GAO-20-662, COVID-19 Contracting: Observations on Contractor Paid Leave Reimbursement Guidance and Use

Report — GAO-20-662, COVID-19 Contracting: Observations on Contractor Paid Leave Reimbursement Guidance and Use, dated 2020-07-14, issued by Government Accountability Office.

Full text

COVID-19
CONTRACTING
Observations on
Contractor Paid Leave
Reimbursement
Guidance and Use

Report to Congressional Committees
September 2020

GAO-20-662

United States Government Accountability Office

 United States Government Accountability Office
Highlights of GAO-20-662, a report to
congressional committees

September 2020
COVID-19 CONTRACTING
Observations on Contractor Paid Leave
Reimbursement Guidance and Use
What GAO Found
Section 3610 of the Coronavirus Aid, Relief, and Economic Security (CARES)
Act generally authorizes agencies at their discretion to reimburse a contractor for
the cost of paid leave incurred during the pandemic so that it can maintain its
workforce in a ready state. Between March 2020—when the CARES Act was
enacted—and early July 2020, the Office of Management and Budget (OMB) and
each of the seven other agencies in GAO’s review issued guidance to implement
section 3610. While largely similar, GAO’s work identified some differences
across these guidance documents, including the extent to which the rates used
to calculate these reimbursements could include profit or fees. OMB issued
additional guidance on July 14, 2020, that addressed these differences and
clarified how agencies should handle each situation. For example, OMB noted
that profit or fees should generally not be reimbursed but provided options for
addressing situations in which removing profit or fees would be burdensome.
OMB advised agencies to report the amount reimbursed using section 3610
authority via contract modifications to the Federal Procurement Data System-
Next Generation (FPDS-NG). After excluding reported obligations identified by
agency officials as not associated with section 3610 authority, the reported data
indicated that agencies made relatively little use of the authority through July
2020 (see figure). However, the Department of Energy (DOE) reimbursed
contractors for almost $550 million in paid leave costs, stating it used existing
obligations rather than adding funding via a contract modification. As a result,
these amounts were not reported to FPDS-NG as section 3610 reimbursements.
Obligations Using Section 3610 Authority Reported to the Federal Procurement Data System-
Next Generation by Selected Agencies from January 31 to July 20, 2020
Agency officials and industry representatives GAO interviewed identified several
factors that limited section 3610 obligations to date, including the absence of
dedicated funding. With the exceptions of the Department of Defense (DOD) and
DOE, agency officials GAO met with either did not expect a large amount or were
uncertain about the level of future requests for section 3610 reimbursements.
DOD officials stated that they expected requests amounting to billions of dollars.
View GAO-20-662. For more information,
contact Timothy J. DiNapoli at (202) 512-4841
or dinapolit@gao.gov.
Why GAO Did This Study
In March 2020, Congress passed the
CARES Act, which provides over
$2 trillion in emergency assistance and
healthcare response for individuals,
families, and businesses affected by
COVID-19. The CARES Act also
includes a provision for GAO to review
federal contracting pursuant to
authorities provided in the Act. This
report addresses the implementation of
section 3610 of the CARES Act, which
authorizes federal agencies to
reimburse contractors for paid leave
related to the COVID-19 pandemic
through September 30, 2020.
This report describes (1) the extent to
which section 3610 implementation
guidance provided by selected federal
agencies and OMB differs and (2) the
extent to which selected federal
agencies reported use of section 3610
authority through July 20, 2020.
GAO reviewed relevant guidance
issued by OMB and the seven federal
agencies with contract obligations
greater than $10 billion in fiscal year
2019; interviewed cognizant officials
from OMB and each agency; and
reviewed comments provided by and
spoke with representatives from four
industry associations. GAO also
analyzed public procurement data
reported by selected agencies to
FPDS-NG through July 20, 2020 on
the use of section 3610 authority.
GAO will continue to assess how
agencies are implementing section
3610 authority as part of a series of
planned reports regarding the federal
response to COVID-19.

