a vendor that performs outsourced payroll functions, for example, could be deemed a subcontractor within the scope of the EO. It’s hard to know where this reasoning finds a logical stopping place.
Ultimately, this will lead to a similar conclusion as the accommodation process – some employees may pose an undue hard- ship by virtue of their accommodation request; however, employees in similar positions may not pose any such hardship.
While this broad reading is not compelled by the explicit wording of the EO, we concede it is consistent with the Guidance, in which the Task Force gives the following examples of vendors not covered by the EO – food services, onsite security, grounds keeping, janitorial. The narrowness of these examples speaks volumes of the Government’s view of the breadth of the clause.
Imperfect though it is, we think the best way to evaluate whether a vendor is a subcontractor is to ask this question: Is the vendor performing a function that is necessary to perform a federal contract? If the answer is yes, there is a good argument the vendor would be deemed a subcontractor under the EO by the Government. (If you’re interested in seeing how this approach has been used in another context, check out OFCCP v. Monongahela R.R. Co., 1986 WL 802025 (Dep’t of Labor), aff’d 1987 WL 967412 (Sec’y Mar. 11, 1987) discussing Section 503 of the Rehabilitation Act.)
One final word may be useful here. While the FAR does not make it clear, we feel there is (or at least should be) a distinction between a “subcontractor” and a commercial item “vendor.” Indeed, the NDAA tried to codify that distinction back in 2019. While the operative language didn’t make it into law, the draft language nonetheless may be useful in helping contractors draw a rational distinction between subcontractors that support a contract and vendors that support a contractor’s overall business. According to the 2019 NDAA, a “subcontract” does not include “an agreement entered into by a contractor or subcontractor for the supply of a commodity, a commercial product, or a commercial service that is intended for use in the performance of multiple contracts.” Again, this language did not make it into law, but it nonetheless suggests there is a practical difference between a subcontractor and a vendor – something many federal contractors have relied on for years. We suspect many contractors will find this distinction useful in the context of EO 14042 as well, at least until the Task Force further expands the reach of rule. . . .
Are professional Services Vendors, Like Accounting Firms, Management Consultants, and Law Firms, “Subcontractors” Subject To The -99 Flow Down?
While one could argue we’re biased, we’d say no – for two reasons. First, we believe there is a difference between (i) a subcontractor that supports a federal project and (ii) a vendor that supplies commercial products or services that support a company’s entire customer base. The early versions of the 2019 NDAA made this distinction clear, but the specific subcontractor/vendor language didn’t make it into the final Act. Nonetheless, we believe the sentiment is sound and consistent with the way contractors have operated for decades. (It probably also is worth noting that the 14042 flow down provision refers only to subcontractors, whereas other flow down provisions (e.g., Executive Order 11246) refer to “subcontractors or vendors.”)
PAGE 20 | EXECUTIVE ORDER 14042 SURVIVAL GUIDE
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