INTERNATIONAL CONTRACTS

1. INTERNATIONAL CONTRACTS RESPONSIBILITIES UNDER THE DEFENSE BASE ACT – ARE YOUR CONTRACTSLEGAL? Karen H Dobson - June2018

2. Housekeeping for WebinarTo Download Presentation and other filesClick on the file you’d like to download. Make sure that it’shighlighted in blue after click the file to downloadThen select “Download File(s)” Karen H Dobson - June2018

3. Housekeeping – Have Questions?Click in the ‘Q&A’ section on the right side of your screenType your question into the comment boxClick Send Karen H Dobson - June2018

4. Housekeeping – Webinar MaterialsToday’s webinar materials will be emailed to attendees,including:- Presentation slides- Q&As- CLP certificate (if you registered)- All questions may not be answered during the session, if this isthe case we will provide these Q&A responses, to all registrants.- A copy of the presentation will be on the Acquisition Gateway(https://hallways.cap.gsa.gov), Professional Services Hallwayonce it has been made 508 compliant. Karen H Dobson - June2018

5. Housekeeping – CLPTo Receive CLP - Enter your email address- Registered users will receive a certificatewithin a few weeks oftraining via email fromJonathan.dewolfe@gsa.gov Karen H Dobson - June2018

6. INTERNATIONAL CONTRACTS RESPONSIBILITIES UNDER THE DEFENSE BASE ACT – ARE YOUR CONTRACTSLEGAL? Karen H Dobson - June2018

7. RESPONSIBILITIES UNDER THE DEFENSE BASE ACT (DBA)ARE YOUR CONTRACTSLEGAL? • Why Your Contractors Care AboutDBA INTERNATIONALCONTRACTS • DBA realities for your internationalcontractor • Where does DBAapply? • Who has authority to determine when DBAapplies? • Consequences for not havingcoverage • What is the Defense Base Act? • Defense Base ActStatutes • How it works and why it costs somuch • Contractor pays a premium to theInsurer • Insurer manages claims by injuredworkers • Sample claims an insurerpays • Insurers responsibilities for managingclaims • Mechanics of apremium • Key drivers ofclaims • Influence of the government’scontractors • Contract types andrequirements • What can youdo • Sites forreference Karen H Dobson - June2018 7

8. WHY YOUR CONTRACTORS CARE ABOUTDBA Karen H Dobson - June2018 8

9. DBA REALITIES FOR YOUR INTERNATIONALCONTRACTOR • DBA rates are one of the most expensive line items (CLIN) in bidproposals. • Lower DBA rates mean more competitive and successful bids forthem. • Profit margins on contracts tend to besmall. • Each incremental savings creates additionalprofit. • Winning contracts keeps the contractor inbusiness. • Insurance is currently the most viable vehicle of DBAcoverage. • The insurance company is responsible for accepting premium and payinglosses. • Poor loss histories (more losses than premium) can lead to NO DBA coverage, which means NOCONTRACTS. Karen H Dobson - June2018 9

10. WHERE DOES DBAAPPLY? • The Defense Base Act is required by the Federal AcquisitionRegulations: • 52.228-3 – Workers’ Compensation Insurance (Defense BaseAct) • Subject to exceptions [SEE KEY SITES AND EXCEPTIONS ON LAST SLIDE], it appliesto: • Any contract for work outside the United States and funded by the UnitedStates. • All employees of government contractors working overseas – and theirsubcontractors. • All employees regardless ofnationality. • All contractors funded by US government money who perform work outside the continental US – not limited to work on defense bases (despite itsname). • A copy of the ACT can be found at:http://www.dol.gov/owcp/dlhwc/dba.htm Karen H Dobson - June2018 10

11. WHO HAS AUTHORITY TO DETERMINE WHEN DBAAPPLIES? • The U. S. Department of Labor (USDOL), Office of Workers'Compensation Programs (OWCP) administersDBA. • Only the Secretary of Labor can grant a waiver or exception to theAct. • The Department of Labor has no authority to regulate insurance premiums orrates. • All authorized carriers are regulated by the states in which theyoperate. • The OWCP district office monitors the payment of compensation and medical care to ensure compliance with the provisions of theAct. • What are the insurance requirements under the Defense BaseAct? • The insurance requirements under the Defense Base Act are identical to those found in the Longshore and Harbor Workers' Compensation(DLHWC). Karen H Dobson - June2018 11

