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.