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GAO-20-662  COVID-19 Contracting
Letter

1
Initial Differences in OMB and Selected Agencies’ Guidance on
Implementing Section 3610 Have Been Addressed
4
Publicly Reported Obligations Data May Not Capture Full Amount
of Paid Leave Reimbursements to Date, and Extent to Which
Contractors Will Request Subsequent Reimbursements  Is
Uncertain
10
Agency Comments
15
Appendix I
GAO Contact and Staff Acknowledgments
18

Figures
Figure 1: Timeline of Selected Agencies’ Issuance of Section 3610
Implementation Guidance
5
Figure 2: Obligations Using Section 3610 Authority Reported to
the Federal Procurement Data System-Next Generation
by Selected Agencies from January 31 to July 20, 2020
11

Contents

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GAO-20-662  COVID-19 Contracting

Abbreviations

CARES Act

Coronavirus Aid, Relief, and Economic Security Act
COVID-19

Coronavirus Disease 2019
DHS

Department of Homeland Security
DOD

Department of Defense
DOE

Department of Energy
FAR

Federal Acquisition Regulation
FPDS-NG
Federal Procurement Data System-Next
Generation
GSA

General Services Administration
HHS

Department of Health and Human Services
NASA

National Aeronautics and Space Administration
OMB

Office of Management and Budget
VA

Department of Veterans Affairs

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GAO-20-662  COVID-19 Contracting
441 G St. N.W.
Washington, DC 20548
September 3, 2020
Congressional Committees
Coronavirus Disease 2019 (COVID-19) is a strain of coronavirus to which
the public does not have immunity. After emerging in late 2019, the virus
quickly spread around the globe. On January 31, 2020, the Secretary of
Health and Human Services declared a public health emergency for the
United States. On March 11, 2020, the World Health Organization
characterized COVID-19 as a pandemic, and 2 days later the President
declared COVID-19 a national emergency. The nation subsequently has
seen the spillover effects of a pandemic on the economy as millions have
lost their jobs due to stay-at-home orders and business closures aimed at
“flattening the curve,” or taking the burden off the health care system by
reducing the spread of infections.
Among other actions in response to this unprecedented global crisis, in
March 2020 Congress passed, and the President signed into law, the
Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which
provides over $2 trillion in emergency assistance and health care
response for individuals, families, and businesses affected by COVID-19.
The CARES Act also includes a provision for GAO to provide a
comprehensive audit and review of federal contracting pursuant to
authorities provided in the Act. This report—part of a series of planned
reports regarding the federal response to COVID-19—addresses the
implementation of section 3610 of the CARES Act.1 Section 3610
generally authorizes federal agencies to reimburse contractors for paid
leave provided to a contractor’s employees and subcontractors who are
unable to access work sites due to facility closures or other restrictions,
and whose duties cannot be performed remotely during the COVID-19
pandemic.2 This authority extends through September 30, 2020. While
authorizing such reimbursements, section 3610 did not appropriate any
additional funding to agencies to cover these expenses. This report
describes (1) the extent to which section 3610 implementation guidance
provided by selected federal agencies and the Office of Management and

1For example, see GAO, COVID-19 Contracting: Observations on Federal Contracting in
Response to the Pandemic, GAO-20-632 (Washington, D.C.: July 29, 2020) and COVID-
19: Opportunities to Improve Federal Response and Recovery Efforts, GAO-20-625
(Washington, D.C.: June 25, 2020).
2Coronavirus Aid, Relief, and Economic Security Act, Pub. L. No. 116-136, 134 Stat. 281,
§ 3610 (2020).
Letter

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GAO-20-662  COVID-19 Contracting
Budget (OMB) differs; and (2) the extent to which selected federal
agencies reported use of section 3610 authority as of July 20, 2020.
To identify the extent to which section 3610 implementation guidance
provided by selected federal agencies and OMB differs, we selected the
seven federal agencies with contract obligations greater than $10 billion
in fiscal year 2019. These agencies were:
•
Department of Defense (DOD)
•
Department of Energy (DOE)
•
Department of Health and Human Services (HHS)
•
Department of Homeland Security (DHS)
•
Department of Veterans Affairs (VA)
•
General Services Administration (GSA)
•
National Aeronautics and Space Administration (NASA)
We gathered and analyzed guidance, memorandums, frequently asked
questions, and other resources related to implementation of section 3610
issued by these agencies, as well as by OMB. We compared these
documents to determine similarities and differences. We also interviewed
or received written responses from cognizant officials at these agencies
to learn about these similarities and differences and plans for additional
guidance. The scope of this engagement does not include use of section
3610 authority within the Intelligence Community.3
To identify the extent to which selected federal agencies reported use of
section 3610 authority as of July 20, 2020, we analyzed procurement data
on contract obligations related to the use of section 3610 authority for
those selected agencies that reported use in the Federal Procurement
Data System-Next Generation (FPDS-NG) between January 2020 and
July 2020. For the selected agencies, we identified FPDS-NG records for

3The Intelligence Community consists of 17 civilian and military organizations, including
the Central Intelligence Agency, Defense Intelligence Agency, Federal Bureau of
Investigation, National Reconnaissance Office, National Security Agency, and Office of
the Director of National Intelligence. We coordinated with the National Reconnaissance
Office Inspector General, who also serves as the Pandemic Response Accountability
Committee’s Intelligence Community Liaison. The Office of Inspector General is
conducting a separate evaluation of the National Reconnaissance Office’s implementation
of section 3610 authorized by the CARES Act and will share its scope and methodology
across the Intelligence Community Inspector General community.

