Using the FAR to Protect your Contract During a Pandemic

What protection do you have from delays caused by the COVID-19 virus in your federal contract?   How can you assure you are paid as rapidly as possible during this difficult time? 

These are only some of the questions that every Federal Contractor should be asking themselves and be prepared to respond to as soon as possible to help assure the survival of their business.

As the COVID-19 virus spreads across our country and the globe, many federal contractors are not only concerned about the safety of their employees and families, but also the dire financial implications; from keeping the lights on, to the increasing risk of missing contractual deadlines. As supply chains across the globe slow or halt, you close your doors, or move to a work from home model, these changes could all impact your small business’ ability to perform and deliver.

However, while these disruptions can cause fear and uncertainty, it is important to note that many federal contracts contracts contain FAR clauses that excuse delays and entitle them to an equitable adjustment of the contract price. Understanding when these clauses apply and how to pursue adjustments can make all the difference if your small business is facing delays and disruptions caused by COVID-19.

FAR clauses including: FAR 52.212-4 (commercial contracts), FAR 52.249-8 (fixed price supply and service contracts), and, FAR 52.249-14 (cost reimbursement and time and material contracts), all permit a schedule adjustment if your contract performance is disrupted.  The main message is this: you will not be in default because of a failure to perform if the failure arises from causes beyond the control (and without the fault or negligence) of the contractor.

Consider that if the failure to perform is caused by the default of a subcontractor and the cause of the default is beyond the control of both the contractor and subcontractor, contractors may be excused from liability for excess costs under FAR 52.249-14 and FAR 52.249-8 and -9.

FAR 52.249-14 also states that contractors also may not be entitled to relief if the contracting officer ordered the contractor to purchase the supplies from another source and the contractor unreasonably failed to comply with that order. The commercial item clause does not address excess costs specifically, but it does add a notice obligation.

The key here is that these provisions do not entitle the contractor to compensation. Non-compensable delays are when the contractor is entitled to a time extension, but there is no entitlement to any additional monetary compensation. Neither the contractor nor the government has control over the non-compensable delay.  Therefore, both parties assume their own additional costs.

If your small business needs the protection of excusable delay provisions, you need to carefully consider the circumstances of each case, provide notice to the government, take reasonable steps to perform, and of course, document all events and impacts.

Other important, standard FAR clauses can also provide some protection to your small business. For example, a contractor may request both a schedule adjustment and compensation for costs associated with performance delays if the contracting officer, in his or her discretion, issues a stop-work order, pursuant to FAR 52.242-15.

To pursue a schedule and compensation adjustment in these circumstances, the contractor would need to assert its right to an adjustment to the contract price within 30 days “after the end of the period of work stoppage.”

However, if your CO does not issue a stop-work, small businesses facing delays and disruptions can also pursue an adjustment to the contract price under other FAR clauses.

Remember: any claim made for a schedule or price adjustment will depend significantly on your particular facts and circumstances. However, where contractors find their performance delayed or disrupted by restrictions related to COVID-19, they should understand the potential recovery options available.

Whether you need help with these issues, or any other Government Contract Management and Administration issue, ReliAscent can help you.   ReliAscent can also help you with DCAA, FAR and CFR compliance issues as well.  At ReliAscent, our 3 Pillars or service and expertise make us uniquely positioned in the industry to help you stay both compliant as well as profitable.   Please feel free to contact us to discuss any of these issues.