Client Alert

The Emergency Economic Stabilization Act ("EESA") of 2008, which became law on Friday, October 3, 2008, authorizes the Secretary of Treasury, through the newly created Office of Financial Stability, to enter into contracts, including contracts for services, and to designate financial institutions as financial agents. By outsourcing many of the functions required in the economic stabilization plan to contractors and financial agents, the Department of Treasury can quickly get experienced such entities to work. This is an opportunity for existing contractors and financial agents to expand their work and for new entrants to the market.

For a description of the types of opportunities recently announced to be awarded through EESA and their requirements, please click here.

With government contracts usually comes the Federal Acquisition Regulations ("FAR"), and with financial agent agreements comes special Department of Treasury regulations. Both of these regulatory regimes include requirements that exceed normal corporate best practices.

It remains to be seen to what extent the FAR will govern contracting under EESA, notwithstanding the much-touted waiver of FAR requirements under EESA. Moreover, it is uncertain whether existing Treasury regulations governing financial agents may be amended to address the possible differences between the financial agents who will be appointed under EESA and the financial agents historically designated by Treasury.

Highlighted below are key aspects of FAR procurement contracts and Financial Agency Agreements implicated by Treasury's contracting under EESA.

FAR Procurement Contracts

• The Secretary may waive specific FAR requirements for unusual and compelling urgency.
• What is not new: Procurement flexibility has been available to government agencies facing crises in the past -- most recently -- contingency contracting for OIF/OEF, disaster recovery for Katrina, authorization for the Department of Homeland Security, and the Federal Aviation Administration procurement regulations.
• What is new: EESA essentially leaves it to the Secretary of Treasury to define which FAR provisions are necessary to waive, giving potential offerors the opportunity to recommend waiver of provisions it considers barriers to performing this work.
• What should a contractor ask to be waived? Under the authority granted in other crises, the competition, intellectual property, and accounting provisions are most commonly waived in whole or in part.

    Women- and minority-owned businesses:

• Nothing in the FAR requires women- and minority-owned businesses to receive contracts.
• The federal government has established goals of awarding 23% of its contracting dollars to small businesses, 5% to small, disadvantaged businesses, 5% to women-owned small businesses, 3% to service-disabled veteran-owned small businesses, and 3% to HUBZone businesses and the Small Business Administration provides an annual "report card" to Congress regarding each federal agency's progress in achieving those goals.
• Even though there are no specific requirements for contracting with women- and minority-owned businesses, EESA requires the Secretary to develop and implement standards and procedures to ensure, to the maximum extent practicable the inclusion and utilization of women- and minority-owned businesses. Including qualified women- and minority-owned small business on a contractor's team will likely enhance an offering.

    FAR hurdles:

• Requirements for affirmative action plans for minorities, workers with disabilities and veterans for organizations with $50,000 or more in government contracts and subcontractors and 50 or more employees in any one facility. It is uncertain at this point, and perhaps unlikely, that these provisions will be waived, but if they are not, a contractor has 120 days to comply.
• Requirements for contractors that are not small businesses themselves to establish and have approved small business subcontracting plans which set goals for subcontracting spends over $500,000 to be allocated to the small business categories discussed above. The actual expenditure of subcontracting dollars to large and the various categories of small businesses must be reported. The contractor is not required to achieve the federal government's goals, but must make attempt to include these small business groups to the maximum extent practicable.

Treasury Financial Agency Agreements

• Department of Treasury has long had authority to appoint Financial Agents.
• What are Financial Agency Agreements? Financial Agency Agreements are not procurement contracts for services or supplies, but instead are agreements under which a qualified financial institution can perform banking services transactions on behalf of the Department of Treasury.
• What are financial institutions? "Financial institution" includes a complex list of organizations defined by law and regulation.

    Financial Agency Agreement hurdles:

• Current regulations require financial agents to comply with the affirmative action requirements which are otherwise required under procurement contracts, grants, cooperative agreements, and any other government funding instrument.
• Remaining terms and conditions are "negotiable," starting with a Department of Treasury standard form agreement.

Other Considerations

• Personnel security requirements will likely exceed standard industry practices, requiring deeper background investigations and screening.
• Information technology security will likely be required to meet the Federal Information Security Management Act ("FISMA") standards.

    Conflicts of interest:

• What is a conflict of interest? A situation where the objectivity of the contractor may be impaired because performance of the contract or financial agency agreement under EESA has the potential to affect other interest of the organization. This includes conflicts of affiliates, consultants, or subcontractors, and in identified opportunities, individual employees, on a team.
• Is there a way around a conflict of interest? Yes. As is commonly done in procurement contracting, an offeror may propose a "mitigation plan" by which the interests of the organization that conflict with the work under EESA are walled off. Depending upon the type and degree of conflict, the wall between the part of the organization performing the EESA work and the part of the organization performing the conflicting work may be separated in several ways, including, but not limited to: separate physical locations, controlled physical access, independent groups of employees, separate information technology systems, separate information technology access, and separate back-office or headquarters support groups. The government must approve a proposed mitigation plan.

We believe one of our most important duties as your legal counsel is to keep you informed during these uncertain times. Should you have any questions about any of the issues described above or any aspect of government contracts, we would welcome your call.

Government Contracts Team
Womble Carlyle's Government Contracts team is prepared to assist you in navigating all the challenges of government contracting – from the initial competition to the final close-out of the contract. Our attorneys are uniquely equipped to assist government contractors with the regulatory hurdles faced when selling goods, technologies and services abroad. Our government contracts practice is nationwide in scope, and our attorneys have represented clients in all sectors – defense and aerospace, technology and services, computer and electronics, banking and financial services, universities and non-profits, pharmaceuticals and bio-tech, real estate and construction.