On March 13, 2020, President Trump issued a national emergency declaration in response to the coronavirus outbreak. Since then, the efforts of state and federal agencies to keep the COVID-19 pandemic contained have had a range of impacts on contractors.
While navigating the ever-changing situation may prove challenging for many businesses, exploring some proven and potential results may help illuminate the path forward for those in government contracting.
Clarifying "essential business" status
National Defense advised contractors to be aware that they might not be considered essential simply because they are working to fulfill a federal contract. The outlet noted that state-mandated lockdowns may conflict with contractual obligations when both federal and state classifications remain relatively open to interpretation.
If they have not done so already, businesses should look for the Defense Federal Acquisition (DFA) Regulation Supplement Clause (252.237-7023) in their contracts. This clause states that businesses performing "mission-essential functions" can continue work — but it is essential to do so with all safety precautions taken.
Documenting excusable delays
Just because a national emergency has been declared, contractors are not automatically granted an excusable delay. Instead, any delay excuses must be well-documented and proven.
There is a Federal Acquisition Regulation force majeure clause stating that "the contractor shall not be in default because of any failure to perform this contract under its terms if the failure arises from causes beyond the control and without the fault or negligence of the contractor." Specifically, cited examples include "epidemics" and "quarantine restrictions."
However, contractors must identify precisely how these factors beyond their control impact contractually agreed upon delivery schedules. Once this is possible, it may be advisable to wait before settling on a new timeline, which may be difficult to identify given the continuing coronavirus-related uncertainty.
Accommodating DPA implications
The Defense Production Act (DPA) allows the president to bypass typical contract procurement procedures in an effort to obtain or initiate the manufacture of critical products and technologies. While it is unclear to what extent this authorization will be utilized, there may be some implications for contractors with manufacturing resources.
For instance, in March 2020, President Trump "require[d] General Motors Company to accept, perform and prioritize contracts or orders for the number of ventilators that the Secretary [of Health and Human Services] determines to be appropriate."
Writing for Lawfare, Harvard Law students Masha Simonova and Nathaniel Sobel explained that "the government could use this authority in the current pandemic to grant relief in the form of loans or loan guarantees to contractors who are facing lost profits or hardships as a result of complying with DPA orders."
Securing additional relief
In addition to possible DPA-related financial relief, contractors can turn to the FAR Changes Clause (52.243-1 through 52.243-4). If new direction from a contracting officer (CO) will hinder a vendor from completing their contracted services, the law firm Pillsbury has suggested "that the contractor make a timely request to its CO for a schedule extension."
Furthermore, Pillsbury has advised "separately account[ing] for the cost growth they experience as a result of the CO direction, in case they cannot reach an informal resolution and need to submit a claim for financial relief."
Essentially, it is critical for impacted government contractors to prioritize immediate and open communication with contracting officers and other stakeholders while maintaining detailed records of coronavirus-related impacts on contractual obligations. While attention and vigilance may not resolve the situation immediately, given the ever-changing nature of the ongoing pandemic, these actions can help contractors understand where they stand and may lead to securing much-needed financial assistance or schedule relief.
