The COVID-19 pandemic is still costing the country substantial amounts of money without and certainty of guarantees. The end of this pandemic is not yet in site and federal contractors may now wonder whether this situation falls with the context of force majeure clauses, especially in government construction contracts.
With the pendamic and fierce weather conditions faced by government contractors, a obvious question is whether the force majeure legal application can bail companies out of performing contract requirements. This is a tough decision to make. Hopefully, government procurement agencies will not seek to get the benefit of the unexpected pandemic while forcing liability on small businesses and defense contractors.
A “force majeure” clause (French for “superior force”) is a contract provision that relieves the parties from performing their contractual obligations when unexpected circumstances beyond their control arise, making contract performance difficult or impossible or commercially impracticable.
One question is whether the absence of a force majeure clause will allow courts to read such an expectation into the contract. An argument can be made that although contracts do anticipate the unexpected, the government’s own catastrophe and inability manage and handle the pandemic should reap the benefits by still making contractors responsible for performance under difficult economic conditions.
Will the common requirement of good faith and fair dealing be allowed? This must yet be tested. Many government contractors anticipate fling claims but may be tested under the Contract Disputes Act (CDA) and the courts’ equitable powers may be also be tested.
You want to first address whether or not your contract contains force majeure clauses that cover the coronavirus pandemic. If so, you may want to seek professional help to address any notification requirements, negotiations with the contracting officer or some other remedy that reduces to hardship to your company.
A force majeure clause is a federal government contract can potentially relieve your company from performance under the contract. However, since a party to the contract is the United States government, walking away of immediately ceasing performance with any serious level of discussion is would not be something your company wants to do.
A force majeure clause, if covering the specific event in question, requires notification to the other party. In this case of a federal contract, the government also has a right to scrutinize the event in question and even push back in some situations.
Government Contracts & FAR Force Majeure Definition
As it applies to government contract, and considering the translation from the French language, the force majeure definition includes a superior or irresistible force. When considering this clause in a federal contract, you want to make sure that you are dealing with an unexpected event or effect that cannot be reasonably anticipated or controlled. To avoid damages under the clause the agency will more than likely argue that your situation does not meet the definition.
COVID-19 Coronavirus Pandemic Application?
With the current COVID-19 pandemic situation, the impact on government contractors has already begun. Contracting agencies are already requesting specific changes to performance; contractors are already feeling the pinch in schedules, employee performance issues due to quarantine requires and directions given by the Center for Disease Control (CDC). These are all issues faced by small businesses and other contractors.
Does Your Involvement with COVID-19 Warrant Enforcement of Force Majeure Clauses?
COVID-19 may cause the contracting officer (CO) to direct your company do something that you know may increase performance costs, rearrange schedules or make it almost impossible to perform. What do you do int these tough situations?
One possible solution is to immediately notify the CO that any orders or changes has the impact of disruption or have changed the original contract performance. FAR 52.243-1 through FAR 52.243-4, under the Changes Clause may come within the purview of using the Force Majeure clause to get an outcome.
- If you are able to comply with the contracting officer’s direction, you still want to notify him or her about any disruption or contract performance problems that you may have.
- Immediate notification and record keeping can help facilitate the record in the event of litigation.
What Happens if Your Contract Does Not Have a Force Majeure Clause?
More than likely, your federal contract would contain a force majeure clause. If it does not, then you would have to address the contracting officer with the common law principles of frustration of purpose, impracticability or some other means to seek relief. If the contracting officer, without reasonable consideration, directs your company to perform, where the common law defenses lurk, can you can that there was a constructive termination of the contract? These are all likely issues for the courts to decide.
Ideally, all contracts made in connection with an upcoming event will include a force majeure, or impossibility, clause. In the absence of a force majeure clause, parties to a contract are left to the mercy of the narrow common law contract doctrines of “impracticability” and “frustration of purpose,” which rarely result in an excuse of performance. Review in general: FAR 52.249.-14 (Excusable Delays); FAR 52.242-14 (Suspension of Work)
Should You Submit a Government Contract Claim or Request for Equitable Adjustment?
As discussed, the COVID-19 coronavirus pandemic may cause the contracting agency to demand more from your company in such difficult times. After notifying the contracting officer of the significant changes, you certainly want to keep track of costs, delays and relevant hardships. You also want to document communications and conversations with government personnel, actions or inaction taken by the government.
- Remember that contractors should not take substantive direction from the Contracting Officer’s Representative (COR) since they do not have the authority to bind the federal government. You should always clarify with the CO.
If you are relying on a force majeure clause to develop a contract claim, then you want to also show that the contract did not anticipate extra costs under these circumstances. In addition, you want to show causal connections between the alleged direction / changes from the contracting officer to your company.
- If you are performing a project that has a schedule, you may want to consider requesting and extension from the contracting officer.
- If you cannot come to some acceptable resolution with the government, you may want to seriously look at submitting a claim under the Contract Disputes Act.
If a claim is not feasible, you would want to immediately notify the government about the difficulties and pending issues and also submit a request for equitable adjustment on the contract.
Does a FAR Force Majeure Clause Allow You to Stop Performance on a Government Contract?
The main question for government contractors impacted by COVID-19 is whether they can simply stop performance on the contract? Force force majeure clauses generally include circumstances such as “acts of God or government authorities, natural disasters, or other emergencies” or a long list of potential catastrophes.
As a general rule force majeure can include:
• earthquakes, and
• weather disturbances (sometimes referred to as “acts of God”)
• war, terrorism or threats of terrorism, government regulations, civil disorder, labor strikes or disruptions, fire, disease or medical epidemics or outbreaks.
Your goal is to show that the COVID-19 pandemic incident is legally included in the force majeure clauses in your contract. As stated earlier, the first step would be to immediately communicate with the contracting officer and provide him or her with all of the details and support for your hardship and how the events can create a significant hardship to the extent that it would impact performance under the contract. Your actions should conclude that you are seeking relief from the government. Walking away from the project would not be advisable. See also information about flowdown clauses.
For immediate assistance with dealing with the COVID pandemic, government contract claims, requests for equitable adjustments and how FAR force majeure clauses may impact you, call our government contract lawyers .
Call toll free at 1-866-601-5518.