This is the first of an eight-part series addressing cutting-edge strategies for Certified Claims under the Contract Disputes Act. Certified Claims are the primary avenue available to government contractors to recover damages due to changes, delays, inefficiencies, and other government-caused issues.
Whether a recession is here now or merely waiting in the wings, proactive government contractors can make strategic moves to be in the best possible position to weather the storm.
Government contracting has the reputation of a safe haven against economic cycles (given the federal government’s long history procuring goods and services, often in even greater quantities during down times).
But contractors should not be content as passive observers.
By understanding the Federal Acquisition Regulation’s remedy granting clauses, contractors can maximize the value of existing contracts and position themselves to maintain positive cashflow if times get lean.
Remedy Granting Contract Clauses
As with most issues with government contracting, the operative question is – what is in your contract.
The vast majority of government contracts include standard clauses granting a variety of rights and remedies to contractors.
The most well-known is the Changes clause – FAR 52.243-1 (supplies and services) and 52.243-4 (construction). The Changes clause enables contractors to recover excess performance costs based on government-caused changes (either directed or constructive). Relatedly, the FAR’s Excusable Delay clause (52.249-14) addresses project delays outside the contractor’s control.
In addition to changes to the work/schedule, many contracts include clauses related to project conditions. For example, construction contracts should include the Differing Site Conditions clause (FAR 52.236-2), which requires an equitable adjustment if the contractor encounters unforeseen physical conditions on-site.
The first move for any contractor that experiences increased projects costs should be to consult your contract and identify the appropriate remedy granting clause that offers relief.
. . . And What to do When Your Contract Doesn’t Have the Clause You Need
While the FAR includes broad remedy granting clauses for changes and delays, contractors need to be aware of the exceptions.
For example, the present menace of record inflation sent many contractors searching through their contracts to find clauses addressing material price escalation. For those with firm-fixed-price (FFP) contracts, they likely did not find coverage under the FAR’s Economic Price Adjustment (EPA) clause (FAR 52.216).
As I covered here, the Department of Defense has already taken a hard line against awarding equitable adjustments on existing FFP contracts that do not include an EPA clause or other toehold for inflation-based modifications.
Accordingly, contractors had to look to other arguments or clauses to try and make ends meet.
Know what clauses are (and are not) in your contract before starting work. Understanding the available remedies will help guide performance and keep you out in front on issues of notice and entitlement.
Notice and Other Timing Issues
To be clear, contractors must do more than just know that these clauses appear in the contract. Claims for extra time and costs require notice within thirty (30) days of the change. Tracking, documentation, and proper notice to the government are key.
Contractors should also be aware that compensation – even for “slam dunk” claims – is not instantaneous. Far from it.
In addition to the notice period, contractors must assume additional time for agency review and negotiation. For those claims requiring escalation to formal status under the Contracts Disputes Act, there is a 60-day government response period. Claims that are rejected and require an appeal can take still longer.
Which brings us back to our original topic – contracting in uncertain times.
Contractors with known claims should not stall or otherwise assume that the funds will be there when they are ready.
If/when the economy tightens, more and more contractors will seek to extract maximum value from existing contracts – including submitting and pursuing claims.
By acting now, proactive contractors will be out in front of the situation, not playing from behind.
Come back next Tuesday (November 8) when we’ll tackle the essential elements of a Contract Disputes Act claim.
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.