DPC Issues Section 3610 Draft Reimbursement Guidance

Yesterday evening, May 18, Defense Pricing and Contracting issued draft instructions and requirements for contractors submitting Section 3610 reimbursement requests. Comments from industry are welcome by emailing osd.dfars@mail.mil before 5pm ET on Friday, May 22, 2020.

The draft instruction requires significant information from contractors. The required information falls into these general categories: detail about requested reimbursement; information about the contractor's rates billed to the government and a variety of information to substantiate that rate; and, information about potential credits or reductions. Individuals at the Vice President level and above within the organization will be required to sign Section 3610 reimbursement requests.

Detail About Requested Reimbursement: Among other things, these questions ask about (a) other entities with which the contractor may be affiliated, requesting a corporate structure description and narrative concerning any other 3610 reimbursement requests within the corporate family; (b) identification of any other contracting officers or federal agencies from which the contractor is requesting reimbursement; (c) a list of all DoD contract numbers/order numbers/agreements, and all contracts/orders/agreements with other federal agencies for which the contractor is seeking 3610 reimbursement, provided in a sortable format listing agency, buying activity, ACO/DACO/CACO/PCO, DUNS numbers and CAGE codes, and including a description of non-governmental work and the allocation of paid leave costs between government and commercial customers.

Information About Rates: These questions ask for (a) a narrative identifying the circumstances that impacted paid leave costs and performance under each applicable contract, employee, region, etc.; (b) a full description of the methodology the contractor used to develop the reimbursement request, including how the contractor developed the appropriate rates, and what they include (noting that they may include labor rates, overhead, and G&A but not profit or fee); (c) information about the status of the contractor’s accounting system and COVID-19 paid leave guidance; (d) substantial detail about paid leave, hours worked, etc., by employee; (e) information about how sick leave is factored into forward pricing for the period claimed (instructing contractors to remove sick leave costs that are included in indirect rates used to price FFP contracts); (f) information about actual, unburdened labor rates paid to personnel for which 3610 reimbursement is requested; (g) information about forward pricing, including showing the calculations used to remove indirect employees’ paid leave charges subject to 3610 reimbursement from its indirect rate calculation, and revised indirect rates; and (h) instruction to prime contractors to require the same information from subcontractors, and requiring prime contractors to conduct the same analysis that contracting officers are required to conduct in order to validate subcontractors’ requests.

Information About Credits or Reductions>: Specific information and representations are required about the contractor’s participation (if any) in the Paycheck Protection Program, tax credits, and any other credit allowed by law.

Crowell & Moring lawyers stand ready to assist with drafting comments and, when the guidance is final, preparing Section 3610 submissions including validating subcontractor submissions.