By Holly Roth and Elizabeth Leavy

Law360 (April 21, 2020, 4:19 PM EDT) --

Holly Roth

Elizabeth Leavy

On April 15, the U.S. General Services Administration emailed an unprecedented notification to federal supply schedule contractors, informing them that the GSA's senior procurement executive, Jeffrey Koses, had temporarily waived applicability of the Buy American Act, or BAA,[1] and the Trade Agreements Act, or TAA,[2] to the acquisition of certain personal protective equipment, and cleansing and disinfecting materials through the GSA federal supply schedule, or FSS, contracts and, potentially, other GSA contracts.

The waiver, originally provided in Senior Procurement Executive Memo 2020-11 dated April 3, reflects Koses' determination that adequate BAA-compliant and TAA-compliant supplies were not available for the following five federal supply classes, or FSCs:

FSC	General Products Purchased
4240	N95 masks
6810	Sodium Hypochlorite (bleach)
6840	Disinfectants including cleaners, sprays and wipes
7930	Cleaners including sanitizing surface and floor cleaners
8520	Hand sanitizers, soaps and dispensers

The memo waives the BAA and the TAA for the products identified above for all existing, applicable FSS contracts for the period of April 3 to July 1. The memo states that contractors remain prohibited from supplying products produced in prohibited countries listed in Federal Acquisition Regulation subpart 25.7.

The memo's nonavailability determination is important to businesses whose FSS contracts currently permit them to sell PPE products, such as the N95 masks, where such products are produced in substantial quantities in China and, possibly, other non-TAA designated countries. Yet, the memo is ambiguous as to whether the waiver applies only to the products expressly identified above, or to additional products listed within the identified FSCs, but not specifically enumerated in the memo.

Taking FSC 4240 as a simple example, this FSC is actually titled "Safety and Rescue Equipment." It includes such items as goggles, respirators (perhaps broader than the N95 mask referenced), spectacles, firefighting helmets, escape ladders, rope washers, avalanche probes, biological masks, etc. By the inclusion of this FSC in the memo, it is unclear whether appropriate FSS contract holders may now sell non-BAA, non-TAA compliant products under this FSC without fear of breaching their contract and violating the False Claims Act.[3]

FSS contract holders are advised to confirm the scope of the memo's waiver with their respective contracting officers before adding other noncompliant products within the identified FSCs to their FSS contracts. In addition, FSS contract holders are advised to disclose the country or countries of origin of each non-BAA, non-TAA compliant product at the time such product is added to their FSS contracts.

In addition, GSA FSS contract holders who are able to avail themselves of this nonavailability determination to provide products for medical use and purchase products directly from manufacturers or brokers in other countries, should familiarize themselves with the recent U.S. Food and Drug Administration's guidance, notices and other information governing the importation of N95 masks and other health care related devices.

The GSA's FSS contracts are the workhorses of federal government contracts. They are intended to provide executive agencies as well as state and local governments with fast and effective access to commercial products and services, within the scope of the FSS contract, where prices for the associated products and services have already been determined by the GSA to be fair and reasonable. Each category of FSS contracts — including the consolidated schedule — limits the scope of the products or services that an individual FSS contract holder may sell, and what a government agency may acquire, to the special item numbers identified in the FSS contract.

As a simple example, the N95 masks might fall within the scope of a contractor's FSS contract for construction and building material. However, the N95 masks likely would not fall within the scope of a contractor's FSS contract for information technology products and services. Whereas an FSS contractor whose contract contains a special item number for construction and building material could now sell, as a result of the waiver, the N95 masks of Chinese manufacture to the government, an FSS contractor with only the information and technology special item numbers could not.

Furthermore, for an FSS contractor to have the ability to sell the products under these FSCs, best practices would dictate that the contractor request a modification to add these products to their existing contract to permit the contractor to easily delete the products at the close of the waiver period, or July 1.

This memo opens the door to the GSA, and other federal agencies, acquiring additional PPE and other products for use in the battle against COVID-19. The GSA's waiver may also lead the way for other agencies who are similarly seeking nonavailability determinations for the purchase of PPE and medical supplies that may not be manufactured in adequate quantities in the U.S. and TAA-compliant countries.

In fact, the Federal Emergency Management Agency is currently seeking such a nonavailability determination from the U.S. Department of Homeland Security for medical and surgical instruments, equipment and supplies.[4]

Given the scarcity of some of the products — in particular PPE — that have been now been determined nonavailable, FSS contractors should be cautious about adding scarce products to their FSS contracts both because of the significant fluctuation in pricing as well as the uncertainty of when such products could actually be delivered to the government in response to a government order.

Contractors need to conduct careful due diligence to verify that their potential sources for any of these products are providing new and genuine — not used or grey market — products. Where FSS contractors turn to overseas suppliers to acquire these products, such due diligence would include taking steps to verify whether a specific country license is required to permit a foreign business to sell the products for export, checking to see whether the N95 respirators are listed on the Centers for Disease Control and Prevention website titled, "Counterfeit Respirators / Misrepresentation of NIOSH-Approval."[5]

Further due diligence steps recommended during the COVID-19 pandemic and scarcity of PPE supplies, include engaging in live Facetime calls with the seller's representative on the ground in the country of origin to ensure that the product is actually in hand and engaging local country representatives for shipping, to ensure the products are in fact picked up and delivered to the port of embarkation.

Finally, an FSS contractor may wish to purchase shipping insurance to cover the potential loss that might result should the products, ordered and paid for, ultimately not be shipped.

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Holly A. Roth is a partner and Elizabeth Leavy is counsel at Reed Smith LLP.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] 41 U.S.C. chapter 83.

[2] 19 U.S.C. 2501, et seq.

[3] 31 U.S.C. §§ 3729 - 3733.

[4] https://beta.sam.gov/opp/3e05e664e606486ca34d1a41b47ff0ff/view#general.

[5] https://www.cdc.gov/niosh/npptl/usernotices/counterfeitResp.html.

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