Federal contractors have a new avenue to potentially secure financial relief from the impacts of COVID-19 on their operations under Section 3610 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The Department of Homeland Security (DHS) announced[1] last week that it would implement Section 3610, joining several other federal agencies that had already announced Section 3610 implementation and guidelines earlier in the month. Below, BakerHostetler’s Government Contracts team broadly describes Section 3610 and its role in the current COVID-19 crisis, identifies federal government implementation guidance, and provides steps federal contractors can take in connection with Section 3610.

Section 3610 Broadly

Under certain circumstances, Section 3610 permits agencies to reimburse federal contractors’ employee compensation. Specifically, for federal contractors confronted with the inability of their employees or subcontractors to perform work at a federal government–approved work site due to facility closures or other restrictions, and their job duties cannot be done remotely through telework, the section provides federal agencies with the discretion to reimburse these contractors at the minimum applicable contract billing rates for any paid leave, including sick leave, provided to employees or subcontractors to keep them in a “ready state.” See CARES Act § 3610.

Reimbursement under Section 3610 has several additional constraints. These constraints include limiting reimbursement to the actual amount paid, but not more than the minimum applicable contract billing rates for up to an average of 40 hours per week.[2] Moreover, federal contractors must reduce the maximum reimbursement authorized under Section 3610 by the amount of any credit the contractor received under Division G of the Families First Coronavirus Response Act (Families First Act)[3] or the CARES Act. The section provides agencies with reimbursement discretion authority only through September 30, 2020.

Federal Government Implementation Guidance

Specific implementation guidance for Section 3610 continues to emerge from the federal government. The Office of Management and Budget (OMB) has provided to federal agencies “guiding principles” on implementation.[4] The Department of Defense (DOD) has provided robust guidance, issuing a class deviation and implementation guidance and regularly updating a Frequently Asked Questions (FAQ) document.[5] On the other hand, DHS’s recent implementation announcement provided scant details beyond the section’s text. Other agencies providing Section 3610 implementation guidance include the Department of Energy (DOE), the National Aeronautics and Space Administration (NASA) and the Office of the Director of National Intelligence (ODNI).[6]

Steps Federal Contractors Can Take in Connection With Section 3610

Federal contractors facing the inability to perform work due to COVID-19-related facility closures or other restrictions, combined with the inability to perform the work by telework due to job duties, should:

• Contact their contracting officer to discuss whether reimbursement under Section 3610 is available, recognizing that contracting officers may not be familiar with Section 3610 based on the recent passage of the section and its associated implementation guidance.
• Discuss with the contracting officer the contracting officer’s specific agency implementation guidance in connection with Section 3610.
• Discuss with the contracting officer how the federal contractor is using or plans to use the various relief provisions available under the CARES Act or the Families First Act.
• Document any claimed leave costs for employees and subcontractors, segregating those amounts intended for reimbursement under Section 3610. Contractors are responsible for supporting any claimed costs under Section 3610 with appropriate documentation.[7]
• Document all relief and credits received from other programs under the Families First Act or the CARES Act (e.g., the Paycheck Protection Program (PPP)). Contractors are responsible for identifying credits that may reduce reimbursement under Section 3610.[8]
• Keep up to date with Section 3610 implementation guidance from the federal agency associated with each active federal contract the contractor is performing.
• Develop a holistic plan for relief that considers the applicability of Section 3610, relevant Federal Acquisition Regulation (FAR) provisions (e.g., Changes clauses, Excusable Delay-related clauses and provisions) and other COVID-19-related programs (e.g., the PPP).
• Remember that reimbursement is not mandatory under Section 3610; rather, it is at each agency’s discretion – so contractors should nevertheless avail themselves of all opportunities to obtain amounts where appropriate.

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As COVID-19 continues to affect all facets of life, federal government contractors will continue to serve as integral parts of the government’s COVID-19 response.

[1] See Message from DHS Chief Procurement Officer for Implementing CARES Act Section 3610, DHS (April 21, 2020), https://www.dhs.gov/blog/2020/04/21/implementing-cares-act-section-3610.
[2] See CARES Act § 3610; see also Memorandum, OMB 4 (April 17, 2020), “Preserving the Resilience of the Federal Contracting Base in the Fight Against the Coronavirus Disease 2019 (COVID-19),” https://www.whitehouse.gov/wp-content/uploads/2020/04/M-20-22.pdf.
[3] Public Law 116-127.
[4] See Memorandum, supra, note 2.
[5] See COVID-19, Defense Pricing and Contracting, https://www.acq.osd.mil/dpap/pacc/cc/COVID-19.html (DOD resource center providing COVID-19-related material); Memorandum, DOD (April 8, 2020), https://www.acq.osd.mil/dpap/policy/policyvault/Class_Deviation_2020-O0013.pdf (providing class deviation); Memorandum, DOD (April 9, 2020), https://www.acq.osd.mil/dpap/policy/policyvault/Implementation_Guidance_CARES_3610_DPC.pdf (providing implementation guidance); FAQ (on Section 3610), DOD (April 17, 2020), https://www.acq.osd.mil/dpap/pacc/cc/docs/covid-19/FAQ_Implementation_Guidance_CARES_Act_Sec_3610_2020.04.17.pdf.
[6] See PF 2020-22 Guidance for Using DOE’s Clauses Developed to Implement Section 3610 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, DOE (April 15, 2020), https://www.energy.gov/management/downloads/pf-2020-22-guidance-using-doe-s-clauses-developed-implement-section-3610 (providing attached guidance and clauses); Frequently Asked Questions (FAQ) Regarding COVID-19 Impacts & the Advance Agreement for NASA Contractors, NASA (April 7, 2020), https://www.nasa.gov/sites/default/files/atoms/files/external_faqs_preserve_readiness_of_space_industrial_base_4.6.20.pdf; IC Guiding Principles for the IC Acquisition & Procurement Community on Implementation of the Coronavirus Aid, Relief, and Economic Security Act, ODNI (April 3, 2020), https://www.dni.gov/files/ODNI/documents/IC_Cares_Guiding_Principals.pdf.
[7] See, e.g., Memorandum, DOD 2 (April 8, 2020), supra n.5 (“Contractors are responsible for supporting any claimed costs, including claimed leave costs for their employees, with appropriate documentation and for identifying credits that may reduce reimbursement under section 3610.”).
[8] See id.