On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, passed in the U.S. House of Representatives. It came just a day after the U.S. Senate overwhelming also passed its version of the CARES Act. The reconciliation version – the House version – is a behemoth 854 pages, spending $2 trillion, and representing two prongs to the federal Government’s critical response to the national emergency caused by the COVID-19 pandemic.
The first prong is aimed at keeping workers paid and employed, enhancing the healthcare system and stabilizing the economy (Division A). The second prong is the $340 billion in emergency appropriations necessary to keep federal agencies operating, to clean facilities for the public or to procure necessary goods and services to combat COVID-19 (Division B).
The CARES Act was actually the third Congressional Action of its kind. The first was Public Law 116-123 (March 6, 2020), which authorized $8.3 billion in emergency funding for medical supplies for state and local governments to prepare for and respond to COVID-19. The second was Public Law 116-127 (March 18, 2020), authorizing free testing, paid emergency leave, enhanced unemployment insurance and improved food and health security.
While additional measures are expected in the coming weeks, below is a summary of the CARES Act, specific to federal government contracts and related acquisitions. For any subsequent federal acquisition contracts, federal agencies are required to comply with the Federal Acquisition Regulations (FAR) and agency supplemental regulations in awarding and administering contracts. For federal grants, recipients are required to comply with 2 CFR 200 Uniform Guidance in awarding and administering agreements or contracts.
The CARES Act amends the existing Public Health Service Act to include “personal protective equipment, ancillary medical supplies and other applicable supplies required for the administration of drugs, vaccines and other biological products, medical devices and diagnostic tests in the stockpile.’’ Once incorporated with the appropriation portion, the Act will provide $16 billion to the Strategic National Stockpile, specifically to procure personal protective equipment, ventilators, necessary medical supplies, to enhance U.S.-based manufacturing capabilities and medical surge capacity.
In an effort to limit the shortage of certain medical devices, the CARES Act adds new language to the Federal Food, Drug and Cosmetic Act. Medical device manufacturers will have increased federal notification requirements when they intend to discontinue to the production of medical devices without an approved modification or better alternative medical device being available and in production. The Secretary of Health and Human Services (HHS) is instructed to develop a device shortage list.
The CARES Act also relaxes requirements around the use of Other Transaction Authority (OTs or OTAs) in advanced biomedical research at HHS. Specifically, during public health emergencies, the Biomedical Advanced Research and Development Authority (BARDA) now has the authority to exceed the $100 million without obtaining permission from higher authority within HHS. The goal here is to allow biomedical research to advance more quickly by using OTs, instead of procurement contracts or grants.
Federal agencies will have the ability to modify existing contracts to allow for the reimbursement of certain costs incurred to keep employees and subcontractors in a state of ready when to access government facilities or telework was unavailable due to COVID-19 closures and restrictions. This is limited to the funds available within an agency’s current budget or the additional funds appropriated under Division B. In addition, contractors must offset against any credits they also received under Public Law 116-127 (March 18, 2020).
The CARES Act also sends $150 billion in funds directly to state, tribal and local governments based on the population formula. Even states with relatively low populations will receive at least $1.25 billion in FY 2020. An additional $3 billion will be sent to U.S. territories and the District of Columbia, and an additional $8 billion will be sent to Tribal governments. These funds are to be used for COVID-19 relief, which can be fairly broad. The one caveat is that these funds cannot be used to cover expenses that were already covered under the government entities existing 2020 Fiscal Year budget – i.e. if a government had funds allocated for indigent and community medical treatment, the CARES funds can only be used for amounts beyond or in addition to those budgeted line items. Also, these governments are not permitted to re-program their own funds and use these federal funds instead.
As a result, state, tribal and local governments throughout the U.S. and its territories are likely to have increased procurements with new funds in response to COVID-19.
