As the economic crisis caused by COVID-19 evolves and worsens, there are many novel questions that government contractors and government agencies face. Certain FAR clauses that limit a contractor’s right to recover damages need to be revisited, including the clause entitled “Default (Fixed-Price Construction)” found at FAR 52.249-10. Under this clause, delay resulting from an Act of God, such as an epidemic, is excusable, but it is also non-compensable. This holds out the very real possibility of significant financial harm to construction contractors and seems to run counter to the government’s objective of preserving companies so that there will be an economic recovery once the crisis is over.

Currently, Department of Defense agencies are making every effort to treat projects as essential to the national defense and contractors are permitted, and in some cases directed, to continue performance. Since the government wants projects to continue, and government contractors want to keep working, there appears to be a commonality of interest. Contractor employees, however, are increasingly concerned about their personal health and safety and, in some cases, are refusing to report for work. This is compounded by the Permits and Responsibilities clause (FAR 52.236.7), which requires contractors to comply with “State, and municipal laws, codes, and regulations applicable to the performance of the work.” Accordingly, even though the federal government requires work to continue, state and local governments may be requiring people to maintain social distancing and stay at home. Even if exemptions are granted for government contractors working on essential projects, that does not lessen the legitimate concern of workers who are fearful of health risks.

There appears to be an irreconcilable conflict between the government interest and the personal health interests of workers. Although the government would be hard-pressed to terminate a contractor for default because of delay resulting from the pandemic, it is of little consolation to contractors that the delay will simply be excusable while fixed project costs continue without compensation. Although the payroll relief provisions of the CARES Act will help companies with fewer than 500 employees meet payroll expenses, fixed home office and field overhead costs will continue unabated. Most notable within the CARES Act is Section 3610, Federal Contractor Authority, which provides discretion for an agency to modify the terms and conditions of the contract to reimburse paid leave where contractor employees could not access work sites or telework but actions were needed to keep such employees in a ready state. In addition to this welcome payroll relief, we believe that the government should take steps to make coronavirus-related delays both excusable and compensable.

Fortunately, there has been recent movement along those lines. The Under Secretary of Defense released a memorandum on March 30, 2020, with the subject “Managing Defense Contracts Impacts of the Novel Coronavirus,” stating that “Where the contracting officer directs changes in the terms of contract performance, which may include recognition of COVID-19 impacts on performance under that contract, the contractor may also be entitled to an equitable adjustment to contract price using the standard FAR changes clauses (e.g., FAR 52.243-1 or FAR 52.243-2).” This suggests that contracting officers, in fairness, may have the authority to treat a COVID-19 project delay as compensable under the  Changes clause. It is also permissible for contracting officers to issue stop work orders and suspensions of work that are compensable. A contractor who is delayed by the coronavirus crisis should request compensation under the Changes or Suspension of Work clauses. The memorandum further provides that:

Requests for equitable adjustment must be considered on a case-by-case basis, in consideration of the particular circumstances of each contract, impacts realized from COVID-19, applicable law, and regulations, and inclusive of any relief that may be authorized by laws enacted in response to this national emergency. When reviewing requests for equitable adjustment, contracting officers are to take into account, among other factors, whether the requested costs would be allowable, allocable and reasonable to protect the health and safety of contract employees as part of the performance of the contract. Equitable adjustments to the contract or reliance on an excusable delay should not negatively affect contractor performance ratings.

The attorneys in our Government Contracting Group are available to assist you on these and other government contracting matters.

Print:
EmailTweetLikeLinkedIn
Photo of Michael H. Payne Michael H. Payne

As Chair of the firm’s growing Government Contracting Group, Michael H. Payne represents contractors, subcontractors, and suppliers on a wide range of federal contracting issues, including the interpretation of solicitation and contract provisions, the filing of bid protests, resolution of disputes, and the…

As Chair of the firm’s growing Government Contracting Group, Michael H. Payne represents contractors, subcontractors, and suppliers on a wide range of federal contracting issues, including the interpretation of solicitation and contract provisions, the filing of bid protests, resolution of disputes, and the preparation of contract claims and the litigation of appeals. Michael has vast experience in federal government contracting, stemming from his time as Chief Trial Attorney for the North Atlantic Division of the Army Corps of Engineers, and is recognized in the federal construction contracting industry as an attorney who enjoys a good working relationship with government agencies.

