COVID-19 has increased costs for government contractors in almost every sector. Requests for Equitable Adjustment (REAs) and claims are available to contractors seeking compensation. But when should you submit an REA or claim? Below are top bases for filing REAs or claims that government contractors should look for when facing cost increases due to COVID-19.
Delays in contract performance are a common driver of increased costs and/or the need to extend a contract’s period of performance for government contractors. There are three types of delays: inexcusable, excusable, and compensable. And, a delay can be both excusable and compensable. Determining the type of delay requires an analysis of responsibility, impact, and the existence of concurrent delays. If a delay is excusable and/or compensable, it may be appropriate to submit an REA or a claim to modify the period of performance and/or seek delay damages (i.e., monetary costs).
- Excusable Delays: An excusable delay occurs because of unforeseeable events outside of a contractor’s control that happened without the contractor’s fault or negligence. An excusable delay should extend the period of performance, but it does not include any monetary relief. To obtain an extension of time, a contractor must demonstrate that the event delayed the overall completion of the project and that the delay did not coincide with another delay. Notably, excusable delays clauses (e.g., FAR 52.249-8, FAR 52.249-10, and FAR 52.249-14) excuse a contractor’s failure to perform for reasons including “epidemics” and “quarantine restrictions.”
- Compensable Delays: A compensable delay must be caused by and is the responsibility of the government. Compensable delays are often due to government-ordered suspensions or situations where the government constructively suspends a contractor’s progress. A compensable delay can be grounds to extend the period of performance and entitles a contractor to delay damages. To recover compensation, the contractor must show that the delay affected overall completion of the project and was not concurrent with any other delays.
Contracting officers are empowered under some circumstances to make changes to the general scope of contracts. Changes can often result in increased costs to the contractor. If your contracting officer orders a change, the Changes clause in your contract may allow for equitable adjustments in both price and schedule. A wide array of costs may fall under the Changes clause, such as costs stemming from government direction to alter or stagger work hours, use more costly procedures, provide personal protective equipment, or perform additional cleanings.
If you encounter or have encountered increased costs due to delays or changes, contact counsel and follow these best practices to set yourself up for success.
- Provide Timely Notice: Providing timely notice to the government of the delay and/or change is key to obtaining any kind of relief. A contractor should provide notice to the contracting officer as soon as possible about the cost increases or delays and check applicable remedy-granting clauses for additional notice requirements. Clauses often include very short (10 or 20 day) notice requirements.
- Maintain Documentation: Keeping good records is important in the event of a dispute with the government. If your company encounters delays and disruptions, the causes and effects, as well as damages incurred (days and/or costs) need to be documented in real time.
- Keep Performing: Without a government-ordered suspension of work or stop work order, contractors still have a duty to perform on their contract or risk termination for default, even if issues arise.