Federal contractors have faced unprecedented challenges performing during the COVID-19 pandemic. Additional costs have included delays and inefficiencies, site closures, quarantines, unavailability of supplies and materials, and full shutdowns of subcontractor operations. For contractors performing under fixed price contracts, the cost impact of COVID-19 was likely severe.
The Federal Acquisition Regulation (“FAR”) recognizes “epidemics” as a force majeure event that may excuse non-performance. Many federal contracts include some version of the Default clause, which prevents the government from terminating a contractor for default due to impacts of force majeure events that are beyond a contractor’s control, such as an epidemic. See, e.g., FAR 52.249-10. See also Pernix Serka Joint Venture v. Dep’t of State, CBCA No. 5683 (Apr. 20. 2020). The Default clause, however, operates as a shield from liability, not a sword authorizing recovery. Contractors are now left wondering whether any avenue exists to recover additional costs incurred after performing in the face of the COVID-19 pandemic.
In response to a likely influx of claims and requests for equitable adjustment due to COVID-19 impacts, the federal government largely took the position that contractors were entitled to extensions of time, but not to additional costs. This article explores the avenues that may be available for contractors to recover costs for performing during a force majeure event that would otherwise be non-compensable.