The Stafford Act created the current system by which a presidential disaster declaration or an emergency declaration triggers financial and physical assistance through the Department of Homeland Security's Federal Emergency Management Agency (FEMA). FEMA Administrator Peter T. Gaynor is empowered to coordinate and direct other federal agencies in providing needed assistance under the Stafford Act, subject to the Department of Health and Human Services' role as the lead federal agency for the federal government's response to COVID-19.
FAR Part 18, Emergency Acquisitions, as it currently exists, is a result of the 2005 Atlantic hurricane season and Hurricane Katrina in particular. FAR Subpart 18.1 includes one group of emergency acquisition flexibilities that may be used anytime and do not require an emergency declaration. The second group of emergency acquisition flexibilities, found at FAR Subpart 18.2, includes flexibilities that may be used only after an official emergency declaration or designation has been made. Emergency acquisition flexibilities are further divided into three subgroups: contingency operation; defense or recovery from certain attacks; and incidents of national significance, emergency declarations, or major disaster declarations.
The flexibilities provided under the Stafford Act and FAR Part 18 will expedite the delivery of critical supplies and services in response to the COVID-19 pandemic. Accordingly, companies that do business with the federal government may already be seeing the impact of executive agencies' use of these emergency acquisition flexibilities as new contracts and task/delivery orders are issued and executed. However, with the increase of contracts and task/delivery orders being executed pursuant to the Stafford Act and FAR Part 18 flexibilities, there likely will be an increased possibility of fraud schemes - analogous to those reported on during Hurricane Katrina - perpetrated by individuals seeking to take advantage of the COVID-19 pandemic realities.
Attorney General William Barr issued a memorandum on March 16, 2020 to DOJ attorneys, with two directives specifically related to the COVID-19 pandemic. The first prong of the memorandum directed all DOJ attorneys to work with the chief judge in their district to protect the health of all judges, court staff, attorneys, parties, jurors and witnesses. He specifically directed DOJ attorneys to take all appropriate precautions, in light of the realities of COVID-19, to support the continuity of judicial operations.
The second prong of the memorandum, and perhaps most important to the government contracting community, directed every DOJ attorney's office to prioritize the detection, investigation and prosecution of criminal conduct related to the coronavirus pandemic. In particular, AG Barr's memorandum referred to businesses engaging in fraud related to the COVID-19 pandemic, and to entities that may be incorporating malware infecting apps designed to track the spread of the virus. AG Barr concluded the memorandum by directing each DOJ attorney to coordinate with the Civil Division's Consumer Protection Branch, the Criminal Division's Fraud Section, and the Antitrust Division's Criminal Program for additional guidance on how to detect, investigate, and prosecute individuals and entities engaged in these schemes. We view this step as a proactive attempt to thwart the scope and types of fraud that occurred in the aftermath of Hurricane Katrina.
Government contractors must be particularly vigilant during a time, such as this, when agencies are authorized to use expedited authorities to award contracts and task/delivery orders expeditiously, as a result of a declaration of national emergency, to ensure that contractors and their employees and the businesses that form contractors' supply chains are not engaged in activities that will be subject to the heightened scrutiny of the Justice Department. Furthermore, government contractors must take all necessary steps to ensure that they do not fall prey to those bad actors who seek to use the COVID-19 pandemic as a means of infiltrating government contractors' networks, thereby putting their data at risk. As we all grapple with the realities of the COVID-19 pandemic, government contractors should ensure that companies that are currently, or wish to become, a part of a government contractors' supply chain maintain robust ethics and compliance programs. Government contractors should use this time to remind their employees and subcontractors alike of the importance of business ethics and due diligence in sourcing supplies and services during these challenging times. Likewise, all businesses should take steps to educate employees about the risks of phishing, cyber-attacks and other intrusions by outside entities seeking to use COVID-19 to exploit vulnerabilities in critical information systems during this time.
The Justice Department has signaled that it will be intolerant of criminal conduct related to business activities that seek to take advantage of those struggling to navigate the COVID-19 realities of our time. Government contractors must take heed and do all that they can to thwart such fraudulent conduct.
Client Alert 2020-109
