A contractor entered into a fixed-price contract with the Center for Disease Control and Prevention (CDC) to conduct on site monitoring of clinical research sites. After a year of performance, the CDC informed the contractor that it has “postponed” contractor site visits due to COVID-19. The CDC subsequently terminated the contract for convenience. As part of its termination for convenience proposal, the contractor sought costs under the FAR’s stop work order provision even though the CDC did not call it a “stop work order” at the time.
The Civilian Board of Contract Appeals (CBCA) awarded the contractor the costs due to the stop work order, stating:
CDC did, in effect, issue a stop work order as a result of the pandemic. An unforeseen pandemic does not shift the risk to the Government for any unexpected costs incurred under a firm, fixed-price contract. Pernix Serka Joint Venture v. Department of State, CBCA 5683, 2020-1 BCA P 37,589 (“It is well-established that ‘a contractor with a fixed price contract assumes the risk of unexpected costs not attributable to the Government.'” (quoting Matrix Business Solutions, Inc. v. Department of Homeland Security, CBCA 3438, 2015-1 BCA P 35,844 (2014))). However, “[i]f a stop-work order is not canceled and the work covered by the order is terminated for the convenience of the Government, the Contracting Officer shall allow reasonable costs resulting from the stop-work order in arriving at the termination settlement.” FAR 52.242-15(c) (incorporated by reference in the contract); Exhibit D at 32.
The Board found that the stop work order clause (FAR 52.242-15) provided relief for COVID delays despite the fact that the contractor otherwise assumes the risk of COVID delays under a fixed price contract.
The same logic should apply to an actual or constructive suspension of work due to COVID delays or disruptions. Thus, when the Government issues a stop work or suspension of work order due to COVID related issues, the Government should pay the contractor for the additional costs and time associated with the delay.
Now, this does not mean the contractor is always entitled to additional time and money due to COVID. Far from it. In a fixed price contract, the contractor generally only receives time, but not money, for a delay due to an Act of God such as COVID. To receive money, the contractor must show that the delay was was caused by a Government direction due to COVID such as shutting down access to the job site.
I would also like the opportunity to discuss the various COVID clauses the Government has been asking contractors to add to their contracts. Do not sign a modification adding this to your contract until you have examined whether this will increase the cost and/or time of performance. If yes, you should ask for this before signing the modification.
Appeal of NUES, Inc., CBCA 7165 (December 15, 2021)