Federal agencies will share approximately $340 billion in new emergency funds to combat COVID-19. In order for federal agencies to continue providing critical services, Congress authorized emergency appropriations for operations, including converting employees to telework and in cleaning/restoring facilities. The funds are Operations and Maintenance (O&M) funds, and are not likely to result in significant new government contracting opportunities.
However, certain agencies received additional appropriations designed to respond to COVID-19, and will likely result in significant new government contracting and grant opportunities before the end of FY 2020, Sept. 30, 2020.
Below is a summary, focusing on significant or novel investment, as well as relaxation of any federal rules that may also impact federal government award activities.
U.S. Department of Agriculture (USDA)
- Reconnect Pilot Grant
The USDA’s Rural Development office received $100 million for its Reconnect Pilot Program, a grant-making program designed to increase the access of broadband service in rural areas. These grant funds may be used for the costs of construction, improvement or acquisition of facilities and equipment needed to provide broadband service in eligible rural areas. Local government entities must apply for the grants and award subsequent contracts in accordance with state and local requirements.
- Food and Nutrition Services - $9.55 billion
In addition to other food insecurity programs, the USDA’s Food and Nutrition Services administers four programs designed to directly distribute food to low-income households: (1) Commodity Supplemental Food Program (CSFP), (2) the Food Distribution Program on Indian Reservations (FDPIR), (2) the Emergency Food Assistance Program (TEFAP) and (4) USDA Foods in Schools.
These well-established programs currently purchase foods directly and then work with a network of community action agencies and food banks to distribute the food directly to the households in need. These programs will now have more funds available to meet the anticipated growing food insecurity across the U.S. and its territories.
Companies interested in selling fruits, vegetables, legumes and proteins to the USDA can find more information here or here.
Food and Drug Administration (FDA)
Under the CARES Act, the FDA received $80 million for salaries and expenses to “prevent, prepare for, and respond to coronavirus, domestically or internationally, including funds for the development of necessary medical countermeasures and vaccines, advanced manufacturing for medical products, [and] the monitoring of medical product supply chains.” The bulk of these expenditures are expected to be in new development.
The National Science Foundation (NSF)
Under the CARES Act, the NSF’s RAPID Program will receive an additional $75 million to be used for research grants on real-time cellular, physiological and ecological research of the COVID-19. These funds are Research, Development, Testing and Evaluation (RTD&E) funds and are available for two years.
Department of Defense (DOD)
- Defense Industrial Base
The Defense Industrial Base will be supported with $2.45 billion in new appropriations. The Defense Production Act will add $1 billion to COVID-19 response, to include accessing materials necessary for national security and pandemic recovery.
- Defense Working Capital Funds
Collectively, the DOD and the Service Branches Defense Working Capital Funds will share $1.45 billion for emergency response purchases, to support production lines, supply chain, access to supplies and to stock military depots and labs. This includes funding to the Defense Logistics Agency (DLA), the DOD’s combat logistics support agency that is well-positioned for defense surge needs and is likely to pivot in response to the COVID-19 response.
- Defense Health Programs
DOD will increase spending by $4.5 billion on medical care and countermeasures for eligible military members, dependents and retirees. This will include direct medical care at government facilities through TRICARE ($1.1 billion), to procure additional medical equipment ($700 million), to expand military treatment facilities and to procure expeditionary hospital packages ($1.6 billion) and private sector health care ($1.1 billion).
DOD will also acquire diagnostic services ($415 million) for the development of vaccines, anti-viral medications, lab operations and diagnostic testing; non-medical protective equipment and supplies ($627.8 million) for pharmaceuticals, bio-hazard mitigation and physical protection for military installations, ships and first responders; IT equipment ($300 million) in new IT equipment to increase capacity across the DOD.
The DOD will have an additional $1.5 billion available for emergency deployments of the National Guard, if necessary.
Similarly, appropriations of $713.6 million were made for medical supplies, physical protection of equipment at military facilities and for the deployments of the USNS COMFORT and USNS MERCY to New York and Los Angeles, respectively.