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GAO-20-662  COVID-19 Contracting
which the Description of Requirements field contained the terminology
specified by OMB—“COVID-19 3610”—to indicate use of section 3610
authority.4 We manually reviewed these records to ascertain whether they
appeared to address section 3610-related activities and asked the
selected agencies to also review these records for accuracy. We
reviewed guidance from these seven agencies as well as OMB related to
the tracking and reporting of the use of section 3610 authority and
interviewed or received written responses from cognizant officials. We
discussed and collected examples of internal tracking tools, such as
spreadsheets used at these agencies to monitor use of section 3610
authority, as well as data collected through these tools. We assessed the
reliability of FPDS-NG data by reviewing existing information about the
FPDS-NG system and the data it collects—specifically, the data
dictionary and data validation rules—and performed electronic testing.
We also discussed with selected agencies the steps they took to review
the accuracy of contract obligations reported to FPDS-NG as relating to
section 3610. After excluding data the agencies determined were not
specifically for section 3610-related purposes, we determined the FPDS-
NG data were sufficiently reliable for the purposes of describing the
extent to which selected agencies reported use of section 3610 authority.
We gathered additional perspectives on the use of section 3610 authority
from industry associations including the Aerospace Industries
Association, Coalition for Government Procurement, National Defense
Industrial Association, and Professional Services Council.
We conducted this performance audit from May 2020 to September 2020
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.

4As part of our query of FPDS-NG records, we included slight variations on the specified
OMB terminology, such as “COVID19” in addition to “COVID-19”.

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GAO-20-662  COVID-19 Contracting
We found that between March 2020—when the CARES Act was
enacted—and early July 2020, OMB and each of the agencies we
reviewed had issued section 3610 implementing guidance.5 While the
initial set of guidance was largely similar, our work identified two primary
differences across these guidance documents: the date from which
contractors could request reimbursement of paid leave and the extent to
which these reimbursements could cover profit or fees. OMB issued
additional guidance on July 14, 2020 that addressed these differences.
Following the enactment of the CARES Act on March 27, 2020, OMB and
federal agencies we reviewed began issuing implementation guidance.
Guidance took a variety of formats, including memorandums, class
deviations, circulars, and frequently asked questions.6 DOD, DOE, DHS,
and NASA issued their initial guidance prior to OMB’s first section 3610
guidance, issued on April 17, 2020, and those agencies later issued
supplemental guidance.7 Each of the agencies we reviewed issued some
form of guidance by July 2020. DOD finalized earlier draft guidance on
August 17, 2020 (see figure 1).

5Agencies outside the scope of our review also have issued guidance related to
implementation of section 3610. For example, the Environmental Protection Agency
provided guidance to contracting personnel and contractors, and in June 2020, that
agency’s Office of Inspector General issued a memorandum describing the guidance.
6Federal Acquisition Regulation (FAR) § 1.404. Class deviations are deviations from the
FAR necessary to meet the specific needs and requirements of an agency and which
affect more than one contract action. Class deviations are also issued in relation to
agency acquisition regulations; for example, to allow DOD organizations to deviate from
the Defense Federal Acquisition Regulation Supplement. Defense Federal Acquisition
Regulation Supplement § 201.404. DOD’s class deviation issued in relation to section
3610 establishes the applicability of section 3610 and the allowability of associated costs.
7Office of Management and Budget, Preserving the Resilience of the Federal Contracting
Base in the Fight Against the Coronavirus Disease 2019 (COVID-19), OMB Memorandum
M-20-22 (Washington, D.C.: Apr. 17, 2020).
Initial Differences in
OMB and Selected
Agencies’ Guidance
on Implementing
Section 3610 Have
Been Addressed

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GAO-20-662  COVID-19 Contracting
Figure 1: Timeline of Selected Agencies’ Issuance of Section 3610 Implementation Guidance

Note: Multiple guidance documents issued by an agency in a short period of time represented either
different types of guidance, or guidance that addressed different aspects of section 3610
implementation. For example, on April 8, 2020, the Department of Defense (DOD) issued a class
deviation. The next day, DOD issued guidance addressing implementation of section 3610 for
different contract types and how to report use of section 3610 authority, as well as a set of frequently
asked questions.

