Additional Blogs of Interest

COVID-19 Causes Delays and Suspensions of Government Contracts

Posted by Whitcomb, Selinsky, PC Staff on Apr 23, 2020 2:45:40 AM

The coronavirus (COVID-19) outbreak has caused business disruption across the globe and is having a direct impact on government contractors. The federal government and the medical community’s efforts to contain COVID-19 requires a broad-based commitment to social distancing and self-quarantines, which directly impacts contract completion times and employee productivity. Outside of vital projects related to public health and safety or national security, contract specialists should expect that over the next few weeks, many government contracts will be formally or informally suspended for the duration of the COVID-19 quarantine period. Below are some important factors for government contractors to consider in order to protect their rights during this unprecedented time.

Force Majeure

Government contracts contain Federal Acquisition Regulation (FAR) clauses that provide grounds for entitlement to excusable delays, and are frequently referred to as force majeure clauses. A force majeure event refers to the occurrence of an event which is beyond the reasonable control of a party and which prevents that party from performing its obligations under a contract. It’s fairly certain that a pandemic such as COVID-19 would qualify as force majeure under government contracts.

The test for force majeure usually requires the satisfaction of three distinct criteria:

1) The event must be beyond the reasonable control of the affected party;
2) the affected party’s ability to perform its obligations under the contract must have been prevented,impeded or hindered by the event;
3) the affected party must have taken all reasonable steps to avoid or mitigate the event or its;consequences.

Applicable Regulations

Both Federal Acquisition Regulation 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 that arises from causes beyond the control and without the fault or negligence of the Contractor. Examples of these causes are (1) acts of God or of the public enemy, (2) acts of the Government in either its sovereign or contractual capacity, (3) fires, (4) floods, (5) epidemics, (6) quarantine restrictions, (7) strikes, (8) freight embargoes, and (9) unusually severe weather.

At the very least, all government contractors should be entitled to a no-cost time extension to cover the delays resulting from the coronavirus epidemic. 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.

Most contractors will be permitted to delay performance, but they still need to consider the costs that they incur as a result of the contracting officer’s suspension -of-work order. FAR 52.242-14 Suspension of Work states, “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 three key points to address here:

1) First, the suspension must be ordered by the contracting officer. If you receive a suspension order from anyone else (e.g., a Contracting Officer’s Representative (COR), a Contracting Officer’s TechnicalRepresentative (COTR), or a contract specialist), request direction from the contracting officer in writing;

2) Second, the suspension of work must be for an “unreasonable period of time.” What constitutes an“unreasonable period of time” varies based on the nature of the contract and the duration of anyparticular suspension; and

3) Third, the clause limits contractors to damages “necessarily” caused by the unreasonable suspension.Again, the kind of damages that are “necessarily” caused by a suspension will vary based on the natureofa particular contract. Some examples of recoverable costs include: demobilization and remobilizationcosts, costs to maintain site security or an on-site trailer, and overhead costs that are reasonable,allowable and allocable to the delayed contract (see generally FAR Part 31).

Final Thoughts

With the exception of government contractors who are considered essential for national security reasons under COVID-19 stay-at-home orders, COVID-19 will cause unprecedented business disruption for government contractors. Government contractors need to be proactive in reviewing their contracts and understanding what actions they must take to protect their rights under delayed contracts.

When a contractor attempts to assert the existence of an epidemic or pandemic as grounds for excusable delay, to have a chance of succeeding, the contractor must be able to present evidence of the existence of an epidemic, and that the epidemic was the cause of the delay that it experienced. To do this, the contractor must be able to identify when the impacts occurred, how long they lasted, and must explain to the contracting officer how the epidemic directly affected the company’s critical path of performance of the work. Finally, a contractor must also establish that it made reasonable efforts to mitigate the adverse effects of the epidemic on its performance, and explain how those efforts were ineffective.
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Tags: Government Contracts

U.S. Army Corps Of Engineers' Mistake Has Huge Unallowable Claims

Posted by Whitcomb, Selinsky, PC Staff on Oct 21, 2019 1:00:00 PM

In a report made public on October 3, 2019, the U.S. Department of Defense (DoD) Office of Inspector General (OIG) announced that the U.S. Army Corps of Engineers (USACE or Corps) failed to properly monitor Puerto Rico power grid restoration contractors following Hurricane Maria, leading to more than $50 million in potentially unallowable claims. 1 During the Hurricane Maria emergency response, two USACE offices awarded a type of contract that fails to encourage contractors to keep their costs down, and then failed to properly monitor the labor costs claimed by contractors to ensure those invoices were accurate.

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Tags: Government Contracts

New FAR for Low-Tier Small Business Subcontracting Credit

Posted by Marc Tawil on Sep 30, 2019 4:40:00 AM

The Dept. of Defense (DoD), General Services Administration, (GSA) and the National Aeronautics and Space Administration (NASA) are proposing to revise the Federal Acquisition Regulation (FAR) to implement a section of the National Defense Authorization Act and regulatory changes made by the Small Business Administration in a  2016 final rule. The primary objective of the proposed rule is to open the door for small businesses interested in participating in Federal procurement as a subcontractor and implement statutory requirements to help achieve this.