12. CONSEQUENCES FOR NOT HAVING DBACOVERAGE • This insurance is called Exclusive Remedy. The contractor has the confidence that the insurance company will respond to their employee’s injuries to the best of their ability, with the employees best interest at heart and in accordance with thelaw. • If there is no DBAcoverage: • an injured employee (or survivors in case of death) may sue the employer for tort damages. In such action, the contractor loses its defenses of i) negligence of a fellow servant, or ii) that the employee assumed the risk of his employment, or that iii) the injury was due to the contributory negligence of theemployee. • Subject to fines and possible jail time: the contractor shall be guilty of a misdemeanor and, upon conviction thereof, shall be punished by a fine of not more than $10,000 or by imprisonment for not more than one year, or both. If the employer is a corporation, the president, secretary, and treasurer shall also be severally liable for such fine and imprisonment. These three corporate officers shall also be personally liable, jointly and severally with the corporation, for any compensation or other benefit payable under the Act with respect to the injury or death of any of itsemployees. • NOTE: As a contracting officer, if you do not include the requirement for Defense Base Act coverage in your solicitation, the contracting company is still responsible for havingthecoverage. And they still face fines and potential jail time for non-compliance. Reminder: only the Secretary of Labor has the authority to determine when there is a waiver for DBA Karen H Dobson - June2018 12

13. IN SUMMARY - WHAT IS THE DEFENSE BASEACT? • The Defense Base Act provides workers' compensation protection to civilian employees working outside the United States on US military bases or under a contract with the U.S. government for public works or for nationaldefense. • SPECIALNOTES • Puerto Rico is subject to theAct. • Grants are not subject to theAct. • Any USAID contract is covered under a Sole Source agreement with Allied World AssuranceCompany. Karen H Dobson - June2018 13

14. DEFENSE BASE ACTSTATUTES • WORKERS' COMPENSATION FOR EMPLOYEES OF U.S. GOVERNMENT CONTRACTORS WORKINGOVERSEAS • Federal law requires all U.S. government contractors and subcontractors to secure workers' compensation insurance for their employees working overseas. The related statutes include the Defense Base Act, 42 U.S.C. §§ 1651-54 and the Longshore and Harbor Workers' Compensation Act, 33 U.S.C. §§ 901-50. Implementing regulations can be found at 20 C.F.R. Parts 701, 702, 703 and 704. The Federal Acquisition Regulation (FAR) also sets out the workers' compensation insurance requirementsfor all overseas contracts at 48 C.F.R. § 28.305 and at § 52-228-3 and §52-228-4. • The U.S. Department of Labor, Office of Workers' Compensation Programs (OWCP), Division of Longshore and Harbor Workers' Compensation, administers the Defense Base Act, ensuring that workers' compensation benefits are provided for covered employees promptly andcorrectly. Karen H Dobson - June2018 14

15. HOW ITWORKS AND WHY IT COSTS SOMUCH Karen H Dobson - June2018 10

16. CONTRACTOR PAYS A PREMIUM TO THEINSURER Defense Base Act (DBA) coverage is provided through an insurance policy. Estimated annual premiums total US$500,000,000 ($1/2billion) Contractor PaysPremium To the InsuranceCompany Karen H Dobson - June2018

17. INSURER MANAGES CLAIMS BY INJURED WORKERS In exchange the Insurance Company pays for any Claims (Losses) to injuredworkers. InsuranceCompany Contractor’s Injured/ DeceasedWorkers Karen H Dobson - June2018

18. SAMPLE CLAIMS AN INSURERPAYS Terminology ofDisability TTD PPD Temporary Total Disability Permament PartialDisability Karen H Dobson - June2018

