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.
When confronting challenges caused by the coronavirus, vendors should know that their contracts may contain clauses that would excuse these 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 for contractors facing delays and disruptions caused by the coronavirus.
Contractors first should understand that a number of standard FAR clauses, 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), may give rise to a schedule adjustment in the event that performance is disrupted by concerns regarding the spread of COVID-19.
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." 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.
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.
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. The commercial item clause does not address excess costs specifically but it does add a...