Coronavirus COVID-19 is rapidly disrupting the performance of federal government contracts across all sectors, leaving contractors and subcontractors with more questions than answers on how to structure their operations. In the following Q&A, we address some of the top issues contractors are currently facing.
The Government has closed my work site, precluding my employees from performing their work. If I continue to pay the employees, can I recover those costs?
If your employees cannot perform their work because the work site is closed (and telework is not an option due to the nature of the work), this may be construed as an actual or constructive stop work order. As with a government shutdown, contractors facing this scenario may be entitled to an equitable adjustment to account for idle employee time because they are expected to be ready to perform as soon as the Government reopens facilities.
A March 20 Memorandum from Office of Management and Budget Deputy Director for Management Margaret Weichert (“Weichert Memorandum”) confirms that equitable adjustments may be appropriate if the requested costs are reasonable. Specifically, the Weichert Memorandum advises that such requests “should be considered on a case-by-case basis” and that agencies may consider such factors as “whether it is beneficial to keep skilled professionals or key personnel in a mobile ready state for activities the agency deems critical to national security or other high priorities (e.g., national security professionals, skilled scientists).” Continue reading “COVID-19 Disruptions and Work Stoppages: A Q&A for Federal Contractors”
The largest active buyer in the market right now remains the federal government. FSS is an important tool for the government to get supplies and services, but do not be fooled. With these potential opportunities, there also are potential risks for FSS contractors that fail to follow the terms and conditions of their FSS contracts and/or seek to cut corners.
As is often the case, FSS vendors go above and beyond to provide services or deliver supplies to federal agencies to respond to emergency situations like the COVID-19 pandemic. As is also the case, months later, after the dust settles, agency offices of inspector general arrive to audit contracts. Inevitably, in the effort to expeditiously fill government orders, things get overlooked or ignored, and “but I was helping the agency fulfill its mission in response to a pandemic” is not a defense that will resonate with government auditors.
On March 18, 2020, by Executive Order (“E.O.”), President Trump invoked the Defense Production Act of 1950 (“DPA”). The E.O. delegates DPA authority to the Secretary of the Department of Health and Human Services with respect to “all health and medical resources needed to respond to the spread of COVID-19 within the United States.” This means that the performance of rated contracts and orders (i.e., certain contracts and orders in support of programs covered by the DPA, as explained below) must be prioritized over competing commercial or non-rated governmental obligations—even if doing so could result in a breach of other obligations.
Set forth below is a checklist for contractors that have received (or believe they may receive) a rated order from a federal government agency:
1. Memorialize Standard Operating Procedures (“SOP”)
Effectively managing rated orders requires careful attention, particularly given the operational disruptions from coronavirus COVID-19. A company should consider establishing (or updating) SOPs for rated orders covering the following:
Designating a Point of Contact (“POC”) Responsible for Rated Orders. Publicize the POC within the company so that management and employees (e.g., C-Suite, Sales, and Marketing) who do not normally handle government contracting matters know who to contact.
Establish a Process to Communicate with Subcontractors. A prime contractor in receipt of a rated order stands in the shoes of the federal government and is required to notify applicable subcontractors of compliance with the rated order. Consider notifying subcontractors of the possibility of receiving a rated order and provide background on the DPA so they are not caught by surprise.
Establish a Commercial Customer Communications Plan. Because a rated order can delay or interfere with performance of commercial contracts, consider keeping commercial customers aware of potential impacts in the event that the government issues a rated order.
Frequent Communication with Contracting Officers. If the company believes it might receive a rated order, establish clear lines of communication with your Contracting Officers. Provide or re-confirm contact information for the company’s POC for rated orders.
The Department of Defense’s (“DoD”) Office of Under Secretary of Defense for Acquisition and Sustainment issued Guidance on March 10, 2020, addressing internal and external communications in response to the coronavirus COVID-19 pandemic. SeePlanning for Potential Novel Coronavirus Contract Impacts.
The Guidance states that the Contracting Officers (as distinguished from Program personnel) hold the contractual authority to address contract performance impacts related to COVID-19. Moreover, the Guidance encourages close communication between Contracting Officers and contractors, and stresses Contracting Officer transparency, a term not normally seen in contract administration guidance. In pertinent part the Guidance states as follows:
Communication between the Government and contractors is key to total workforce safety and mission continuity. Therefore, contracting officers should be as transparent as possible as they make decisions potentially impacting contract performance or contractor personnel. Contracting officers should also encourage their contractor site leads/leadership to engage with their employees as soon as possible to share information and discuss any COVID-19 concerns they have, and ask their contractors to identify potential impacts to the welfare and safety of their workforce or contract performance, which impacts our total force. Continue reading “DoD Urges Contracting Officer Transparency in COVID-19 Impacts”
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:
identify and document cost disruptions; and
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. (SeeGovernment Contractor Shutdown Advisory for steps to be taken if government facilities are quarantined or shut down due to the virus). Continue reading “Three Vital Steps to Prepare For COVID-19 Impacts to Contract Performance”