Delays and Suspensions of Government Contracts as a Result of the Coronavirus

In light of the ongoing national emergency arising from COVID-19, also called the Coronavirus or the Wuhan virus, we wanted to take a break from our ongoing series on bid protests to address the impact of the coronavirus on ongoing government contracts. Outside of vital projects related to public health and safety or national security, we expect that over the next week many government contracts will be formally or informally suspended for the duration of the Coronavirus quarantine period. Many government contractors will receive letters or emails ordering them to stop work on projects located on government facilities or that involve personal contact with government personnel. Others will simply be unable to continue performance due to a lack of critical personnel who are either ill, or in quarantine. This will raise inevitable questions as to who will bear the cost of such suspensions and delays. Here are some important factors to consider to protect your rights in this difficult time.

Both FAR 52.249-14 Excusable Delays and FAR 52.212-4 Contract Terms and Conditions – Commercial Items explicitly provide that contractors shall not be considered in default as a result of delayed performance caused by an epidemic and/or quarantine restrictions. At the very least, all government contractors should be entitled to a no-cost time extension to cover the delays resulting from the coronavirus. While such a time extension will not compensate contractors for damages incurred as a result of the delay, it does offer protection against termination for default or the assessment of liquidated damages. Under FAR 52.249-14(c) the contractor need only request that the contracting officer consider the cause of the delay and revise the delivery schedule accordingly to obtain a time extension.

It’s great to get the time extension you need, but what about the costs resulting from orders to suspend performance? FAR 52.242-14 Suspension of Work states:

(b) If the performance of all or any part of the work is, for an unreasonable period of time, suspended, delayed, or interrupted (1) by an act of the Contracting Officer in the administration of this contract . . . an adjustment shall be made for any increase in the cost of performance of this contract (excluding profit) necessarily caused by the unreasonable suspension, delay, or interruption, and the contract modified in writing accordingly.

There are a couple of key points to unwrap here. First, the suspension must be ordered by the contracting officer. It is vital to understand that no one but the contracting officer has the right to order a suspension and incur additional costs to the government. If you receive a suspension order from anyone else, a COR, a COTR, or a contract specialist, request direction from the contracting officer in writing.

Second, the suspension must be for an “unreasonable period of time.” What is an unreasonable period of time under these circumstances? No one knows the answer to that at this point, but we would expect it to vary based on the nature of the contract and the duration of any particular suspension. However, we recommend that contractors presume that they will be able to recover damages without regard to whether the duration was unreasonable, as much of the time this question will not arise during negotiations over undisputed suspension costs.

Third, the clause limits contractors to damages “necessarily” caused by the unreasonable suspension. What kind of damages are “necessarily” caused by a suspension? Well demobilization and remobilization costs are obvious candidates, and many contracting officers will pay such costs without dispute. But other costs which are unavoidable, such as the costs to maintain site security or an on-site trailer during the pendency of the suspension are also usually recoverable.

So what should you do to protect your rights if you receive an order suspending work on a government contract? After you have verified that the order comes from an authorized contracting officer, you need to send a letter notifying the contracting officer that contract performance has been suspended and that you expect to incur costs as a result. The initial letter does not need to detail all costs with precision; it is more important that it notifies the government of your intent to seek reimbursement for the costs, whatever they may turn out to be. It is vital that the letter be sent promptly, as FAR 52.242-14(c) limits your recovery to damages incurred no more than 20 days before you provide notice to the government. If you need help drafting such a notice, give us a call.


The information contained in this publication should not be construed as legal or medical advice, is not a substitute for legal counsel or medical consultation, and should not be relied on as such.

About the Authors

Maria L. Panichelli

Partner

Maria is a partner and the Chair of the Government Contracting department.   She focuses her practice exclusively on federal government contracting and procurement, guiding her clients throughout the entire lifecycle of their...

Read More by Author

Michael A. Richard

Associate

Michael is an attorney in Obermayer’s Government Contracting Department, where he excels at getting clients to the settlement table. Michael’s tenacity is truly a force to be reckoned with. Over the past...

Read More by Author