Construction contractors are increasingly concerned about the financial impact of the Coronavirus. This could delay a project for months. And time is money. Let’s discuss whether a contractor is entitled to compensation due to a Coronavirus related delay.
The typical federal construction contract does not include a standalone “force majeure” clause, identifying an epidemic as an excusable delay. Instead, the contract includes a termination for default provision, which states the contract cannot be terminated for delay if caused by, among other things, epidemics:
The delay in completing the work arises from causes other than normal weather beyond the control and without the fault or negligence of the Contractor. Examples of such causes include (i) acts of God or of the public enemy, (ii) acts of the Government in either its sovereign or contractual capacity, (iii) acts of another Contractor in the performance of a contract with the Government, (iv) fires, (v) floods, (vi) epidemics, (vii) quarantine restrictions, (viii) strikes, (ix) freight embargoes, (x) unusually severe weather, or (xi) delays of subcontractors or suppliers at any tier arising from causes other than normal weather beyond the control and without the fault or negligence of both the Contractor and the subcontractors or suppliers.
(FAR 52.249-10) Thus, it is clear the Government cannot terminate a contract for default because of delays due to the Coronavirus. You probably figured that. But what if your contract is not terminated? Can you still get additional costs for Coronavirus related delays?
The Government would likely use the Suspension of Work clause (FAR 52.242-14) to suspend a project due to the Coronavirus. This clause allows the Government to suspend work at its convenience for a “reasonable period” and without payment to the contractor. What is reasonable depends on the circumstances of each case. Appeals of Commer. Contrs. Equip., Inc., 2003-2 B.C.A. (CCH) P32,381 (A.S.B.C.A. September 17, 2003) Thus, while the Government may suspend a project due to the Coronavirus, it must act reasonably. This leaves the door open for potential compensation. I can envision situations where the Government is unable or unwilling to allow the contractor to resume performance within a reasonable time after the suspension is issued, or where the Government prevents a contractor from mitigating its delay damages during the suspension.
Now, if the Government does not suspend the project, and you are delayed because of the Coronavirus, you would be entitled to time but not money. This is because the virus is beyond the Government’s and contractor’s control. So, each party bears the risk of loss associated with this unforeseen delay. It is important, however, to notify the Government that you are being delayed due to the epidemic.
Since you may be able to recover delay damages if the Government acts unreasonably when suspending the project due to the virus, it is important to keep accurate records of the delay and associated costs. Let’s hope this virus passes quickly.
