Three Vital Steps to Prepare For COVID-19 Impacts to Contract Performance

Albert B. Krachman, Scott Arnold, and Michael J. Slattery

As the coronavirus (“COVID-19”) pandemic continues its mass global disruption, federal contractors should take or accelerate steps to protect themselves. Three steps stand out in our view:

    1. review contracts;
    2. identify and document cost disruptions; and
    3. communicate, communicate, communicate—in writing—with your Contracting Officers.

How You May Be Impacted

How might your business be impacted? Supply chain disruptions may deprive contractors of materials required to stay on schedule and complete performance. COVID-19 exposure for employees and key personnel may deprive the contractor of needed labor. Spread of the disease among government employees may lead to a delay in approvals, or could lead to a quarantine of government facilities, which could impact the ability of service contractors to timely perform their contractual obligations—not unlike a government shutdown. (See Government Contractor Shutdown Advisory for steps to be taken if government facilities are quarantined or shut down due to the virus).

Three Steps to Take

First, review existing contracts for terms that: (1) might provide relief or insulate the contractor from the impact of COVID-19; or (2) require the contractor to petition for relief from their requirements in the face of the pandemic. Several clauses might provide for relief, including the Excusable Delays clause (FAR 52.249-14), the various Changes clauses (FAR 52.243-1 through 52.243-4), the Termination for Convenience clauses (FAR 52.249-1 through 52.249-5) and the Suspension of Work (FAR 52.242-114) and the Stop Work (FAR 52.242-15) clauses of the FAR. Clauses that might require the contractor to petition for relief include the Defense Priority and Allocation Requirements clause (FAR 52.211-15). 15 C.F.R. § 700.80 permits the contractor to petition the government for an exception or an adjustment to the requirements of this clause, if, for example, COVID-19 interferes with compliance.

Second, identify and gather documents supporting cost impacts and disruptions. For example, the Suspension of Work and Stop Work Orders require contractors to document their delays, the causes of the delays, and the cost of such delays. It is vital that you precisely document all of the deleterious impacts of the virus on your ability to perform, as well as when these impacts occurred, and the causative effects they have on performance. The Government has denied claims relating to prior epidemics where affected contractors failed to document when the epidemic occurred, its precise duration, the personnel affected, the periods during which they were absent, the causative effect of the epidemic on the delay and its extent, and the contractor’s efforts to mitigate the effect by use of overtime or other measures.

Third, provide required written communication to the Contracting Officer. Contractors should provide regular written updates to the Contracting Officer in order to establish a contemporaneous record that supports the grant of relief the contractor seeks. Failure to adhere to the notice requirements set forth in contracts can be fatal to receiving relief, so it is best to provide notice as soon as it becomes apparent COVID-19 may adversely impact performance.

As one illustration, the Excusable Delays clause, FAR 52.249-14, shows how contractors should execute the three steps of review, identification, and communication for each of their existing contracts. FAR 52.249-14 excuses potential contract defaults for failure to perform if the failure arises from causes beyond control and without the fault of negligence of the contractor. The clause provides nine examples of causes beyond the fault or control. Notably, three of the listed causes might apply to COVID-19 (these include “act of God,” “epidemic,” and “quarantine,” see FAR 52.249-14(a)(1), (5), and (6)).

COVID-19 may be different from almost anything that has affected government contracting in the recent past. To the extent it recognizes this extraordinary state of affairs, perhaps the federal government may relax some of the more detailed notice and documentation requirements imposed by the relevant contract clauses and applicable case law. But unless and until regulations or guidance is issued to the contrary, affected contractors should thoroughly prepare and document delay claims assuming strict standards will apply. Do not assume relief will be automatic or a walk in the park.

Blank Rome’s Coronavirus (“COVID-19”) Task Force is fully versed in preparing and defending claims in this area and includes interdisciplinary resources across every business sector from insurance recovery to HR.