COVID-19 or the Coronavirus is having an unprecedented and, frankly, previously unimaginable global impact. Please click here to visit Fox’s Coronavirus Resource Center for links to free webinars and articles offering practical guidance to companies of all sizes on a variety of legal issues.
Government contractors are already feeling the effects of the pandemic. Breakdowns in the global supply chain, labor shortages, and regional lock downs are already delaying federal projects across the country and around the world. These are extraordinary times – but contractors must still look to standard remedy granting FAR clauses for relief.
In Part 1 and Part 2 of this series, I discussed requests for equitable adjustments (REAs) and claims for time and extra costs on federal projects. Now, in Part 3, I’ll discuss the actions that government agencies can/will take on projects – and how those actions could impact the remedies available to contractors.
The critical thing for federal contractors to understand (in all circumstances) is that there are no automatic FAR remedies. While the government generally will not hold a contractor liable for delays beyond its control, the contractor must take affirmative and diligent steps to protect its rights and seek additional time and costs.
OMB and DOD Guidance
On March 20, 2020, the U.S. Office of Management and Budget (OMB) issued a memorandum to executive agencies regarding anticipated contract performance challenges due to COVID-19. The OMB memo encourages agency flexibility and a case-by-case approach for REAs seeking additional time and/or costs due to the pandemic.
Shortly thereafter, the Department of Defense (DOD) published additional guidelines for its agencies in dealing with federal contractors affected by COVID-19.
The DOD memo addresses excusable delays under certain FAR remedy granting clauses – including those addressed in Parts 1 and 2 of this series. The memo also authorizes Contracting Officers to consider adjustments to contract price (as presented through contractor REAs). The DOD points to Section 3610 of the CARES Act and cites to discretionary agency authority to use available funds to modify contracts to reimburse contractors for workers’ lost time up to September 30, 2020 – if the contractor provides leave to its employees or subcontractors “to protect the life and safety of Government and contractor personnel.” The specific example used in the memo is instances “where contractor employees could not access work sites or telework, but actions were needed to keep such employees in a ready state.”
The guidance from OMB and DOD is directed to government agencies – but federal contractors should listen, too. There are remedies available, but contractors must act with speed and efficiency in seeking relief.
My advice: Assess the status of on-going projects now and do not delay in providing notice to the Contracting Officer and seeking appropriate relief.
Stop Work / Suspension of Work / Changes
While the OMB and DOD memos contemplate interrupted (but still on-going) performance, agencies have the authority to take additional actions in the best interests of the government. For projects where the pandemic makes performance impossible (or at least impracticable), I expect to see a rise in Stop Work Orders (FAR 52.242-15) and Suspensions of Work (FAR 52.242-14).
Please see Part 2 of this series, where I discuss how contractors should approach REAs under these remedy granting FAR clauses.
In addition, the DOD memo discussed above specifically refers to the Changes clause (FAR 52.243-1 and 52.243-2) as applying where “the contracting officer directs changes in the terms of contract performance, which may include recognition of COVID-19 impacts on performance.”
The Changes clause offers a traditional remedy for contractors to seek additional time and costs. DOD’s guidance therefore offers an interesting insight into the government’s approach to this crisis. It should encourage contractors to take affirmative and diligent steps towards requesting excess costs if/when they arise.
Again, there are no automatic remedies. Contractors must ask for the relief and follow the applicable FAR notice and documentation requirements.
Pending and Future Contracts
The primary focus of this series has been practical advice for contractors facing delays on federal projects due to the current situation – but contractors should also be thinking about pending and future government projects.
If your business submitted a final proposal and is waiting on a contract award decision, now is the time to consider the potential impact of COVID-19 on future performance. Is it possible to modify or even withdraw a proposal? It likely depends on the particular contract and phase of the procurement. At a minimum, I recommend communicating with agencies about anticipated issues now – it may be deemed too late to wait until after award.
Contractors should also think strategically about the COVID-19 pandemic when bidding new work. The government requires contractors to build all known contingencies that might affect performance into bids. COVID-19 is now undeniably a known contingency and the government will not assume responsibility for delays or shortages that contractors should have reasonably anticipated in advance.
Nick Solosky is a Partner in Fox Rothschild’s Government Contracts Practice Group. You can reach Nick directly at NSolosky@FoxRothschild.com or 202-696-1460.