OMB’s April 17, 2020 guidance notes that maintaining the resilience of
the federal contracting base requires a multifaceted strategy to combat
the significant disruptions, both to health and economic well-being,
caused by COVID-19. According to the guidance, such strategies include
maximizing use of contractor telework, extending contract performance

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GAO-20-662  COVID-19 Contracting
dates if telework or other flexible work solutions are not possible, and,
where appropriate, reimbursing contractors for paid leave or negotiating
other forms of equitable adjustment necessary as a direct result of
COVID-19. For example, the guidance explains that it may be beneficial
to reimburse contractors for paid leave to keep personnel in a ready state
for activities so the contractor can resume supporting the agency’s
mission as soon as possible when circumstances permit.
Guidance from OMB and the agencies we reviewed generally reiterates
elements of section 3610:
•
Purpose. Reimbursement is for paid leave provided to keep
employees or subcontractors in a ready state, including to protect the
life and safety of government and contractor personnel.
•
Rate and hours. Reimbursement must be at the minimum applicable
contract billing rate not to exceed an average of 40 hours per week
and does not cover paid leave provided beyond September 30, 2020.
•
Other financial relief. Maximum authorized reimbursement is to be
reduced by the amount of additional credits the contractor may be
allowed under either the CARES Act or the Families First Coronavirus
Response Act, signed into law on March 18, 2020.8
In other instances, guidance from OMB and the agencies in our review
includes topics that were not explicitly covered in section 3610:
•
Eligibility. Section 3610 states that its authority only applies to a
contractor whose employees or subcontractors cannot perform work
on a site approved by the government—including federally-owned or -
leased facilities—due to facility closures or other restrictions and who
cannot telework because their duties cannot be performed remotely
during the COVID-19 public health emergency. OMB’s guidance from
April 17, 2020 elaborates on the nature of sites to which section 3610
applies, specifying that approved contractor-owned or contractor-
leased facilities qualify. Guidance from all selected agencies reiterates
the definition from section 3610, with DOD, DOE, HHS, VA, and GSA
guidance also including the language from within the OMB April 17,
2020 guidance.
•
Government discretion to provide reimbursement. Guidance from
OMB and each selected agency emphasizes that reimbursement is at
the discretion of the government and not mandatory.

8Pub. L. No. 116-127, 134 Stat. 178 (2020).

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GAO-20-662  COVID-19 Contracting
•
Duplication of payment. Guidance from OMB and each selected
agency reminds contracting officers to consider other authorities and
funding options when contemplating contractor reimbursement under
section 3610. Regarding contractors’ attempts to use other sources of
financial relief—such as loans under the Paycheck Protection
Program or other credits allowed—OMB guidance discusses steps
agencies should consider to prevent duplication of payment or
“double-dipping.”9 OMB notes the need for fully supported
documentation, which may involve contractor representations for the
employee leave costs it requests. To ensure the government is able to
recover any improper payments, OMB also states that the contractor
is responsible for reporting to the contracting officer if it cannot
determine the amount of other funding or credits it will receive at the
time it requests section 3610 reimbursement.
Guidance from all selected agencies includes discussion of how to
prevent duplication of payment, with some process variation. All place
the onus on contractors to either identify other funding or credits
received or requested, or make statements that they will not receive
such funds or credits. In addition, HHS, GSA, and DHS guidance
states that contractors will be responsible for making repayments in
the event of duplicate payment.
Agencies also have tailored their guidance to reflect specific alternative
approaches available for contracting officers to consider in place of or in
addition to section 3610 reimbursement. For example:
•
DHS guidance identifies certain standard Federal Acquisition
Regulation (FAR) clauses through which equitable adjustments to
contract prices in response to COVID-19 disruptions could be made.10
•
NASA guidance identifies some existing FAR and NASA FAR
Supplement clauses through which the agency could reimburse paid
leave costs.11
•
GSA guidance suggests contracting officers consider alternatives—
including delivery schedule and other contract extensions, use of

9The Paycheck Protection Program is designed to provide loans to small businesses to
help them keep their workers on payroll. See Pub. L. No. 116-136, §§ 1102, 1106 (2020);
85 Fed. Reg. 20811, 20814 (Apr. 15, 2020).
10FAR § 52.243-1 (Changes-Fixed-Price) and FAR § 52.243-2 (Changes-Cost-
Reimbursement).
11Cited authorities include FAR § 52.242-15 (Stop-Work Order) and NASA FAR
Supplement § 1852.242-72 (Denied Access to NASA Facilities).

