The global spread of the COVID-19 virus may put many federal contractors at risk of missing contractual deadlines. In a growing number of cases, supply chains may become cut off, work spaces may be closed, or employees may need to stay home, all of which could impact a contractor’s ability to perform in a timely manner. This is the first in a series of blog posts aimed at helping contractors navigate performance delays, changes, and other complications caused by the coronavirus outbreak.

When confronting challenges caused by the coronavirus, contractors should know that their contracts may contain clauses that would excuse these delays such as FAR 52.249-14 (cost reimbursement and time and material contracts), FAR 52.249-8 (fixed price supply and service contracts), and FAR 52.212-4 (commercial contracts). All of these clauses share a common thread – a contractor should not be in default because of a failure to perform the contract if the failure arises from causes beyond the control and without the fault or negligence of the contractor.

Among the examples of causes beyond a contractor’s control cited in the clauses include “epidemics” and “quarantine restrictions.” See FAR 52.249-14(a); FAR 52.249-8(c) and (d); FAR 52.249-9(c) and (d); FAR 52.212-4(f). These exceptions appear to contemplate situations like the spread of the COVID-19 virus, which has been declared a public health emergency by U.S. authorities, and which has resulted in quarantine restrictions around the world. See, e.g., Ace Elec. Assocs., Inc., ASBCA No. 11781, 67-2 BCA ¶ 6456 (“Illness occasioned by the onset of a flu epidemic is in general an excusable cause for delay provided it can be shown that performance was in fact delayed by reason of such epidemic.”).

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. This excuse, however, may not apply under non-commercial contracts if the subcontracted supplies or services were obtainable from other sources in sufficient time for the Contractor to meet the required delivery schedule. See FAR 52.249-14(b); FAR 52.249-8(d); FAR 52.249-9(d). Under FAR 52.249-14, 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. FAR 52.249-14(b). The commercial item clause does not address excess costs specifically but it does add a notice obligation.

Key here is that these provisions do not entitle the contractor to compensation. Non-compensable delays are delays for which the contractor is entitled to a time extension, but there is no entitlement to any additional monetary compensation. The theory is that neither the contractor nor the federal government has control over the non-compensable delay. Therefore, both parties assume their own additional costs. The contractor absorbs its delay costs for being out on the project longer and the federal government absorbs its costs by granting a time extension to the contractor and extending the contract.

To obtain protection under the excusable delay provisions, contractors should carefully consider the circumstances of each case, provide notice as required, and take reasonable steps to perform, and rigorously document events and impacts. See, e.g., Nat’l Fruit Prod. Co., Inc. v. Dep’t of Agriculture, CBCA No. 2445, 12-1 BCA ¶ 34979 (finding contractor could have taken additional steps to perform during an alleged insect epidemic); Crawford Dev. and Mfg. Co., ASBCA No. 17565, 74-2 BCA ¶ 10660 (finding contractor failed to demonstrate how a flu epidemic impacted its work force).

In addition to the excusable delay provisions, other standard FAR clauses also may provide for protection. For example, the standard FAR changes clauses, e.g., FAR 52.243-1 or FAR 52.243-2, provide options for obtaining an equitable adjustment for increased work. In the next post in this series, we will address the instances where a contractor is entitled to compensation because of added requirements imposed due to the coronavirus.

Tags: changes, coronavirus, covid-19, epidemic, excusable delay, illness, outbreak, pandemic, performance delay, public health emergency, quarantine, Supply Chain, virus
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Photo of Evan R. Sherwood Evan R. Sherwood

Evan Sherwood counsels federal contractors on Contract Disputes Act (CDA) claims, the cost accounting standards (CAS), cost allowability, requests for equitable adjustment (REAs), contract terminations for convenience/default, and related audits, litigations, and investigations. He also advises on contract compliance and formation issues, including TINA/defective pricing…

Evan Sherwood counsels federal contractors on Contract Disputes Act (CDA) claims, the cost accounting standards (CAS), cost allowability, requests for equitable adjustment (REAs), contract terminations for convenience/default, and related audits, litigations, and investigations. He also advises on contract compliance and formation issues, including TINA/defective pricing, data rights, mandatory disclosure rules, ethics, conflicts of interest, teaming arrangements, and other transaction agreements (OTAs). He has litigated matters before the Court of Federal Claims, the Armed Services Board of Contract Appeals, the Government Accountability Office, and the Federal District Courts.

In his work for defense and civilian agency contractors, Evan:

  • Prepares CDA claims and REAs;
  • Litigates matters involving CAS compliance, cost accounting practice changes, and cost allowability under the FAR and grant rules;
  • Defends contractors during audits and investigations involving the Defense Contract Audit Agency (DCAA), Defense Contract Management Agency (DCMA), and the Office of the Inspector General (OIG);
  • Advises on constructive changes, work delays, defective specifications, stop-work orders, government-furnished property, CPARS, warranty matters, data rights, and quality controls;
  • Counsels on disputes between primes and subcontractors, including teaming disputes; and
  • Conducts internal investigations and defends clients in federal investigations involving whistleblower allegations and retaliation claims.

Evan is a Vice Chair of the ABA Public Contract Law Section’s Contract Claims & Disputes Resolution Committee. He routinely writes and speaks about legal issues in federal contracting.

