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.
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.