Michael’s high success rate in settling cases prior to litigation has earned him clients that rely on his advice in the long term. As a trusted advisor to his clients, he is known for his responsiveness and is not afraid to be straightforward about the realities of pursuing a case.

Michael is aggressive when called for and approaches each case analytically and develops strategies for his clients’ best long-term results. He thinks outside the box and frequently develops arguments in approaches that facilitate the resolution of disputes without litigation.

With in-depth knowledge of military and civil works construction, Michael represents clients before the Armed Services Board of Contract Appeals (ASBCA), the Government Accountability Office (GAO), the United States Court of Federal Claims, and a number of Federal District and Appellate Courts, including the United States Court of Appeals for the Federal Circuit. Throughout his career, he has enjoyed a strong relationship with the dredging industry, representing many dredging contractors nationwide.

Known in the legal community as a techie, Michael always uses the latest technology to practice law more efficiently. He regularly teaches other attorneys at the firm and local bar associations how they can use devices such as iPads to enhance their practices. Michael started the Federal Construction Contracting Blog, the first blog focused on federal construction contracting,  which is still a go-to resource for the industry.

Photo of Robert Ruggieri Robert Ruggieri

Robert G. Ruggieri focuses his practice in the areas of government contracts, procurement, and construction. His clients, which include prime contractors, subcontractors, and suppliers, routinely seek his advice in protesting government procurement decisions, size and NAICS code protests, interpreting the Federal Acquisition Regulation…

Robert G. Ruggieri focuses his practice in the areas of government contracts, procurement, and construction. His clients, which include prime contractors, subcontractors, and suppliers, routinely seek his advice in protesting government procurement decisions, size and NAICS code protests, interpreting the Federal Acquisition Regulation (FAR), preparing Requests for Equitable Adjustment (REAs), prosecuting claims under the Contract Disputes Act (CDA), and responding to government investigations, suspensions, and debarment proceedings.

Bob also assists small businesses in federal contracting with teaming and joint venture agreements, federal business ethics compliance, SBA 8(a), HUBZone, SDVOSB, WOSB & EDWOSB, WBE/MBE/DBE certifications and appeals, and federal government mentor-protégé agreements.

Bob has enjoyed considerable success for clients prosecuting and defending bid protests at the Government Accountability Office and the United States Court of Federal Claims. Similarly, Bob has successfully litigated contract disputes throughout the country in federal and state forums. He regularly handles a wide variety of complex construction claims, including claims relating to delays, inefficiency, differing site conditions, defective plans and specifications, acceleration, and lost productivity. Types of projects he has handled over the years include marine construction, dredging projects, bridges, roads, environmental cleanups, power plants, municipal convention centers, office buildings, residential complexes, wastewater treatment plants, and schools.

Notwithstanding his extensive litigation experience, Bob recognizes the benefits of resolving contract disputes at an early stage through negotiated settlements or alternative dispute resolution mechanisms, such as mediation, before the onset of extensive and costly discovery efforts.

Bob is a contributor to the firm’s Federal Construction Contracting Blog, and he previously served as associate editor of the Construction Law Now blog.

Photo of Casey J. McKinnon Casey J. McKinnon

Casey J. McKinnon focuses his practice on government contracts and litigation, representing clients in all stages of litigation related to federal contracting, including case strategy, discovery, trials, and appeals. He counsels clients throughout the procurement process including solicitation review, proposal preparation, and pre…

Casey J. McKinnon focuses his practice on government contracts and litigation, representing clients in all stages of litigation related to federal contracting, including case strategy, discovery, trials, and appeals. He counsels clients throughout the procurement process including solicitation review, proposal preparation, and pre and post-award bid protests. Casey also assists with day-to-day contracting issues including drafting, reviewing, and negotiating contracts and other matters of contract administration.

Casey is also a member of the firm’s Commercial Litigation Group. His experience spans all aspects of commercial litigation, including discovery, motions practice, oral arguments, and trials. He has litigated cases in Virginia, Maryland, and the District of Columbia on a range of issues, with a focus on contract disputes.  Casey also has appellate experience and has presented arguments before the Virginia Supreme Court.