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.

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 of this series, I discussed requests/claims for excusable delays on federal projects.  This remedy – most commonly invoked under FAR 52.249-14 (Excusable Delays) – amounts to extending contract completion deadlines to avoid termination.

But what about federal contractors that incur additional costs due to COVID-19 delays?

In this Part 2, I discuss practical strategies for contractors to recoup those extra costs (in addition to time extensions) from the government through requests for equitable adjustments (REAs) or certified claims.  Also, check back tomorrow for Part 3 of the series discussing possible ways the government will approach COVID-19 on individual projects (and how it affects contractor performance requirements).

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 costs.

Compensable vs. Non-Compensable Time Extensions

Given the widespread nature of COVID-19 and corresponding impact on many contractors/projects, I think it is likely the government will seek to treat COVID-19 delays as “no cost” impacts by granting non-compensable time extensions.  In other words, the government would extend contract completion dates and not hold delays against contractors (for purpose of things like liquidated damages and performance evaluations).

But that does not necessarily close the door on REAs and claims that seek to recover additional costs. 

The FAR includes a number of remedy granting clauses that permit the recovery of extra performance costs.  For example, FAR 52.249-8 (Default – Fixed-Price Supply and Service) states that “the Contractor shall not be liable for any excess costs if the failure to perform the contract arises from causes beyond the control and without the fault or negligence of the Contract.”  Such causes include both epidemics and quarantine restrictions.

The key for federal contractors seeking to recover costs arising out of COVID-19 delays is definitive proof that the virus caused the delays and/or excess costs.  Check out the Best Practices included in Part 1 of this series for advice on dealing with the government and properly supporting claims – including providing timely notice, supporting documentation, good faith efforts.

Stop Work and Suspension Orders

As the pandemic stretches on, it is likely that contractors on certain projects will see Stop Work Orders (FAR 52.242-15) and Suspensions of Work (FAR 52.242-14).  These FAR clauses permit the Contracting Officer to temporarily stop or suspend performance in the best interests of the government.

Once a contractor receives a stop/suspend work order, it must take prompt and reasonable steps to mitigate any additional costs incurred on the project.  When a contractor incurs extra performance costs (in spite of these efforts), it is prudent to submit the costs to the government through an REA or claim.

In doing so, the contractor should pay special attention to the type of order issued by the Contracting Officer.  Each clause requires particular circumstances to recover costs – all REAs/claims must adhere to those requirements to merit recovery.

Changes to the Work

Contractors may also be able to look to the FAR’s Changes clause (52.243-1) to recover excess performance costs due to COVID-19.  It is possible (and perhaps likely on certain projects) that Contracting Officers will implement changes to scopes of work, schedules, project access, and completion milestones (among many other things).

All of these circumstances could form the basis for a claim of actual or constructive contract changes under FAR 52.243-1).

Contractors must assert claims for extra time and costs within thirty (30) days of the change.  It is therefore imperative that contractors stay on top of project correspondence, communicate with the government, and provide prompt notice as required.

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 general, I expect the government to treat most delays caused by COVID-19 as “excusable” by granting non-compensable time extensions.  In Part 1 of this series, I will identify best practices for contractors to request/claim time extensions on federal projects delays due to COVID-19.

Part 2 of the series will cover opportunities for contractors to recover costs associated with delays (“compensable” time extensions).  Part 3 will look at the variety of ways that the government could approach the pandemic (and how those choices will affect 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 request time extensions.

The Contractor’s Duty to Proceed

Government contractors face a duty to proceed with contract performance (absent an order from the government suspending, stopping, or terminating the work).  In other words, unless the government issues an order to the contrary, contractors must complete the work on-time and on-budget.

Despite this duty, there are remedies and protections available in the FAR for delays arising out of causes outside the contractor’s control (for example, a global pandemic).

The FAR’s Force Majeure Clause

In the commercial context, delays due to Acts of God are addressed in Force Majeure provisions that excuse performance under extreme circumstances.  For government contractors, there is no one FAR clause that provides such broad protections.  Instead, the applicable remedy granting clause depends on the circumstances and contract type.

