The Coronavirus has changed almost every aspect of life in the United States and around the world. Government contractors are facing some very unique challenges as they try to adjust to this ever-changing course of events.
However, Federal contractors are also in a very unusual situation. Sure, there definitely have been some closures and work stoppages but there are some contractors that are still vitally needed during the pandemic.
The Federal Government is Sympathetic to the Situation.
The government understands that many contractors are in precarious situations. Right now more than ever government agencies are emphasizing how important it is to communicate and document issues in scheduling and performance for potential relief in the future.
The Office of Management and Budget issued the following statement to the various government agencies:
“be flexible in providing extensions to performance dates if telework or other flexible work solutions, such as virtual work environments, are not possible, or if a contractor is unable to perform in a timely manner due to quarantining social distancing, or other COVID-19 related interruptions.”
Government contractors may be entitled to relief for the following reasons:
- Delays caused by Covid-19
- Increased performance costs due to Covid-19
- Costs from government-initiated contract terminations caused by COVID 19
- Performance issued that are the result of complication due to COVID 19
Cost Recoveries
Most government contracts operate under the “four corners of the document rule” This means that you must look into the terms and conditions of the contract itself to understand what can be utilized to protect your interests. An example is if a contracting officer failed to cooperate with the terms of the contract.
Public Law 85-804, the President may “authorize any department or agency … to enter into contracts or into amendments or modifications of contracts … whenever he deems that such action would facilitate the national defense.” This allows for relief under extraordinary circumstances, which could include situations such as those that arise under this unexpected pandemic.
Excusable Delays
Under FAR 52.249-8, a contractor will be excused from liability “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 contractor.” Epidemics and quarantine restrictions are examples of excusable delays as listed under this clause.
However, certain causation must be established. You must be able to connect the excusable delay and the delay in the performance of the contract. It is vital to immediately document the cause of the delay as soon as possible.
FAR 52.242-17, which provides a broad remedy for “any” contracting officer action “or inaction” that affects performance and causes cost or schedule impacts. For example, if a contractor has to be onsite, but then the site is closed to the coronavirus and the contractor is not permitted to be onsite. Make sure you contact your contracting officer and inform them of any impact you are experiencing immediately.
Work Stoppages
In government contracts, a stop-work order can be issued for 90 days or more depending on the agreement. After this period is over, usually the contractor must resume with the work or the contracting officer terminates the contract. The government contractor must assert entitlements to an adjustment within 30 days after the period ends in order to collect a recovery. This usually consists of equitable adjustment plus profit or extension of billing schedule or both.
This remedy is available to only involuntary work stoppages. A voluntary work stoppage would consist of people not coming to work by their own decisions, due to the need to self-quarantine during the pandemic. This would excuse performance but would not be considered a contestable delay.
With any delay, contact the contracting officer, document the delay, and that it was due to a government act, and document the cost impact of the delay.
Excusable Defenses
Excusable delays prevent the government from terminating a contractor for default when the problem is not under the control of the contractor. This is called excusable defenses to a termination for default.
FAR 52.249-8 says the following:
- (c) Except for defaults of subcontractors at any tier, 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 Contractor. Examples of such causes include (1) acts of God or of the public enemy, (2) acts of the Government in either its sovereign or contractual capacity, (3) fires, (4) floods, (5) epidemics, (6) quarantine restrictions (7) strikes, (8) freight embargoes, and (9) unusually severe weather. In each instance, the failure to perform must be beyond the control and without the fault or negligence of the Contractor.
- (d) If the failure to perform is caused by the default of a subcontractor at any tier, and if the cause of the default is beyond the control of both the Contractor and subcontractor and without the fault or negligence of either, the Contractor shall not be liable for any excess costs for failure to perform, unless the subcontracted supplies or services were obtainable from other sources insufficient time for the Contractor to meet the required delivery schedule.
Government contractors should document everything, including what proactive measures they considered, such as looking for alternatives to employees working on site, to mitigate damages. This shows that the contractor did their best to avoid any delays.
This Pandemic Will Not Last Forever
The Federal government will soon be back on track and in much need of goods and services provided by small businesses. Many agencies, such as the Department of Defense, are fully funded for the year. and will be moving forward with their contracts immediately.
To do any business with the federal government, you must register your business in the System for Award Management directory. The government will not hire any type of business (large or small) that has not registered in the SAM directory.
Please read one of the helpful blog articles on our site like Everything You Need to Know About SAM for Small Businesses. These blogs will help give you all the information you need to understand how we can help make the process very easy for you. Sam Directory will happily guide you through this often confusing process. With our help, you will be able to be on the path to government subcontracting quickly and efficiently.