Coronavirus Impacts Working with the Federal Government: Contractor Considerations

March 18, 2020

By: Eric Poppe, Javier Diaz and John Ford

As companies prepare for coronavirus disease 2019 (“COVID-19”), government contractors also need to consider how work will continue on contracts if agencies are required to close or a POC (i.e. Contracting Officer, Contracting Specialist, etc.) is quarantined due to COVID-19.

The U.S. Office of Personnel Management (“OPM”) has provided preliminary guidance to agencies regarding this matter. On March 3, 2020, OPM issued a memorandum for the heads of executive departments and agencies. In order to be prepared for COVID-19, OPM states that departments and agencies must incorporate telework in their continuity of operations (“COOP”) plans. Additionally, agencies should immediately review their current COOP plans to ensure that telework has been fully incorporated and that as many employees as possible have been identified as telework employees in the plan, and are telework capable (or “telework ready”).

If a POC is quarantined due to exposure to COVID-19 and is a telework program participant, they would generally be expected to perform telework at home (since their home is generally an approved location), as long as the employee is asymptomatic.

Although agencies are required to have continuity of operations plans in place, there may be hiccups as agencies begin to transition to telework. The most important thing a contractor can do now is to begin to communicate with their Contracting Officers and plan for the worst case scenario.

If a contract is in effect, the contractor will likely be expected to continue work on a contract unless the Contracting Officer orders a suspension of work under the contract. There are two primary Federal Acquisition Regulation (“FAR”) clauses that permit such ordered suspensions: FAR 52.242-14, Suspension of Work, which is used in construction contracts and FAR 52.242-15, Stop-Work Order, which is authorized for use in supply and service contracts. In addition to ordered suspensions under these clauses, there may be circumstances where unauthorized government actions cause a delay in contract performance. Such unauthorized actions may result in constructive suspensions of work.

In this regard, the Suspension of Work clause also covers constructive suspensions on construction contracts. For supply and service contracts, FAR 52.242-17, Government Delay of Work, covers constructive suspensions. Each clause provides different remedies for the contractor, although they all provide some form of monetary relief to the contractor. For this reason, delays covered by these clauses are commonly referred to as compensable delays.

Therefore, contractors need to understand the remedies that are available to them under the clause(s) that are in their contract. If work on a contract is suspended, either through an ordered suspension or a constructive suspension, then contractors need to account for all expenses related to pausing and restarting work as a result of the suspension to increase chances of reimbursement. Employers should also plan ahead to move employees from possibly paused projects to productive roles.

Make sure to consider the potential impact on your supply chain and ability to perform the work and have frequent communication with the government. Contracts should be reviewed to understand the period of performance and potential impact, and review the applicable FAR Clauses incorporated. Typically, cost reimbursement and T&M contracts contain clause FAR 52.249-14 – Excusable Delays. On the other hand, there is no separate excusable delays clause for fixed price contracts. Instead, excusable delays are discussed in FAR 52.249-8, Default (Fixed Price Supply and Service) and 52.249-10, Default (Fixed Price Construction).These clauses outline how a number of events or circumstances can excuse the contractor from default of performance under the award. Contractors should note, however, that they are responsible to promptly notify their Contracting Officer in that event. If the Contracting Officer determines that any failure to perform results from one or more of the causes listed, the delivery schedule should be revised; however, none of these clauses provide any monetary relief to the contractor. If the failure to perform is caused by a subcontractor, these clauses impose different performance and notice obligations on the prime contractor. Again, contractors need know what excusable delay clause is in their contracts and what contractors are to do in order to receive the benefits of an excusable delay.

If you have questions concerning any of these issues or other contracting matters, do not hesitate to contact Cherry Bekaert for advice and assistance. We will be issuing a series of articles on the impact of the coronavirus and performing work for the Federal Government.