DoD Memo: Managing Defense Contracts Impacts of the Novel Coronavirus
On March 30, 2020, Kim Herrington, Department of Defense ("DoD") Acting Principal Director, Defense Pricing and Contracting, issued a memorandum titled, Managing Defense Contracts Impacts of the Novel Coronavirus.
The memo notes that the challenges DoD faces in confronting COVID-19 are historic and felt across the entire defense industrial base, including that the effects of this pandemic "will affect the cost, schedule, and performance of many DoD contracts." (emphasis added). To that end, the memo also notes the various tools under the FAR that are available to address the impacts of the COVID-19 on government contracts. Specifically, the memo provides that:
DoD contracts contain clauses that excuse performance delays, including Federal Acquisition Regulation (FAR) 52.249-14, Excusable Delays; various “Termination” clauses; and FAR 52.212-4 for commercial contracts. Each of these clauses provides that a contractor will not be in default because of a failure to perform the contract if the failure arises beyond the control and without the fault or negligence of the contractor. In the event of such a delay, the contractor is entitled to an equitable adjustment of the contract schedule. Where the contracting officer directs changes in the terms of contract performance, which may include recognition of COVID-19 impacts on performance under that contract, the contractor may also be entitled to an equitable adjustment to contract price using the standard FAR changes clauses (e.g., FAR 52.243-1 or FAR 52.243-2).
In addition, the memo also states that requests for equitable adjustment ("REA") are to be made on a case-by-case basis and that when reviewing REAs, "contracting officers are to take into account, among other factors, whether the requested costs would be allowable, allocable and reasonable to protect the health and safety of contract employees as part of the performance of the contract." Importantly, the memo also notes that REAs or a contractor's reliance on FAR delay clauses "should not negatively affect contractor performance ratings." This is great news––and, it is also the subject of a GovConJudicata blog post from last week (here).
Lastly, the memo mentions that Section 3610 of the CARES Act "provides discretion for the agency to modify the terms and conditions of the contract to reimburse paid leave where contractor employees could not access work sites or telework but actions were needed to keep such employees in a ready state." In that respect, DoD will issue implementing guidance on this Section soon.
Managing Defense Contracts Impacts of the Novel Coronavirus
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