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progress payments, and accelerated payments to small business
contractors—before using section 3610 authority.
•
DOD guidance outlines additional ways to address the impact of
COVID-19 on contractors, including the possibility of relief from
contract delivery requirements in the event of delays caused by
COVID-19, and contract modifications, subject to the availability of
funds, to reflect changes to the government’s needs.
Agency-specific circumstances drove other unique features of some
agencies’ guidance. For example, if an obligation by DHS under section
3610 exceeds $1 million, then the agency must notify Congress in
accordance with an existing provision in its appropriations act.12 GSA has
specific processes that address how to implement section 3610 both on
its own contracts and those established for use by other agencies. For
example, in relation to its government-wide indefinite delivery vehicles,
such as the federal supply schedules, GSA’s guidance makes clear that
section 3610 authority applies at the order level rather than the contract
level.
Our work identified two areas where guidance issued by OMB and some
of the agencies we reviewed between March 2020 and early July 2020
differed. In its April 2020 guidance, which took the form of “guiding
principles,” OMB noted that agencies have wide discretion when treating
paid leave as a reimbursable cost and stated it expects to see variance in
how agencies implement section 3610, as a reflection of their different
mission requirements, contractual arrangements, and funding situations.
Subsequently, on July 14, 2020, OMB issued additional guidance that
addressed the two differences we identified in OMB and other agencies’
guidance and clarified how agencies should handle each situation.13
•
Reimbursement time frame. All selected agencies agree on the end
date for reimbursement of paid leave costs—September 30, 2020—
which is specified in section 3610. OMB, HHS, GSA, NASA, and DHS
indicate that the date of the enactment of the CARES Act—March 27,
2020—is the start date for reimbursement. VA does not include an
explicit start date in its guidance but requires compliance with OMB

12See Consolidated Appropriations Act, 2020, Pub. L. No. 116-93, 133 Stat. 2317, div. D,
tit. V, § 507 (2019).
13Office of Management and Budget, Additional Guidance on Federal Contracting
Resiliency in the Fight Against the Coronavirus Disease (COVID-19), OMB Memorandum
M-20-27 (Washington, D.C.: July 14, 2020).

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guidance. DOE, on the other hand, states that the date of the COVID-
19 public health emergency declaration—January 31, 2020—is the
start date.14 Prior to August 2020, DOD also used this date, but it
issued additional guidance on August 17, 2020 that revised the start
date for reimbursement under section 3610 to March 27, 2020. DOD
noted, however, that as section 3610 did not prohibit it from
reimbursing a contractor for paid leave prior to that date using
contract authorities otherwise available, contracting officers may, at
their discretion, consider reimbursing such paid leave costs as other
COVID-19 related costs.
OMB’s July 14, 2020 guidance notes that section 3610 does not
prohibit an agency from reimbursing a contractor for paid leave prior
to the March date under contract authorities otherwise available to the
agency, such as those available to keep national security
professionals or skilled scientists ready to perform high-priority
activities. However, it further notes that for the purposes of tracking
and reporting, agencies should not identify such reimbursements as
payments under section 3610. We did not find any records in FPDS-
NG dated prior to March 27, 2020 that were identified as obligations
using section 3610 authority.
•
Reimbursement of profit or fees. In its initial discussion of what may
be included in contractor billing rates used for reimbursement, OMB’s
April 17, 2020 guidance stated that these rates shall not include profit
or fees. DOD and DOE also prohibit reimbursement of profit or fees,
DHS prohibits reimbursement of profit, and VA requires compliance
with OMB guidance. However, GSA allows contractors to include
profit or fees in reimbursement requests in instances when excluding
them would be impractical. Further, NASA notes that for firm-fixed-
price contracts, contractors can bill for profit that is part of the original
contract price, although not for additional profit. HHS alerted
personnel to the OMB April 2020 guidance upon its release, and in
later supplemental guidance stated that for certain contract types
including time-and-materials and labor-hour, the minimum applicable

14In conditioning contractor reimbursement on “facility closures or other restrictions” and
the inability to telework because “job duties cannot be performed remotely,” section 3610
specifically refers to a time frame that takes place “during the public health emergency
declared on January 31, 2020 for COVID-19.” Pub. L. No. 116-136, § 3610.

