By Robert Nichols and Andrew Victor of Nichols Liu LLP
On March 30, 2020, the Department of Defense published a memorandum addressing how agencies should handle contractor Requests for Equitable Adjustment (REAs) and other performance issues in response to the COVID-19 crisis.
DOD’s guidance addressed ways to provide relief to contractors, such as through the Excusable Delays clause at Federal Acquisition Regulation (FAR) 52.249-14. DOD also directed contracting officials to consider REAs in light of Section 3610 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which the President signed into law on March 27, 2020.
Section 3610 provides agencies the discretion to use “funds made available to the agency” by Congress to modify any contract or other agreement to reimburse contractors for workers’ lost time up to September 30, 2020, if the contractor provides leave to its employees or subcontractors “to protect the life and safety of Government and contractor personnel.”
In its guidance, DOD highlighted Section 3610 as providing discretion for agencies to modify contracts to reimburse paid leave where contractor employees could not access work sites or telework, but actions were needed to keep such employees in a ready state. DOD explained that Defense Pricing & Contracting within the Office of the Secretary of Defense would provide implementing guidance for Section 3610 as soon as practicable.
DOD also reiterated that contracting officers are empowered to make difficult decisions on adjusting contracts appropriately. For example, when reviewing REAs, contracting officers should consider whether the requested costs would be allowable, allocable, and reasonable to protect the health and safety of contract employees as part of the performance of the contract. Moreover, contract adjustments or reliance on an excusable delay should not negatively affect contractor performance ratings. Contracting officers must work closely with contractors to ensure continuity of operations and protection of the Defense Industrial Base.
Contractors can cite this memorandum to their government points of contact and contracting officers when discussing COVID-19 impacts on their contracts. Contractors should also be mindful of further guidance to be issued by Defense Pricing & Contracting.