Publications
Article

Tips to Mitigate Future COVID-Funding Enforcement Risks

Law360

In response to the coronavirus pandemic, the federal government is undertaking the most extensive financial support effort in U.S. history. The exact parameters of these efforts are still uncertain as of the date of this article, but no matter what, they will be massive and will touch many parts of American life, including the $500 billion per year federal contracting market.

Most recently, President Donald Trump’s declaration of a national emergency earlier this month will make up to $50 billion in public funds available to fight the spread of COVID-19. For instance, under Section 502 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act[1] contractors may receive assistance from the Federal Emergency Management Agency, at a 75% federal cost share. 

As federal funds make their way to federal contractors and grantees, many of whom are on the front lines of helping the U.S. government respond to this epidemic, it is important to take steps now to protect against the possibility of future government enforcement actions alleging fraud or misuse of these government funds.

Keep in mind that the government personnel in the trenches with you today, during the heyday of the COVID-19 response, will likely be long gone years from now, when your organization finds itself on the receiving end of an audit, a subpoena, or even a False Claims Act action.

In a March 16 memorandum, U.S. Attorney General William Barr directed the U.S. Department of Justice to “prioritize the detection, investigation and prosecution of all criminal conduct related to the current pandemic.” Moreover, experience shows that investigations of fraud and abuse issues always follow significant federal relief efforts, such as those following hurricanes Katrina and Maria.

Decisions made in new and untested circumstances, sometimes in haste and under pressure, no matter how well intended, can leave a company open to later scrutiny and second guessing. So, what can you now do to protect yourself later?

The usual advice to government contractors to document everything and over-communicate with the customer is still valid, but beyond these broad statements, on a practical level, it is important that communication be focused, coordinated and trackable. The following discrete actions and recommendations may help contractors and subcontractors develop a sensible plan for mitigating the risk of a future government enforcement action.

Designate a Primary Point of Contact

Consider designating a specific managerial-level individual as a primary point of contact with government officials on coronavirus-related issues such as performance impacts and waivers from contract requirements. You might elect to copy this designated individual on correspondence with the government, or ensure that contractor employees provide the designated individual with copies of key correspondence.

With either approach, the designated individual’s files will later serve as a one-stop shop if your organization must collect documents in response to a government request. Additionally, this can help ensure that the contractor’s communications to the government are consistent.

Consider the Impact of Future IT Migrations and Personnel Departures

One of the biggest challenges when collecting documents in response to a government subpoena is locating documents from legacy IT systems, or from long-departed employees. If your organization is receiving large sums of federal funds as part of a coronavirus response effort, it would be prudent to develop a plan to (a) maintain access to the files of key custodians, (b) have those key custodians keep organized files, and (c) to develop an institutionalized, long-term plan to track where key files reside within your organization’s electronic management system, particularly if IT migrations are planned.

Create a File of Potentially Helpful Documents

Have government personnel praised your organization’s above-and-beyond efforts? Save that email, or, if this was communicated orally, put the substance of what the government said into a thank you email back to the government.

Did the government temporarily excuse your organization from having to provide personnel who meet a particular labor category qualification? Get that in writing from the contracting officer.

Did the government release award fees or confer other special distinctions or awards? Keep the records.

Has the government extended deadlines for deliverables or agreed to accept something less than what your contract requires? Pursue a formal modification and keep it in your contract file.

Reinforce the Imperative of Compliance to Your Workforce

In these unprecedented times of panic buying, fear and stress, people may feel that the regular rules do not apply, and temptations to cut corners may arise. A federal contractor can show that it acted responsibly during this time of crisis by setting an ethical tone from the top.

This means having the chief executive and/or other top-level managers communicate to employees, in writing bearing today’s date, that the code of conduct continues to apply and that the organization expects employees to continue to comply with established processes and procedures.

Now is a good time to remind employees of the channels available to them if they have questions or need to elevate an issue. Now is also a good time to challenge your ethics and compliance professionals to ensure that the programs they have developed do not simply go on hiatus while people are working remotely.

Ensure That Dealings with the Federal Government Comply With Your Own Governance Requirements

Make sure that you document your own internal processes, such as board decisions and votes and management recommendations related to dealing with federal agencies. Having all relevant people involved and copied will help demonstrate that a company has acted thoughtfully and in accordance with their established procedures.

It will take a while for there to be certainly around what federal relief efforts will be, but it is certain that acting prudently now may help position your organization well in the future, should it become necessary to respond to government audits or other inquiries.

“Tips to Mitigate Future COVID-Funding Enforcement Risks,” by Dominique L. Casimir and William E. Lawler III was published in Law360 on March 27, 2020.


[1] 42 U.S.C. 5121-5207.