Updates to Federal Bill Targeting Government Contractors Operating in Russia

As we covered in a prior alert, the recently introduced Federal Contracting for Peace and Security Act (H.R. 7185) could have a profound impact on government contractors. The Act would require termination of existing contracts and prohibit awards, extensions, and renewals of prime contracts and subcontracts with companies doing business in the Russian Federation during its ongoing war of aggression against Ukraine.

The Act is progressing through Congress. Specifically, an amended version of the Act was reviewed and approved by voice vote during a Wednesday meeting of the House Oversight and Reform Committee. 

The amendment includes significant updates from the original legislation, e.g.:

• Whereas the original bill defined the “covered period” of aggression as retroactively beginning on February 21, 2022, the amendment defines it as 60 days after enactment, and requires an agency to provide advance written notice to a company at least 15 days before terminating its contracts under the Act.
• The amendment contemplates potential “good faith extensions” for contractors that (1) pursue all reasonable steps to comply with the Act; and (2) provide a reasonable, written plan to achieve compliance. Subsequent extensions may also be granted where a contractor continues to pursue reasonable steps to cease operations in the Russian Federation and demonstrates progress with its compliance plan.
• While the original bill would have affected a prime contract that included a subcontract at any tier to procure any product or service from a company conducting business in the Russian Federation, the amendment would apply only to prime contracts and “major subcontracts” for certain prohibited items. To that end, the amendment calls on the Office of Management and Budget to promulgate regulations including:

-“[a] list of equipment, facilities, personnel, products, services, or other items or activities, the engagement with which would be considered business operations, subject to” the Act’s prohibitions;
-“[a] requirement for a contractor or offeror to represent whether such contractor or offeror uses any of the items on the list” just described;
-“[a] definition of the characteristics of any major subcontract that qualifies as a covered contract under this Act”; and
-“[a] description of the process for determining a good faith extension.”

 

While these revisions may lessen the Act’s impact on certain contractors, the Act still holds the potential to upend federal procurement. Moreover, it must be considered in tandem with the numerous State actions that are moving at an even more breakneck pace. Crowell is continuing to monitor these developments, and will be highlighting particularly significant State actions in the coming days.