19. INSURERS RESPONSIBILITIES FOR MANAGINGCLAIMS • File and maintain incidentreports • Maintain medical histories for eachclaimant • Manage claims payments to allnationalities • ManagingWarHazardsclaimsuntiltheyare“stable” • Maintain claims databases include open/closed claims, reserves, recoveriesand adjustors notes • Payment challenges for foreignnationals • Incident investigations includingsurveillance • Beneficiary locating and dependencyreviews • Setting up bank accounts to receivebenefits • Compensabilityevaluation • Wage earningdetermination • War Hazardsinvestigations • Manageevacuations • Providemedicalservices/emergencyresponseandmanagedcare • Assess maximum medical improvement, return to work and permanent partialdisability • Complywithgovernmentand officialincidentreportingand mediaaccounts • Manage vocational rehabilitant and labor marketsurveys • Archive recorded states, document retrieval andauthentication Karen H Dobson - June2018

20. QUESTIONS? Karen H Dobson - June2018 21

21. MECHANICS OF APREMIUM • PREMIUM = Remuneration X rate /$100 ofremuneration • Example: $1,000,000 Remuneration X $2/100 = $20,000Premium • Remuneration = money for services rendered by the employee and subject to income tax,including: • Regularpay • Overtimepay • Tips andbonuses • Room and board /lodging • CarAllowance • Rate should develop premiums tocover • Estimated lossreserves • Administration of theclaims • Profit to the insurancecompany • Premium developed by comparing historical losses against historical payrolls to project future losses based on estimated anticipatepayroll. • PREMIUMS ARE ESTABLISHED THROUGH STATISTICS – THEY ARE NOT ACOMMODITY Karen H Dobson - June2018

22. KEY DRIVERS OFCLAIMS • WorkforceComposition • Second career (i.e.ex-military) • Nationality • Skills not matched with jobdescription • Nature of the Defense BaseAct • Litigated claims decided by Administrative LawJudges • Recreational activities covered with generousbenefits • Injured workers have to be rehabilitated to the same health as before theirinjury • Promotes an accelerated form of “ambulancechasers” • Zone of SpecialDanger • And… • The Government’s Contracts Karen H Dobson - June2018

23. INFLUENCE OF THE GOVERNMENT’SCONTRACTS Karen H Dobson - June2018

24. CONTRACT TYPES ANDREQUIREMENTS • Spectrum of firm fixed price to cost plus • Firm Fixed Cost = contractor has every incentive to minimize theirexpenses • Cost Plus = they know they will be reimbursed no matterwhat • Contractors still have to be competitive so there is a market incentive to managecosts • Bio-placing employees – matching a specific employee, usually with a clearance and specific job skills, with a specificjob • Injured employee has to return to home country forrehabilitation • Educated on DBA claims beforearriving • Lose intellectual capital ofindividual • No job to return to so more incentive forclaims Karen H Dobson - June2018

25. WHAT CAN YOUDO? • Consider the impact of the contract language and how it promotesresponsible employeecare • Does the contractor make more money training someone new for a position rather than rehabilitating an injured worker and returning them to theirjob? • Can an employee rehab in theater and still maintain the integrity of thecontract? • Can you include a line item for a safety manager or group doctor, where it makessense? • Ask for loss runs – good indicator of quality employers(contractors) • Include a requirement for a summary (you have enough to read) of their losscontrol • procedures that are unique tothem. • Include a requirement for baseline testing for employees, even for soft tissueinjuries Karen H Dobson - June2018

26. REFERENCESITES DEPARTMENT OF LABOR’S MAIN PAGE FORDBA https://www.dol.gov/owcp/dlhwc/lsdba.htm WAIVERS Countries where local national and foreign nationals are exempt from DBA Coverage https://www.dol.gov/owcp/dlhwc/dbawaivers/dbawaivers.htm https://www.acq.osd.mil/dpap/cpic/cp/waivers_for_defense_base_act_insurance.html DEPARTMENT OF LABOR’S FREQUENTLY ASKEDQUESTIONS https://www.dol.gov/owcp/dlhwc/FAQ/DBAFaqs.htm#1 AUTHORIZED INSURERS UNDER THEACT https://www.dol.gov/owcp/dlhwc/lscarrier.htm USAID https://www.usaid.gov/sites/default/files/documents/1868/AAPD16-04.pdf Karen H Dobson - June2018 20