- DOD Relaxations and Amendments
Congress granted the DOD authority to waive certain procurement restrictions in order to increase cash flow with contractors, remove restrictions that are inconsistent with emergency response scenarios, and improve liquidity of contractors in the defense industrial base.
- Undefinitized Contract Actions (UCAs)
The CARES Act provides heads of agency within the DOD, authority to waive limitations on the obligation of funds related to undefinitized contract action (UCAs) in response to COVID-19. The CARES Act also waives 10 USC 2326(b)(3), which under ordinary circumstances would require the contractor to submit its qualifying price proposal prior to spending more than 50% of the ceiling price (incurred cost limit) and would require the contracting officer to limit obligations to 75% of the ceiling price in order to ensure timely definitization. Both indicate a desire to give agencies increased flexibility during negotiations, while contractors begin performance.
- Other Transactions Authority (OTs or OTAs)
The CARES Act permits the delegation of authority to lower organizational managerial levels across defense agencies (except DARPA and Missile Defense Agency) in order to expedite research and development on prototype projects. The provision is designed to improve defense industrial base liquidity, particularly among small businesses at DOD. In lieu of FAR-based contracts, OTs are expected to truncate industry response time to the pandemic.
Department of Energy (DOE)
The Office of Science will receive $99.5 million for “necessary expenses related to providing support and access to scientific user facilities in the Office of Science and National Nuclear Security Administration, including equipment, enabling technologies and personnel associated with the operations of those scientific user facilities” for efforts related to COVID-19.
Federal Communications Commission (FCC)
The CARES Act appropriates $200 million to the FCC to “support efforts of health care providers to address COVID-19 by providing telecommunications services, information services and devices necessary to enable the provision of telehealth services during an emergency period.”
General Services Administration (GSA)
The majority of federally leased property is administered by the GSA. Congress provided $275 million for deep cleaning, and for acquiring unanticipated space. There is no reference to the potential need to build temporary hospitals and care facilities.
The CARES Act now requires the GSA administrator to provide Congress a written determination no fewer than three days before making an award, if the administrator has determined that the use of noncompetitive procedures is necessary for public interest in response to a public health emergency declaration.
Department of Homeland Security (DHS)
Department-wide, the Coast Guard and the Transportation Security Administration (TSA) will share $428.1 million to procure personal protective equipment including gloves, goggles, hand sanitizer, respirators and surgical masks, and make IT and cyber-security infrastructure enhancements.
Federal Emergency Management Administration (FEMA)
FEMA will receive $45.4 billion in newly appropriated funds to continue its comprehensive efforts in response to COVID-19. These funds will be placed in the Disaster Relief Fund, and of that, $25 billion will be used in declared disaster areas under the Stafford Act. Another $400 million will be available to state and local responses for firefighters, emergency managers, and emergency food and shelter.
Congress took other measures granting broader license-to-practice authority to healthcare workers who are licensed in a different jurisdiction than where services are needed and included restrictions on the use of this Disaster Relief funding to ensure that it was not used in the Global War on Terror.
U.S. Forest Service (USFS)
The USFS agencies will share $70.8 million, the bulk of which will be used for daily cleaning, purchase of PPE, testing and facilities improvement.
Indian Health Service (IHS)
The IHS will receive $1.03 billion in appropriations, to procure medical equipment and supplies, mobile triage units, medicines, direct and referred medical care, transportation and telehealth infrastructure.
Health and Human Services (HHS)
Under the first and second Congressional responses, HHS received appropriations to combat COVID-19 through state and local responses and the CDC. Under the CARES Act, HHS will receive additional appropriations. The figures reported are just those from the CARES Act and are not combined with the previous amounts.
- Centers for Disease Control (CDC)
The CDC will receive $4.3 billion. Of that, $1.5 billion will be redistributed to state, tribal and local government for surveillance, epidemiology, laboratory capacity, infection control and communications activities at local levels. Another $500 million will be used for public health data surveillance and analytics infrastructure. CDC funds will also support state and local health responders, including the reimbursement of funds for care already provided and materials that are currently being acquired. Additional funds will be available for the Infectious Disease Fund, which HHS can use as needed to respond.