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billing rates will be prenegotiated rates.15 Rates can be prenegotiated
to include profit or fees.
OMB’s July 14, 2020 guidance states that reimbursement “should” be
limited to the actual cost incurred and “should not” include profit. This
differs from OMB’s more stringent original language, which was “shall
not.” Further, the guidance suggests ways in which agencies can
lessen administrative burdens associated with excluding profit, such
as making calculations using company or industry level data. In
addition, the guidance notes that for certain contract types, including
time-and-materials and labor-hour, assessment of the reasonableness
of costs incurred under section 3610 will take into consideration
prenegotiated contract billing rates.
Contract obligations data reported in FPDS-NG, which was reviewed by
agency officials, indicated the agencies in our review had made
relatively few new obligations to reimburse contractors using section
3610 authority through July 2020.16 Our work found, however, that DOE
reimbursed contractors for almost $550 million in paid leave costs—far
more than its publicly reported new obligations for this purpose of $0.5
million—primarily due to its stated use of existing contract obligations. In
these cases, agency officials said they did not need to issue a contract
modification to obligate additional funding and therefore these amounts
would not be reported to FPDS-NG as section 3610 reimbursements.
As of July 20, 2020, only DOD, NASA, and DOE reported to FPDS-NG
any obligations related to section 3610—approximately $22 million on 39
contract actions. The other four agencies did not report any section
3610-related obligations. As shown in figure 2, DOD accounted for $18.3
million of the obligations.

15Section 3610 authorizes agencies to reimburse at “the minimum applicable contract
billing rates not to exceed an average of 40 hours per week any paid leave, including sick
leave,” and does not specifically address reimbursement of profit or fees. Pub. L. No. 116-
136, § 3610.
16Our review does not include members of the Intelligence Community. The Intelligence
Community does not report contract obligations to FPDS-NG.
Publicly Reported
Obligations Data May
Not Capture Full
Amount of Paid Leave
Reimbursements to
Date, and Extent to
Which Contractors
Will Request
Subsequent
Reimbursements
Is Uncertain

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Figure 2: Obligations Using Section 3610 Authority Reported to the Federal
Procurement Data System-Next Generation by Selected Agencies from January 31
to July 20, 2020

Note: Agency officials reviewed Federal Procurement Data System-Next Generation (FPDS-NG) data
included in the figure for accuracy. In some instances, these reviews identified FPDS-NG records
reported in error as uses of section 3610 authority. In other instances, these reviews identified
obligations reported in FPDS-NG as uses of section 3610 authority which reflected a combination of
section 3610 and non-section 3610 obligations. Agency officials subsequently isolated the section
3610 portion by reviewing contract documents. In the case of the Department of Energy, agency
officials noted additional amounts used for section 3610 reimbursements that were not reflected as
such in FPDS-NG, primarily because the agency said it used existing contract obligations. As a result,
obligations reported in FPDS-NG as uses of section 3610 authority may differ from actual obligations
for this purpose.

OMB guidance notes that in order to track use of section 3610 authority,
agencies should report modifications for section 3610 reimbursements to
FPDS-NG by entering “COVID-19 3610” at the beginning of the
Description of Requirements field.17 Some agencies have taken steps to
review the accuracy of FPDS-NG records indicating the use of section
3610 authority. During their review process, agency officials identified
certain data reported to FPDS-NG as section 3610 obligations that
differed from the actual amount obligated for that purpose. For example,
officials from DOD’s Defense Pricing and Contracting office told us they
review such FPDS-NG records to check that they are accurately coded
and request corrections where necessary. According to DOD officials,

17VA guidance requires “CARES ACT” to be entered into this field in FPDS-NG. While VA
requires compliance with OMB guidance, which includes entry of “COVID-19 3610” into
this field, OMB’s terminology is not explicitly stated in VA’s guidance. According to a
senior VA official, VA plans to clarify the requirement to use the OMB terminology in future
guidance updates.