The FAR clause that comes closest to a traditional commercial Force Majeure clause is FAR 52.249-14 (Excusable Delays).  The clause appears in many types of federal contracts, including cost-reimbursement, time-and-material, and labor-hour contracts.  Contractors that provide supplies, services (including construction services), and research & development to the government should check their contracts to see if this clause is incorporated.

FAR 52.249-14 provides that – for causes outside the contractor’s control – including specifically epidemics and quarantine restrictions – the government will not hold the contractor “in default because of any failure to perform.”  Generally speaking, the clause enables contractors to claim only an excusable delay (that is, the clause entitles the contractor to a time extension, not costs associated with the delay).  The remedy amounts to extending contract completion deadlines to avoid termination.

Other Remedy Granting FAR Clauses

Even if FAR 52.249-14 does not appear in your contract, other FAR clauses provide similar relief.

For example, FAR 52.249-10 (Default Fixed-Price Construction) provides for excusable delays related to epidemics and quarantine restrictions, provided that the contractor notifies the Contracting Officer in writing of “the causes of delay” within ten (10) days.

As discussed below, the best practice for obtaining any kind of relief is to provide timely notice to the government.  A contractor should provide notice as soon as it knows of the delay – and also take care to check the applicable remedy granting clause for additional notice/documentation requirements.

Best Practices

Contractors that experience delays on federal projects due to COVID-19 should rely on the following best practices to request/claim excusable time extensions and avoid government terminations:

·       Provide Timely Notice.  All remedy granting FAR provisions require the contractor to provide notice to the government.  Given the current climate, do not delay.  Put the Contracting Officer on notice as soon as delays arise and continue to communicate thereafter.

·       Project Documentation.  Contractors need to prove project delays – not just claim them.  While keeping good records is always a best practice for federal contractors, it will prove even more important in the event of a dispute with the government over project delays.

·       Keep Performing When Possible.  Even if COVID-19 delays contract performance, that does not allow the contractor to stop trying.  Absent a suspension of work or stop work order, contractors should continue to perform (again, while simultaneously providing notice of all delays).

·       Exercise Good Faith.  Good Faith is another best practice that should be used all the time – not just during extreme circumstances.  Contractors that go the extra mile almost always fare better on government contracts in the end.  The same will undoubtedly turn out to be true during a pandemic.

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.

Douglas P. Hibshman

Federal contractors have been, and continue to be impacted by COVID-19 outbreak and its consequences such as suspensions of work, performance delays, extra costs, contract terminations and the like. To make matters more challenging, the government has failed to issue comprehensive guidance to contractors on how to systematically and consistently deal with the coronavirus’ impacts on federal contracts. Therefore, contractors are left to rely upon their contract terms and the Federal Acquisition Regulation (FAR) provisions incorporated into their contracts to interpret those provisions on a contract-by-contract basis to determine what relief is available for coronavirus impacts.

The Federal Contractors’ Guide to Coronavirus Contract Impacts provides an overview of the relevant FAR provisions that may apply to coronavirus impacts, the actions the government may take on federal contracts due to the impacts, the rights contractors have under the applicable FAR provisions, and the “best practices” that contractors should implement to provide the best opportunity to obtain time extensions and attempt to recover extra costs caused by coronavirus impacts.

Click here to read the guide.

In the best interest of the health and safety of our attendees, we have decided to postpone the Federal Contracts Symposium. It is our intention to reschedule the Symposium as soon as we can responsibly do so. Watch this blog for updates.

We wish everyone well.

The attorneys of Fox’s Federal Government Contracts & Procurement Practice.

Douglas P. Hibshman

Nearly all federal contractors and subcontractors are required to implement a written Affirmative Action Plan (AAP) within 120 days of receiving a federal prime contract or subcontractor award, a task that can often appear daunting.

Our complimentary guide, written by Doug Hibshman, a partner in the firm’s Federal Government Contracts & Procurement Practice, is designed to help contractors make sense of the process. It covers all aspects of the AAP process, including the goals of the AAP, what contractors are required to implement AAPs, implementation timeframes, audits and consequences for noncompliance.

The guide also includes helpful list of best practices for AAPs to assist contractors in developing their plans in compliance with federal law.

