Class Deviation – CARES Act Section 3610 Implementation

Many DOD contractors are concerned about being able to maintain a mission-ready workforce during the COVID-19 national emergency but there is relief in sight.

Circumstances may look different depending on the contractor. Contractors that provide on-site services will differ from a contractor that works remotely. A contractor that is generating no revenue will have a more urgent need for relief than a contractor who is still able to perform its work on a reduced schedule.

On April 8, 2020, the Department of Defense released a class deviation which implemented Section 3610 of the CARES Act. This also included a new clause in the Defense Federal Acquisition Regulation Supplement (DFARS). The class deviation provides relief for contractors to stay in a ready state by treating paid leave costs that are being incurred to keep its employees in a ready state due to the COVID-19 national emergency as allowable. Contracting officers can use funds made available to the agency by Congress to reimburse contractors for workers lost time between Jan 31, 2020 and September 30, 2020 at the minimum applicable contract billing rates (not to exceed 40 hours per week) for any paid leave, including sick leave. This provides contracting officers the ability to modify contracts to provide reimbursement of these costs that would otherwise not be reimbursable and provide such reimbursement on any contract type.

However, contractors should be mindful that if they are seeking compensation from other provisions of the CARES Act it could affect their reimbursement under Section 3610. This would include loan forgiveness under the Payroll Protection Program loan and paid leave under the Families First Coronavirus Relief Act.  Contracting officers are being encouraged to work with contractors to avoid duplications.

It is also important for contractors to evaluate which provision would be more beneficial. For example, the PPP loan has certain restrictions including caps on salaries while Section 3610 may allow reimbursement at the fully burdened labor rates.

Also noted in the class deviation, reimbursement is not mandatory and subject to availability of funds. It will be important to be in communication with your contracting officer or prime and this should be done so as soon as possible to help lead to the best outcome.

If you need assistance or have further questions please feel free to contact KatzAbosch’s Government Contracting team.

News, Tips & Insights Sign-Up to Receive Updates

Enter your email address to subscribe to our digest of accounting and firm news.

  • This field is for validation purposes and should be left unchanged.