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these reviews identified instances in which obligations reported in FPDS-
NG as uses of section 3610 authority actually reflected a combination of
section 3610 and non-section 3610 obligations, such as for general
services or test operations. DOD officials were subsequently able to
isolate the section 3610 obligations by reviewing contract documents. As
a result, DOD officials noted that they confirmed that, as of July 20, 2020,
$18.3 million of the $108.8 million identified in FPDS-NG as section 3610
reimbursements was specifically obligated for that purpose. A DOD
official stated that they are continuing to review obligations reported in
FPDS-NG to ensure they are accurately recorded. In addition, officials
from the DOD Office of Inspector General told us that they check FPDS-
NG records coded as section 3610 against contract documents and
discuss the records with cognizant contracting officers. Officials stated
that their review has helped correct instances where use of section 3610
was reported in error.
Other agencies have established procedures, in addition to FPDS-NG
reporting, to track and maintain visibility into use of section 3610
authority, including notification requirements and centralized tracking
tools. For example, the Office of the Chief Procurement Officer at DHS
requires heads of contracting activities to consult with this office before
implementing any action under the CARES Act, including section 3610.
GSA requires contracting officers to report any contract action using
section 3610 authority to the Office of Government-wide Policy via a
spreadsheet. NASA also tracks contractor requests centrally and, for 15
of its prime contractors, sent letters requesting information on the impact
of COVID-19, including affected project names, contract numbers, and
facility names and locations. DOE also maintains an internal reporting
system that identifies the amount reimbursed to contractors for section
3610 paid leave costs, which includes the amount of reimbursements and
the number of individuals on paid leave. DOE provided data that showed,
as of July 31, 2020, it had reimbursed contractors nearly $550 million for
the costs of paid leave provided to more than 9,000 individuals. DOE
officials explained that they were primarily able to use existing obligations
for these reimbursements, rather than new obligations. As DOE officials
said they did not need to issue a contract modification to obligate
additional funding for these reimbursements, they were not reflected as
section 3610 reimbursements in FPDS-NG.
Agency officials and industry associations cited a number of reasons for
the level of obligations using section 3610 authority to date.

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GAO-20-662  COVID-19 Contracting
•
Authorization without an appropriation for section 3610
reimbursements. While section 3610 states that, notwithstanding any
other law, agencies may use funds made available by the CARES Act
or any other act to reimburse contractors, the CARES Act does not
appropriate additional funding specifically for that purpose. OMB’s
July 14, 2020 guidance states that section 3610 reimbursements must
be made using an appropriation available to fund a fiscal year 2020
need. Officials from some agencies noted reluctance to use funding
from other priorities—such as DOD’s modernization and readiness
efforts—for section 3610 reimbursements. Representatives from
industry associations also expressed concerns about availability of
funding and the possibility of denied reimbursement requests due to a
lack of funding, even if contractors meet all other eligibility conditions.
In addition to raising funding concerns, some industry associations
have asked Congress to extend section 3610 authority past its current
September 30, 2020 expiration date to December 31, 2020. As of
August 2020, Congress had not taken action to extend this authority.
•
Use of other options to address COVID-19 disruptions. OMB
guidance notes the availability of other sources of financial relief for
contractors in addition to section 3610, such as accelerated payments
to small businesses, favorable tax changes, and use of loans under
the Paycheck Protection Program to pay employees. Agency officials
also cited the availability of other options—noted previously in this
report—as a reason for low levels of section 3610 reimbursement
requests. For example, DHS guidance regarding section 3610 notes
the possibility of equitable adjustments to contract prices using certain
standard FAR clauses in response to COVID-19 disruptions. In
guidance issued shortly before the enactment of the CARES Act,
NASA noted existing authorities the agency would use to provide
reimbursement for paid leave costs. This situation may also reduce
the number of actions specifically identified in FPDS-NG as section
3610 reimbursements. A senior NASA official told us that if they were
to use these existing authorities, then NASA would not report the
amount obligated to reimburse contractors as a section 3610
obligation, even if it was provided for similar purposes. OMB’s July 14,
2020 guidance instructs agencies not to identify reimbursements for
paid leave made prior to the enactment of the CARES Act as
payments under section 3610.
•
Perception of burdensome processes for requesting section
3610 reimbursements from DOD. Representatives from industry
associations noted that DOD’s procedures for requesting section 3610
reimbursements could deter requests due to the scope and scale of
required information. For example, in May 2020, DOD released draft

