Sect. 3610 is in effect to repay federal vendors for paid leave

DOD, OMB issue guidances to clarify implementation;
“Double dipping” with other federal aid is prohibited

      Implementation has begun of Section 3610 of the “CARES Act” allowing contracting officers to reimburse federal contractors for their employee paid leave related to the COVID-19 pandemic.

      The Section 3610 recoveries are meant for situations in which contractor employees receive paid leave while they cannot work due to facility closures, quarantines, stay-at-home orders or inability to telework at home. The goal of the reimbursements is to help contractors maintain a mission-ready workforce.

      The Section 3610 funds are not meant to supplement other COVID-19 aid programs. Agencies have been instructed to reduce Section 3610 support if a contractor is receiving other COVID-19 federal aid.

      Defense Dept. officials recently issued a class deviation and additional guidance on implementing Section 3610, and the Office of Management and Budget followed up with additional rules of thumb for applying Section 3610.

DOD memos

      On April 8, DOD officials authorized a class deviation of the Defense Federal Acquisition Supplement (DFARS) outlining a new cost principle to allow companies to recover their paid leave costs in certain situations.

      On April 9, the DOD published implementation guidance and Frequently Asked Questions.

      The documents spell out key features of the Section 3610 relief:

• Contracting officers have discretion in granting Section 3610 relief;
• Relief is subject to the availability of funding;
• Covered costs occurred between Jan. 31, 2020 to Sept. 30, 2020;
• Relief is established through a contract modification;
• DOD intends to reduce the relief provided to a contractor under Sect. 3610 (DFARS 231.205-79) by the amount that a contractor obtains under other relief programs; and
• Sect. 3610 also applies to Other Transaction Authority contracts.

Segregation of costs

      Under DOD's guidelines, costs eligible for reimbursement must be linked to the COVID-19 impacts covered by Section 3610. The costs must be "identified, segregated, recorded, invoiced and reimbursed."

      Contracting officers must “document the dates when the applicable conditions begin and end, the extent of the conditions, the specific reasons why reimbursement under section 3610 applies, impact on cost/pricing, and the effect on contract performance,” according to the Arnold & Porter law firm. The onus is on contractors to provide evidence, the attorneys wrote in a recent article.

OMB guidance

      On April 17, OMB released a memo outlining two central principles to guide contracting officers in deciding whether to apply Section 3610 in a specific case.

      The principles stated by OMB are:

1. “Carefully consider if reimbursing paid leave to keep the contractor in a ready state is in the best interest of the government for meeting current and future needs.”

         A consideration in determining if a contractor is maintaining a “ready state” is whether the work is needed “to protect the life and safety of government and contractor personnel," according to the OMB memo.

2. “Exercise good stewardship” by ensuring that funds are used appropriately and duplication with other funding, along with double dipping, are avoided.

     Good stewardship includes:

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