What is a Force Majeure Clause in Government Contracts?
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.
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.
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.
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 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.
For immediate assistance with dealing with the COVID pandemic, government contract claims, requests for equitable adjustments and how force majeure clauses may impact you, call our government contract lawyers .
Call toll free at 1-866-601-5518.