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GAO-20-662  COVID-19 Contracting
guidance regarding the process for requesting reimbursements and
invited feedback. Industry associations raised particular concerns that
the process would require submission of a large volume of
documentation before the contractors knew whether they would be
eligible for reimbursement or if funds would be available. The
associations suggested breaking the process into two steps, under
which contractors could clarify eligibility and funding first and then
proceed with collecting documentation once they knew their status.
DOD issued finalized guidance on August 17, 2020, which
encourages early engagement with a contracting officer when a
contractor intends to submit a request for reimbursement under
section 3610, including discussion of funding availability. This
guidance also tailors the reimbursement request process to the
circumstances of the contractor, depending on whether it seeks
reimbursement in relation to a single contract, multiple contracts, or at
the level of an entire business unit.
With the exceptions of DOD and DOE, agency officials we met with either
did not expect a large amount or were uncertain about the level of future
requests for reimbursements under section 3610. However, a senior DOD
official told us that DOD expected section 3610 reimbursement costs to
amount to billions of dollars, especially for its largest prime contractors, if
additional funding becomes available via supplemental appropriations. In
a June 2020 testimony before the House Armed Services Committee, the
Under Secretary of Defense for Acquisition and Sustainment quoted a
large prime contractor as stating that the impact of section 3610 could be
up to $1.5 billion for that company and its associated suppliers. The same
contractor also noted estimates in excess of $1 billion for COVID-19 costs
not related to section 3610. DOD officials told us that, in July 2020,
several large defense contractors provided DOD with rough order of
magnitude estimates of the impact that COVID-19-related actions had on
their businesses—including the amount of paid leave they provided to
their employees—that were generally in line with the aforementioned
figure. DOD officials cautioned, however, that these estimates were not
formal requests for reimbursement, nor were they accompanied by
supporting documentation. DOE officials told us they also expected a
significant cost impact due to contractor requests for section 3610
reimbursement.

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GAO-20-662  COVID-19 Contracting
We provided a draft of this report to DOD, DOE, HHS, DHS, VA, GSA,
NASA, and OMB for review and comment. DOE, HHS, DHS, VA, and
GSA told us they had no comments on the draft report. DOD and NASA
provided technical comments, which we incorporated as appropriate.
OMB did not provide comments.
We are sending copies of this report to the appropriate congressional
committees; the Secretaries of Defense, Energy, Health and Human
Services, and Veterans Affairs; the Acting Secretary of Homeland
Security; the Administrator of General Services and the Administrator of
NASA; and the Director of OMB. In addition, the report will be made
available at no charge on the GAO website at https://www.gao.gov.
If you or your staff have any questions concerning this report, please
contact me at (202) 512-4841. Contact points for our offices of
Congressional Relations and Public Affairs may be found on the last page
of this report. Staff members making key contributions to this report are
listed in appendix I.

Timothy J. DiNapoli
Director, Contracting and National Security Acquisitions

Agency Comments

Page 16
GAO-20-662  COVID-19 Contracting
List of Committees
The Honorable Richard C. Shelby
Chairman
The Honorable Patrick J. Leahy
Vice Chairman
Committee on Appropriations
United States Senate
The Honorable Lamar Alexander
Chairman
The Honorable Patty Murray
Ranking Member
Committee on Health, Education, Labor, and Pensions
United States Senate
The Honorable Ron Johnson
Chairman
The Honorable Gary C. Peters
Ranking Member
Committee on Homeland Security and Governmental Affairs
United States Senate
The Honorable Nita M. Lowey
Chairwoman
The Honorable Kay Granger
Ranking Member
Committee on Appropriations
House of Representatives
The Honorable Frank Pallone, Jr.
Chairman
The Honorable Greg Walden
Republican Leader
Committee on Energy and Commerce
House of Representatives

Page 17
GAO-20-662  COVID-19 Contracting
List of Committees Continued
The Honorable Bennie Thompson
Chairman
The Honorable Mike Rogers
Ranking Member
Committee on Homeland Security
House of Representatives
The Honorable Carolyn B. Maloney
Chairwoman
The Honorable James Comer
Ranking Member
Committee on Oversight and Reform
House of Representatives

Appendix I: GAO Contact and Staff
Acknowledgments

Page 18
GAO-20-662  COVID-19 Contracting
Timothy J. DiNapoli at (202) 512-4841 or dinapolit@gao.gov

In addition to the contact named above, Tatiana Winger (Assistant
Director), Robert Bullock, Laura Greifner, Julia Kennon, Miranda Riemer,
Zamir Ruli, Paige Singer, Rachel Stoiko, Roxanna Sun, and Carmen
Yeung made key contributions to this report.

Appendix I: GAO Contact and Staff
Acknowledgments
GAO Contact
Staff
Acknowledgments
(104332)

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