Government Contract Attorneys, SDVOSB Law: Government Contracts Attorneys | Lawyers

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.

Posted in Government Delays

On November 13, 2019, the Civilian Board of Contract Appeals provided precedence on how to address concurrent delay in AMEC FOSTER WHEELER ENVIRONMENT & INFRASTRUCTURE, INC. v. DEPARTMENT OF THE INTERIOR. This is welcome news . . .there has been little precedence on how to evaluate concurrent delay.

The Board began with the proposition that “only delay of activities on a project’s critical path results in overall delay.” The Board then considered an “as-built critical path” to determine the extent the government and contractor delayed the project.

The government’s expert found that all government-caused delay was offset by concurrent contractor-caused delay. Specifically, the government expert maintained that delays to the shower room were “near critical” to the actual critical path delay caused by Modification #1.  The Board rejected this approach:

We reject the agency’s contention that all of the agency-caused delay was offset by concurrent, contractor-caused
delay. We recognize that “the exact definition of concurrent delay is not readily apparent from its use in contract
law.” George Sollitt Construction Co. v. United States, 64 Fed. Cl. 229, 238 n.8 (2005). We do not doubt that the
agency’s expert relied on one possible definition in opining that “near-critical” work in the shower room was
“concurrent” with the modification 1 work until April 2014 and would have delayed the project if modification 1
had not. The problem we see with that approach is that the alternative delay did not materialize. To analyze delay
claims in a manageable fashion, we focus on the fact that “only construction work on the critical path ha[s] an
impact upon the time in which the project [i]s completed.” Mega Construction Co. v. United States, 29 Fed. Cl. 396,
425 (1993), quoted in Affiliated Western, 2017-1 BCA at 179,403. The parties agree that the shower room repairs
were not critical after August 2012. That work thus did not result in delay. We limit our analysis to the critical path
delay that happened.

Based on the above, the Board will recognize concurrent delay only if it also impacted the critical path. This limits when concurrent delay can be raised. Since from a technical standpoint, in order for two (2) activities to drive the critical path at the same time (and hence concurrent according to the Board), they both must have precisely the same amount of “days of negative float” during a particular CPM update period.

The Board’s approach also rejects delay analyses that ignore what actually happened.  If a contractor maintains an accurate CPM throughout the project, that will suffice.  But oftentimes, we do not have the luxury of regular and reliable CPM updates. This is where the experts play a role. They must forensically demonstrate what actually delayed the project through an as-built CPM analysis.  While this can be painstaking, this is what the Board prefers.

The Board also provided guidance on how to price general conditions.  General conditions are “direct costs” of performing the work that are time sensitive. Examples include onsite supervision, rental equipment, trailers, fencing and other costs that continue to mount each day a project is delayed.  For these costs, the Board held that the contractor must add up the general conditions for the entire job and compute an average daily rate.  Then, this average daily rate can be multiplied by the days of delay:

Claimants can recover extended general conditions costs when compensable delay causes them to remain on a project longer than planned. The general conditions costs caused by the delay are the company’s average daily rate for the entire job multiplied by the days of delay.

The above approach means that the contractor must either wait until the job is complete before submitting a claim for general conditions, or estimate what the total general conditions will be at the end of the project.

If you are considering submitting a delay claim against the government, please call our office for a complimentary consultation.

Posted in Government Delays

The Civilian Board of Contract Appeals ruled that a contractor has the right to pursue a delay claim against the VA even though the project is still ongoing.  We represent the contractor.  As of September 30, 2016, the project is over three years late and delays continue to mount. The contractor exercised its right to file a delay claim under the Contract Disputes Act for delays up to September 30, 2016 and plans on filing another delay claim when the project is completed. The VA filed a motion to stay the first delay claim until the project is over.  The contractor objected, noting that that the Contract Disputes Act allows contractors to file claims even when the contract is still ongoing. The Board agreed and held noted that the suspension of work clause requires a contractor to submit a claim for damages “as soon as practicable” not after the contract is over.

The Board’s decision is a welcome one for those contractors facing a project that has been significantly delayed. The contractor should not have to shoulder the financial burden of these delays until the project is over.  This is particularly true for small businesses.

CTA, I, LLC v. Department of Veterans Affairs, CBCA 5826

Posted in Government Delays

The Civilian Board of Contract Appeals ruled that a contractor is not only entitled to overhead and profit on change order work under the VA’s Changes Clause, but also to overhead and profit on other work that was impacted or delayed by the change order work. Appeal of Industrial Maintenance Services, Inc., CBCA No. 5618 (September 15, 2017)  This is new precedent and could change the way we calculate impact costs.  Impact costs stem from a change’s impact on unchanged work.  For example, a change in the HVAC duct work might impact or delay electrical work that cannot be completed until the HVAC duct work is done.  In such a case, the Board ruling would allow the contractor to apply overhead and profit on the value of the electrical work as the appropriate measure of impact costs or “delay overhead”:

However, in seeking delay overhead, the contractors did not raise and opinions have not addressed or recognized that in terms of dollars, the actual scope of the underlying change extended beyond the dollar value of work added, altered, or deleted. As is apparent in this case, with the critical path of performance affected, the impact of the change reached beyond the immediate work modified, and the impacted work is just as much a part of the change as the actually added and altered work. The dollar value of the impacted work is an element of the costs of the modified work. It is from that total amount that the overhead and fee percentages must be calculated to properly compensate the contractor for its costs not recoverable as direct costs.

This decision is interesting and could have a wide sweeping impact on how one calculates impact costs, at least with respect to VA contracts. Note that contractors can still seek delay damages under the suspension of work clause, if a particular change suspends performance.  Careful review of the modes of recovery should be looked at to ensure compensation is fair and reasonable.

Posted in Government Delays