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Tags: Government Contracts

GSA's Motion to Dismiss in Contract Case Fails

Posted by Kimberly Craven on Sep 18, 2019 5:47:22 PM

The Civilian Board of Contract Appeals (CBCA) recently handed down a decision in a dispute over a lease that denied General Services Agency’s (GSA) Motion to Dismiss for failure to state a claim as well as the plaintiff’s Motion to Exclude GSA’s Opposition Reply. Since neither party’s motions were granted, it appears the plaintiff prevailed in its efforts to get GSA to pay up for lost rent and increased costs the plaintiff experienced in the lease dispute.

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Tags: Government Contracts, Contracts Law

Is Your Resume Good Enough for CVE Verification?

Posted by Joe Whitcomb on Aug 26, 2019 8:35:41 PM

There's much that can be learned from the Spartan Group, Inc's appeal of the Center for Verification and Evaluation's (CVE) decision regarding their Veteran owned small business status.  In January 2019, Mr. Kyle Muller, a service-disabled Veteran and 100% owner of the Spartan Group, Inc., applied for his company’s inclusion in the U.S. Dept. of Veteran Affairs' (VA) VIP database. In his company’s application, Mr. Muller identified himself as both President and Secretary and Mr. Ray Douaire as the company’s Treasurer and as his personal mentor. He also included his resume in his application, which listed jobs as director of sales/project manager at Trusted Solutions Group, Inc.(TSG) where he purported to oversee a roofing contract, developed office buildout provisions, and “collaborated with other firms to procure contracts on behalf of TSG.” Mr. Muller listed other past work experience including warehouse manager at a large retail company and officer in the U.S. Navy. His educational background included a bachelor’s degree in criminal justice.

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Tags: Government Contracts, CVE

CVE Cancels Another SDVOSB for Incomplete Documentation

Posted by Joe Whitcomb on Aug 25, 2019 4:48:04 PM

The U.S. Dept. of Veteran Affairs' Center for Verification and Evaluation (CVE) first verified RealSims on June 4, 2015 and then reverified the company on October 22, 2018.  At the time of initial and reverification, service-disabled Veteran Robert McGraw owned 98 percent of the Service Disabled Veteran Owned Small Business (SDVOSB) company and his wife, Debra McGraw owned two percent.   In May 2018, RealSim executed a Letter of Intent to sell 49 percent of its membership interest to another company, Badger Technology Group, which was owned 50/50 by two non-veterans, Dan Wade and Ralf Persson. 

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Tags: Government Contracts, CVE

Companies Have 30 Days to Notify CVE of Any Structural Changes

Posted by Joe Whitcomb on Aug 24, 2019 9:50:41 PM

On August 16, 2019, the SBA Office of Hearings and Appeals (OHA) denied Lachin Architect’s appeal from the U.S. Dept. of Veterans' Affairs' Center for Verification and Evaluation's (CVE) removal of their name from the CVE VIP database. The CVEfirst verified Lachin in January 2013 and reverified it in March 2015. In January 2018, the service-disabled Veteran, Michael Lachin, sold 20 percent of his shares to his nephew David Lachin.

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Tags: Government Contracts, CVE

Your Service Employees Have Special Requirements

Posted by Daniela Tarolli on May 2, 2019 4:17:07 PM

The McNamara-O’Hara Service Contract Act (SCA) applies to service contracts between the federal government and individuals and/or companies. This federal statute mandates contractors and subcontracts to employ “service employees” when their contracts meet the service requirements. The SCA was established to create fair business practices among unionized and nonunionized employers. On the one hand, the SCA allows for nonunionized employees to receive compensation and benefits commensurate with unionized employees; on the other hand, the SCA prohibits nonunionized employers from undercutting unionized employers in the bid process. Essentially, the SCA insures that federally procured service contract employees are receiving prevailing rates in the location the contract is being performed.

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Tags: Government Contracts

Breaking Up Is Hard to Do: Expulsion of an LLC Member

Posted by Andrew Newell on Feb 23, 2019 9:39:03 AM

“Change the changeable, accept the unchangeable, and remove yourself from the unacceptable.”
—Denis Waitley

It’s hard to argue with this advice from Mr. Waitley, a Naval Aviator turned business consultant and motivational speaker. When faced with an LLC member or members that have become toxic, disagreeable or just plain useless, converting Waitley’s advice into action is essential.

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Tags: Government Contracts, Trial Lawyer

Incomplete Novation = No Direct Economic Interest

Posted by Whitcomb, Selinsky, PC Staff on Sep 20, 2018 8:47:57 AM

Parties with an unapproved novation agreement aren’t eligible to protest agency award decisions. The GAO found that under the bid protest provisions of the Competition in Contracting Act of 1984 only an “interested party” may protest a federal procurement. The protester must be an actual or prospective offeror to have a direct economic interest in the award of a contract.

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Tags: Government Contracts

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