Click here to download the Federal Contractors’ Guide to Affirmative Action Plans.

Please join us for Fox Rothschild’s Federal Government Contracts Symposium on March 30-31, 2020 at The Mayflower Hotel in Washington, D.C.

Space is limited, so please use this link to register and view the complete itinerary.

Symposium attendees will receive targeted sessions from Fox’s Government Contracts attorneys on cutting edge issues in government contracting.

In addition, the Symposium will include a Keynote presentation by Patrick J. Fitzgerald, Director at Baker Tilly and former Director of the Defense Contract Audit Agency at the Department of Defense.

The Symposium’s targeted sessions will include:

·       Navigating the DFARS and CMMC Cybersecurity Requirements (with Reggie Jones)

·       Effective Management, Litigation and Resolution of Complex Claims (with Dirk Haire and Sean Milani-Nia)

·       Federal Affirmative Action Plans and Equal Employment Opportunity Requirements (with Kenneth A. Rosenberg and Shannon Young, Assistant General Counsel – H.R. & Ethics, WSP USA Inc.)

·       Internal Investigations and False Claims Act Violations (with Brian W. Stolarz and Douglas P. Hibshman)

·       Bid Protest Trends at the GAO and Court of Federal Claims (with Nick Solosky)

·       Effective Communication and Dispute Resolution with Government Customers (with Erin Frazee Masini, Sara Falk, and Craig Barrett, Associated General Counsel, U.S. Government Publishing Office)

·       Federal Contract Ethics & Compliance Program Requirements (with Diana Lyn C. McGraw and Ronni Two)

·       Intellectual Property and Data Rights Under Federal Contracts (with Jeff Schwartz)

·       Mergers & Acquisitions in the Federal Arena (with Christopher L. Pizzo)

More information and links for registration and accommodations are available here.

If you have questions or want to receive additional information and updates, please contact Stacy Flynn at sflynn@foxrothschild.com or 215.299.2035.

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.

Organizational conflicts of interest (or “OCI”) generally exist when one party has access to nonpublic information as part of its performance on a government contract.

OCI — or even the appearance of OCI — can be a landmine for Federal contractors.  Unresolved OCI can lead to exclusion from a contract competition, contract termination, and even suspension / debarment.

OCI Basics

OCI can arise in many different shapes and sizes.  Sometimes, a mitigation plan is sufficient to wall off the conflict.  Other times, the conflict is so pervasive that it undermines the integrity of the Federal procurement process – resulting in a lost contract (or worse).

It is imperative that contractors diligently investigate any actual or apparent OCI and prepare a comprehensive and compelling plan to address the conflict.  OCI that can be neutralized or mitigated generally does not require disqualification.  But the existence of actual OCI that cannot be adequately mitigated will likely lead the loss of contracting opportunities.

In light of the many forms that OCI can take and the serious consequences associated with a violation, it was surprising to see GAO dismiss a recent protest involving self-evident OCI concerns.

GAO Refuses to Consider “Private” OCI

The protest at issue concerns a U.S. Army task order for intelligence support services.  After the award, the unsuccessful incumbent filed a bid protest at the GAO alleging that the Army failed to investigate OCI in the form of unequal access to proposal materials.

Specifically, the protester alleged that a high-level employee for the awardee previously served as a consultant for the protester.  In that role, the consultant had access to the protester’s confidential information and trade secrets.

The protester argued that the relationship created an unmitigated conflict of interest.

GAO, however, found no OCI and denied the protest.

According to GAO, OCI and the unfair access to information must arise within the context of a government contract.  Here, the underlying relationship did not involve the government.  It was a disclosure that took place between two sophisticated parties on a private transaction.

Because of the private nature of the alleged OCI, GAO would not even consider the protest allegation.  Stated differently, without the involvement of the government, there is no OCI.

OCI Strategies Moving Forward

So where does this decision Federal contractors?

It certainly should not lull contractors into believing that OCI does not matter.  It matters quite a bit.  Without appropriate diligence and a plan for identifying and neutralizing OCI, a contractor could find itself in an OCI case where the GAO takes great interest in exploring alleged unfair or unequal access to information.

