Justin Chiarodo: Government Contracts & Insurance Issues: How Prepared is Your Company?
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GTSC's National Preparedness Month Symposium Presentation: Government Contracts & Insurance Issues: How Prepared is Your Company? Presenter: Justin Chiarodo, Partner, Dickstein Shapiro LLP; John Gibbons, Partner, Dickstein Shapiro LLP Description: Disasters require advance planning to protect your business. Beyond physical preparedness for a disaster or terrorist attack, your firm should pay close attention to its assets – and how your company can best leverage them. This panel will discuss both government contracts and insurance considerations relating to disasters.
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Justin Chiarodo: Government Contracts & Insurance Issues: How Prepared is Your Company?
- 1. Government Contracts and Insurance Issues: How Prepared is Your Company? Justin A. Chiarodo John A. Gibbons September 30, 2014 #3286785
- 2. Government Contract Issues Disaster Relief Contracting 2
- 3. FEMA Disaster Assistance • Pursuant to the Stafford Act, FEMA provides funding to state and local governments – Known as the Public Assistance Grant Program – Federal requirements may apply to these contracts – There must be a “major disaster” or “emergency” declaration by the President for FEMA to provide funding 3
- 4. FEMA Disaster Assistance • Federal assistance may include: – Debris removal – Housing, transportation, medical, legal assistance to individuals – Search and rescue – Repair and replacement of damaged facilities • Federal assistance may be provided: – Directly from the federal government – Through federal contracts – Through state and local governments and/or private organizations using federal funds furnished through cost-sharing arrangements, grants, and loans 4
- 5. FEMA Cost Sharing • Typical cost sharing under the Stafford Act: – 75% Federal / 25% State funding • Federal share may be increased to 90% when a disaster is particularly severe and may even be increased to 100% for a limited time period • Contract may be administered by a federal agency or a state/local government agency • Federal rules and regulations may apply, even when the contract is issued by a state/local agency 5
- 6. FEMA Disaster Assistance Disaster Event Occurs Governor Requests FEMA Assistance Disaster/Emergency Declaration Issued FEMA Awards Grant to State State/Local Government Awards Contracts for Disaster Relief 6
- 7. FEMA Disaster Assistance Major Disaster • Any natural catastrophe or fire, flood, or explosion, which in the determination of the president, causes damage of sufficient severity and magnitude to warrant major disaster assistance under the Stafford Act • Focus is on both immediate and longer-term needs Emergency • Any instance in which federal assistance is needed to supplement state and local efforts and capabilities to save lives and to protect property and public health and safety, or to lessen or avert the threat of catastrophe • Focus is on immediate needs 7
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- 11. Stafford Act Local Preferences • Stafford Act contracts may either be: – Set-aside for local contractors (i.e., non-local contractors cannot compete as a prime, but may serve as a subcontractor) – Or local contractors must be given a preference in the evaluation scheme (but non-local contractors typically can still compete) • The RFP should define who is a “local” contractor • When contracts are set-aside for local contractors, the contract may limit subcontracting to non-local contractors (see FAR 52.226-5) • Contracts for services: at least 50% of the cost of personnel must be spent on employees of businesses within the local area 11
- 12. Katrina Task Force = Increased Oversight • Congressional Task Force examined Katrina response – Contracting urgency in wake of storm led to inadequate oversight – Need for more trained procurement professionals – Ambiguous guidance regarding local contractor preferences • Has resulted in increased oversight of FEMA spending – High profile disasters/emergencies receiving scrutiny by Congress, the media, GAO, etc. – Focus on transparency, advance planning, and preventing fraud and abuse – Heightened scrutiny for contractors 12
- 13. High Stakes in Disaster Fraud Cases • Disaster fraud post-Katrina estimated to reach $6 billion • January 2008 – Emergency and Disaster Assistance Fraud Penalty Enhancement Act • $4 million settlement agreement in FCA suit involving Lighthouse Disaster Relief and its partners – Government alleged that Lighthouse accepted payment for work that was not completely performed – Also alleged false statements to FEMA for early payment 13
- 14. Compliance Tips • Carefully review your RFPs and relevant guidance (e.g., local preferences) • Keep great written records of compliance • Vet your teaming partners • Consult legal and/or contracts professionals with questions 14
- 15. Insurance Issues Disaster Relief Contracting 15
- 16. Natural Disasters One of the Top Risks Identified by Every Industry 16
- 17. First Party Insurance • Private Insurance and Public Assistance • Private Third Party Insurance insures against loss of, or damages to, policyholder’s property (and lost business revenue) • Examples: Business Property, Contingent BI • Fires, Natural Disasters, 9/11, Hurricanes • Other Specialized Types of Coverage 17
- 18. First Party Insurance • Issues frequently disputed between insureds and insurers – How do deductibles and the self-insured retentions work? – How do your limits and sub-limits work? – Does your property coverage match the value of your property? – Coinsurance? – Business interruption? – Contingent Business Interruption? – Civil Authority Coverage? – Ingress/Egress? – Service Interruption? – Dispute resolution? 18
- 19. Be Prepared • Have insurance information available • Checklists • Document, document, document 19
- 20. Questions? • Justin A. Chiarodo | Partner DICKSTEINSHAPIROLLP 1825 Eye Street NW | Washington, DC 20006 Tel (202) 420-2706 | Fax (202) 420-2201 chiarodoj@dicksteinshapiro.com • John Gibbons| Partner DICKSTEINSHAPIROLLP 1825 Eye Street NW | Washington, DC 20006 Tel (202) 420-3644 | Fax (202) 420-2201 gibbonsj@dicksteinshapiro.com 20