Sequestration memo sets stage of allowable costs

In its latest guidance, the White House has set the parameters under which it will let contractors bill the government for the cost of layoffs and contract changes caused by sequestration, if it occurs.

The Sept. 28 memo also reiterates the Labor Department’s position that potential for sequestration does not trigger the Worker Adjustment and Retraining Notification Act, known as the WARN Act, that requires companies to give 60 days of notice before a layoff.

The White House said that contractors can bill the government for costs under two circumstances.

1. If sequestration occurs, and it causes a company to lay off workers or close a plant.

2. The contractor has followed Labor Department guidance on sequestration, and has competition costs for WARN Act liability as “determined by a court as well as attorney fees and other litigation costs.”

A contractor can bill for the litigation costs whether or not they win the litigation, according to the memo from Daniel Werfel, controller of the Office of Federal Financial Management, and Joseph Jordan, administrator for Federal Procurement Policy.

In their memo to agency chief financial officers and senior procurement executives, they said other costs can be billed if they are allowed under the Federal Acquisition Regulation.

The memo also restates the Labor Department position: because of the uncertainty of whether sequestration would actually occur, complying with the WARN Act would cause states to waste resources on employment assistance activities and create “unnecessary anxiety and uncertainty.”