Government Contracting During a Pandemic: Existing Contractors Prepare

By Brett W. Johnson

Government agencies at every level are responding to an ever-changing environment in dealing with the implications of COVID-19. Government contractors may be the last to learn about significant changes to a government program. This may include simply showing up at a government site preparing to perform a contract and being turned away. Or, it may result in a contracting officer making significant changes to a contract to meet the government’s needs. Regardless, government contractors that are prepared to address the changing landscape will be in a better position to minimize government contract interruptions and disruptions.

The first point of order is clear communication from authorized decision-makers throughout the government contract program organizational structure. On the government side, this is the authorized contracting officer that has authority over the contract. On the contractor side, this will usually be the project manager or superintendent that is identified in the contract. The worst scenario for a government contractor is to comply with contract performance direction from a governmental agent that is not authorized to provide such guidance. With the advent of “copy to,” just by having the necessary authorized decision-makers on an email is not enough. The direction should be clear and follow the appropriate chains of command.

Government contractors must appreciate the stresses with which the contracting officers and other contract administrators are dealing with during the crisis. As such, the government contractors that are part of the team and communicate effectively will be best positioned once the crisis passes. However, government contractors and contracting officers must still comply with the contract provisions and applicable government contract regulations in performing the contract. As such, contract scope of work changes and stop work orders must still comply with the applicable laws. For federal government contractors, the clauses are likely Federal Acquisition Regulation (“FAR”) Clause 52.242-14 and FAR 52.242-15. The failure to adhere to this standard provision can have significant impacts once the crisis is over.

However, government contractors should not wait until the contracting officer contacts them about the agency’s response. Instead, government contractors should open lines of communication to discuss change orders, excusable delays, potential stop work orders and other potential unnecessary contract performance requirements (usually dealing with socio-economic provisions) that can be waived by the contracting officer during a crisis. Government contractors should be a part of the solution to assist the government agency customer.

If a stop work order (or a termination for convenience) is issued, the government contractor must immediately act by following the applicable regulations. The government contractor will likely need to flow down the stop work order to the vendors or subcontractors performing on the contract. This may be difficult if the subcontract was not specific to the federal project that is the subject of the stop work order. However, the government contractor should fully analyze the subcontract terms (such as force majeure clauses), applicable state laws, and government declarations to determine if potential relief exists from any contract remedies associated with a potential breach.

The government contractor is also likely entitled to any “ramp down” activities associated with the stop work order.  If the government contractor is required to idle its employees during the stop work order, such costs and idle status need to be tracked. The government contractor will need to take effort to try to incorporate those employees into other projects, but this may not be possible. As such, the government contractor needs to identify proper accounting requirements to ensure that any subsequent claim to the government associated with the “ramp down” for a stop work order or termination for convenience are captured and documented. If the employees are required to be furloughed or laid off, the government contractor must adhere to Collective Bargaining Agreements and Worker Adjustment and Retraining Notification (WARN) Act or similar other state laws by giving the appropriate notices to the employee, the union, and the applicable government agency. 

The government contractor is also required to mitigate other potential claims that may be associated with a stop work order or termination. If the government contractor deals with perishable items, the government contractor should seek guidance from the government agency (in writing) before destroying or donating the items. In addition, the government contractor is required to maintain any government property in its possession during the stop work period.

Government contractors need to be aware and maintain good documentation during this period of time. The False Claims Act was first introduced during the Civil War, as profiteers took advantage of the government purchasing during a crisis. Once this crisis passes, the government auditors, inspectors general and legislative oversight bodies will review governmental actions and contract performance to root out fraud, waste and abuse. The best way to defend against such an action is to be prepared by open communications and good documentation.

In a time of crisis, government agencies regularly turn to government contractors to assist in performing important functions. In future government solicitations, those government contractors that are able to identify key contract officers that are able to attest how they performed during a crisis will be well situated. It is usually too late to wait until a crisis passes to properly handle the eventual outcome. Instead, it is important for government contractors to manage difficult contract performances immediately. This may require multiple interacting legal specialties to ensure protection for the government contractor.