Instead, the primary takeaway here should be for contractors to think seriously about how they disclose confidential and proprietary information in private settings.  If it is necessary to disclose that kind of information to an outside consultant, take care to limit or redact the data to the extent possible.

Contractors should also explore installing language in third-party agreements to limit disclosure and future competition.

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.

Last week, DOD announced the release of CMMC Version 1.0. CMMC Version 1.0 is a comprehensive certification process featuring 171 cybersecurity best practices to ensure that contractors secure their information systems. The question on everyone’s mind is who is going to pay for the certification and all of the work necessary to comply.

DOD has been less than clear on how contractors are expected to pay for CMMC certification. But what is clear is that the costs associated with obtaining CMMC certification will be significant. It is unclear whether contractors can seek reimbursement for these costs. They may be able to claim costs as an allowable indirect cost. We suspect that the cost of certification itself will be covered, but that the greater costs associated with becoming compliant will not be covered as a reimbursable direct cost. In response to comments regarding DFARS 252.204-7012 in 2013, DOD stated that costs related to complying with DFARS 252.204-7012 are likely allowable and chargeable to indirect cost pools. (See page 69274). Since complying with CMMC level 3 is the equivalent to complying with DFARS 252.204-7012, it should follow that, at a minimum, the cost of Level 3 certification should be an allowable cost.

More recently, has claimed that costs associated with CMMC “will not be prohibitive,” but it seems that DOD has yet to work out all the kinks on what exactly that means. For one, not all contractors will need to meet the same level certification. DOD has emphasized that prime contractors will be expected to achieve a higher level of certification than smaller subcontractors. This will cut down on costs for subcontractors. SBA may also assist small businesses with the cost of certification, but has not given any specifics on how they intend to do so.

In a press conference following the release of CMMC, DOD officials stated they are working with large DOD prime contractors to address costs. It’s too early to tell whether these conversations result in solutions on keeping costs down. In the meantime, it appears that contractors will bear the large majority of costs associated with achieving CMMC certification.

On January 30, 2020 the Department of Defense released the Cybersecurity Maturity Model Certification (CMMC). The Department of Defense (DOD) Office of the Undersecretary of Defense for Acquisition and Sustainment developed the CMMC in response to concerns that contractors were not adequately protecting sensitive federal information, known as Controlled Unclassified Information (CUI). Although DOD has been regulating cybersecurity through DFARS 252.204-7012 since 2013, the CMMC is intended to give contractors more specific guidelines.

CMMC Version 1 consists of 5 maturity levels, composed of 17 security domains (i.e. security controls). Each level requires a contractor to implement more security than the one before it.  For example, Level 1, Basic Cyber Hygiene is equivalent to basic cybersecurity requirements found in FAR 52.204-21 and requires contractors to implement only 4 security controls. Level 3, Good Cyber Hygiene, equates to the current DFARS cybersecurity requirements, and Level 5, Advanced/Progressive, contains all 17 security controls.

Not only does CMMC give detailed guidance on securing information systems, it also recognizes that cybersecurity requirements must be tailored to the needs of the federal government, and the resources of a contractor. Beginning in June, RFPs will specify the CMMC level a contractor needs to meet to be awarded the contract. While most RFPs will require Level 3 certification, some will require Level 4 or 5 certification. By contrast, small business subcontractors will not have to meet the same requirements to perform under the contract. CMMC tailors the certification levels so that subcontractors may only be required to meet Level 1 or 2 certification, provided that they do not possess any CUI.

Going forward, CMMC will be DOD’s primary mechanism for regulating information systems security. It’s important for DOD contractors to become familiar with CMMC and begin implementing its cybersecurity best practices. However, contractors should be aware that CMMC does not negate their already existing cybersecurity regulations. For example, CMMC does not reference the 72-hour reporting requirement found in DFARS 252.204-7012. Further, it does not define CUI or Controlled Defense Information (CDI). Similarly, CMMC often references NIST SP 800-171’s requirements, the original guide in complying with DFARS 252.204-7012, but doesn’t explain them. CMMC closes the gaps in the existing regulatory framework, but does not replace it.