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Photo of Susan B. Cassidy Susan B. Cassidy

Susan is co-chair of the firm’s Aerospace and Defense Industry Group and is a partner in the firm’s Government Contracts and Cybersecurity Practice Groups. She previously served as in-house counsel for two major defense contractors and advises a broad range of government contractors…

Susan is co-chair of the firm’s Aerospace and Defense Industry Group and is a partner in the firm’s Government Contracts and Cybersecurity Practice Groups. She previously served as in-house counsel for two major defense contractors and advises a broad range of government contractors on compliance with FAR and DFARS requirements, with a special expertise in supply chain, cybersecurity and FedRAMP requirements. She has an active investigations practice and advises contractors when faced with cyber incidents involving government information, as well as representing contractors facing allegations of cyber fraud under the False Claims Act. Susan relies on her expertise and experience with the Defense Department and the Intelligence Community to help her clients navigate the complex regulatory intersection of cybersecurity, national security, and government contracts. She is Chambers rated in both Government Contracts and Government Contracts Cybersecurity. In 2023, Chambers USA quoted sources stating that “Susan’s in-house experience coupled with her deep understanding of the regulatory requirements is the perfect balance to navigate legal and commercial matters.”

Her clients range from new entrants into the federal procurement market to well established defense contractors and she provides compliance advices across a broad spectrum of procurement issues. Susan consistently remains at the forefront of legislative and regulatory changes in the procurement area, and in 2018, the National Law Review selected her as a “Go-to Thought Leader” on the topic of Cybersecurity for Government Contractors.

In her work with global, national, and start-up contractors, Susan advises companies on all aspects of government supply chain issues including:

  • Government cybersecurity requirements, including the Cybersecurity Maturity Model Certification (CMMC), DFARS 7012, and NIST SP 800-171 requirements,
  • Evolving sourcing issues such as Section 889, counterfeit part requirements, Section 5949 and limitations on sourcing from China
  • Federal Acquisition Security Council (FASC) regulations and product exclusions,
  • Controlled unclassified information (CUI) obligations, and
  • M&A government cybersecurity due diligence.

Susan has an active internal investigations practice that assists clients when allegations of non-compliance arise with procurement requirements, such as in the following areas:

  • Procurement fraud and FAR mandatory disclosure requirements,
  • Cyber incidents and data spills involving sensitive government information,
  • Allegations of violations of national security requirements, and
  • Compliance with MIL-SPEC requirements, the Qualified Products List, and other sourcing obligations.

In addition to her counseling and investigatory practice, Susan has considerable litigation experience and has represented clients in bid protests, prime-subcontractor disputes, Administrative Procedure Act cases, and product liability litigation before federal courts, state courts, and administrative agencies.

Susan is a former Public Contract Law Procurement Division Co-Chair, former Co-Chair and current Vice-Chair of the ABA PCL Cybersecurity, Privacy and Emerging Technology Committee.

Prior to joining Covington, Susan served as in-house senior counsel at Northrop Grumman Corporation and Motorola Incorporated.

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Photo of Michael Wagner Michael Wagner

Mike Wagner represents companies and individuals in complex compliance and enforcement matters arising in the public procurement context. Combining deep regulatory expertise and extensive investigations experience, Mike helps government contractors navigate detailed procurement rules and achieve the efficient resolution of government investigations and…

Mike Wagner represents companies and individuals in complex compliance and enforcement matters arising in the public procurement context. Combining deep regulatory expertise and extensive investigations experience, Mike helps government contractors navigate detailed procurement rules and achieve the efficient resolution of government investigations and enforcement actions.

Mike regularly represents contractors in federal and state compliance and enforcement matters relating to a range of procurement laws and regulations. He has particular experience handling investigations and litigation brought under the civil False Claims Act, and he routinely counsels government contractors on mandatory and voluntary disclosure considerations under the FAR, DFARS, and related regulatory regimes. He also represents contractors in high-stakes suspension and debarment matters at the federal and state levels, and he has served as Co-Chair of the ABA Suspension & Debarment Committee and is principal editor of the American Bar Association’s Practitioner’s Guide to Suspension & Debarment (4th ed.) (2018).

Mike also has extensive experience representing companies pursuing and negotiating grants, cooperative agreements, and Other Transaction Authority agreements (OTAs). In this regard, he has particular familiarity with the semiconductor and clean energy industries, and he has devoted substantial time in recent years to advising clients on strategic considerations for pursuing opportunities under the CHIPS Act, Inflation Reduction Act, and Bipartisan Infrastructure Law.

In his counseling practice, Mike regularly advises government contractors and suppliers on best practices for managing the rapidly-evolving array of cybersecurity and supply chain security rules and requirements. In particular, he helps companies assess and navigate domestic preference and country-of-origin requirements under the Buy American Act (BAA), Trade Agreements Act (TAA), Berry Amendment, and DOD Specialty Metals regulation. He also assists clients in managing product and information security considerations related to overseas manufacture and development of Information and Communication Technologies & Services (ICTS).

Mike serves on Covington’s Hiring Committee and is Co-Chair of the firm’s Summer Associate Program. He is a frequent writer and speaker on issues relating to procurement fraud and contractor responsibility, and he has served as an adjunct professor at the George Washington University Law School.

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