As the COVID-19 virus extends its global reach, defense contractors may be called upon to begin implementing their contracts’ mission-essential services plans. These plans, required by DFARS 252.237-7023, facilitate mission-essential functions in extended crisis situations, including pandemics, which are explicitly noted in the DFARS. As the coronavirus outbreak continues, defense contractors should check whether their contracts include this clause and assess their readiness to implement the requirement if DoD requests activation of the company’s plan.

DFARS 252.237-7023, promulgated partially in response to the 2009 H1N1 influenza pandemic, governs contractor performance of essential contractor services that support mission-essential functions. Under the clause, mission-essential functions include “those organizational activities that must be performed under all circumstances to achieve DoD component missions or responsibilities,” without the performance of which DoD’s ability to provide vital services or exercise authority, direction, and control would be significantly impaired. These functions generally do not include all services provided under a contract, but rather, only those the contract specifically identifies as essential.[1] Common examples include services that support vital systems, such as ships leased, owned, or operated to support military missions, associated base and installation support activities, and similar services provided under the Security Assistance Program to foreign military sales customers.

Mission-essential services plans generally must identify any provisions for acquiring essential personnel and resources to support continued operations for 30 days, or until normal operations are resumed. [2] These plans are intended to address challenges posed in maintaining essential contractor services during crises, including delays between activating the plan and personnel availability on-site, established alert and notification procedures for mobilizing essential personnel, and other issues.[3]

When necessary, Contracting Officers will notify defense contractors to activate their plans,[4] and may also request that contractors update existing plans as necessary in light of the current outbreak and submit any changes for approval. If a contractor anticipates not being able to perform any of the essential contractor services identified in its plan, the contractor is required to “notify the Contracting Officer or other designated representative as expeditiously as possible and use its best efforts to cooperate with the Government in the Government’s efforts to maintain the continuity of operations.”[5] Contractors also may be called upon to provide training or other support to Government or other contractor personnel to ensure that they can perform essential services if the contractor cannot. This could result in a deductive change or partial termination of the contract.

Contractors performing essential services in accordance with these plans must segregate costs associated with such performance and must negotiate an equitable adjustment if costs increase or decrease based on performance in accordance with the plan.[6] Unless a longer period is approved, contractors have 90 days from the date they are directed to continue performance to notify the Contracting Officer of any increase or decrease in cost and request an equitable adjustment that addresses price, schedule and/or delivery.

Defense contractors would do well to look to their contracts and the plans they have in place to refresh themselves on what services are identified as essential under their contracts, and review their operations to ensure that they can provide any essential services as required. If directed to activate their mission-essential services plan, a contractor should also ensure that any subcontractor performing essential services is likewise directed to activate their mission-essential services plan. They should also make plans to segregate any costs associated with performance once a plan is activated, to support a request for equitable adjustment.

[1] DFARS 252.237-7023(b); see also DFARS 237.7602(a).

[2] See DFARS 252.237-7024 (establishing minimum plan requirements for DoD solicitations supporting mission-essential functions).

[3] Id.

[4] See DFARS 237.7602(b); 75 Fed. Reg. 66680, 66681 (Oct. 29, 2010).

[5] DFARS 252.237-7023(d)(2).

[6] DFARS 252.237-7023(f).

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Photo of Peter B. Hutt II Peter B. Hutt II

Peter Hutt represents government contractors in a range of complex investigation, litigation, and compliance matters, including False Claims Act and fraud investigations and litigation, compliance with accounting, cost, and pricing requirements, and contract claims and disputes.
Peter has litigated more than 20 qui…

Peter Hutt represents government contractors in a range of complex investigation, litigation, and compliance matters, including False Claims Act and fraud investigations and litigation, compliance with accounting, cost, and pricing requirements, and contract claims and disputes.
Peter has litigated more than 20 qui tam matters brought under the False Claims Act, including matters alleging cost mischarging, CAS violations, quality assurance deficiencies, substandard products, defective pricing, Iraqi procurement fraud, health care fraud, and inadequate subcontractor oversight. He has testified before Congress concerning proposed amendments to the False Claims Act.

Peter has also conducted numerous internal investigations and frequently advises clients on whether to make disclosures of potential wrongdoing. He is recognized for his work by Chambers USA, which notes that Peter is not only “an excellent litigator,” but is “great to work with and very knowledgeable.”

Peter also represents clients in a wide range of accounting, cost, and pricing matters, as well as other contract and grant matters. He is experienced in addressing issues concerning pensions and post-retirement benefits, contract formation, TINA and defective pricing, claims and terminations, contract financing, price reduction clauses, subcontracting and supply chain compliance, specialty metals compliance, and small business and DBE compliance. He has litigated significant cost, accounting, and contract breach matters in the Court of Federal Claims and the Armed Services Board of Contract Appeals.

Photo of Susan B. Cassidy Susan B. Cassidy

Ms. Cassidy represents clients in the defense, intelligence, and information technologies sectors.  She works with clients to navigate the complex rules and regulations that govern federal procurement and her practice includes both counseling and litigation components.  Ms. Cassidy conducts internal investigations for government…

Ms. Cassidy represents clients in the defense, intelligence, and information technologies sectors.  She works with clients to navigate the complex rules and regulations that govern federal procurement and her practice includes both counseling and litigation components.  Ms. Cassidy conducts internal investigations for government contractors and represents her clients before the Defense Contract Audit Agency (DCAA), Inspectors General (IG), and the Department of Justice with regard to those investigations.  From 2008 to 2012, Ms. Cassidy served as in-house counsel at Northrop Grumman Corporation, one of the world’s largest defense contractors, supporting both defense and intelligence programs. Previously, Ms. Cassidy held an in-house position with Motorola Inc., leading a team of lawyers supporting sales of commercial communications products and services to US government defense and civilian agencies. Prior to going in-house, Ms. Cassidy was a litigation and government contracts partner in an international law firm headquartered in Washington, DC.