- Public Health and Social Services Emergency Fund
The fund will receive $127 billion, of which $100 billion will go directly to hospitals and healthcare providers, to support the COVID-19 response.
The remaining $27 billion will be used for “including the development of necessary countermeasures and vaccines, prioritizing platform-based technologies with U.S.-based manufacturing capabilities, the purchase of vaccines, therapeutics, diagnostics, necessary medical supplies, as well as medical surge capacity, addressing blood supply chain, workforce modernization, telehealth access and infrastructure, initial advanced manufacturing, novel dispensing, enhancements to the U.S. Commissioned Corps, and other preparedness and response activities.” These funds will be split as follows:
- $16 billion to rebuild the Strategic National Stockpile (addressed above),
- $250 million to improve hospital preparedness,
- $11 billion for vaccines, therapeutics, diagnostics and medical or preparedness needs, including:
- $3.5 billion to BARDA for the manufacturing, production and purchase of vaccines, therapeutics, diagnostics and small molecule active pharmaceutical ingredients, including the development, translation and demonstration at scale of innovations in manufacturing platforms.
- $275 million to expand the capacity at rural hospitals, telehealth, poison control centers and with the Ryan White/HIV/AIDS program.
National Institutes of Health (NIH)
The various National Institutes will share $945.5 million for vaccines, therapeutic and diagnostic research.
Centers for Medicare and Medicaid Services (CMS)
CMS will have $200 million to respond to COVID-19, including $100 million specifically for nursing home response to control the spread of infectious disease.
Department of Education (ED)
ED will receive $30.9 billion in new appropriations. The bulk of funding is intended to be rapidly deployed to state and local school districts and colleges and universities that are converting to distance education, including the purchase of technology and IT components.
Department of Veterans Affairs
The Veterans Health Administration will receive $14.4 billion for health care delivery to qualified veterans, including homeless veterans, and will allow for the purchase of medical equipment and supplies, PPE, testing kits for VA medical centers, telehealth, nursing homes and community living centers. There will be an additional $2.1 billion for medical community care, meaning in local, non-VA emergency departments and urgent care facilities. An additional $606 million will be available for medical facilities including alternative sites for care, the procurement of mobile treatment centers and a one-time reconfiguration of VA facilities to meet the COVID-19 response needs. The VA will also have $2.15 billion for procurements related to telework, telehealth, system bandwidth and other devices in response to COVID-19.
The VA will also be grant-making in the amount of $150 million for construction projects at state extended care facilities, i.e. nursing homes and hospitals caring for veterans.
During this time, the VA may also enter into short-term agreements or contracts with telecommunications companies to provide temporary, complimentary or subsidized, fixed and mobile broadband services for the purposes of providing expanded mental health services to isolated veterans through telehealth or VA Video Connect during a public health emergency. While no funds were directly appropriated for these contracts, the VA may use the above referenced funds and may temporarily extend services to veterans who did not previously qualify for telemental health.
Congress also authorized the relaxation of a number of VA rules and regulations to allow veterans to receive care in the community of the veteran where a VA facility is not available. Congress also required the VA to provide PPE to community-based homes as well, meaning that additional PPE will need to be procured.
Department of Transportation (DOT)
- Federal Aviation Administration (FAA)
The airport grants-in-aid ($10 billion) will be allocated to local airport agencies based on the federal funding formula and will cover operating costs to prevent and respond to COVID-19.
- Federal Transit Administration (FTA)
Similarly, the Transit Infrastructure Grants ($25 billion) will be allocated to local governments based on its federal funding formula and will cover operating costs and capital expenses in response to the COVID-19 pandemic. Funds may, but are not required to be, used for improvement programs or long-range plans.
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