Contractor Unable to Recover Costs Caused by Ebola Virus Epidemic; Pernix Serka Joint Venture v. Department of State, CBCA 5683

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Claim for costs incurred as a result of an Ebola epidemic is denied. The contractor sought costs for shutting down a worksite and evacuating personnel due to an Ebola outbreak in Africa in 2014. The board, however, found that the contractor was not entitled to these costs due to its firm fixed-price contract. A contractor with a firm, fixed-contract assumes the risk of unexpected costs not attributable to the government. The contractor attempted to argue that the virus effected a cardinal change or a constructive change to the contract, but the board rejected those theories.

Pernix Sekra Joint Venture had a firm, fixed-price contract with the State Department to construct a rainwater capture and storage system in Sierra Leone. The contract’s provision regarding excusable delays stated that Pernix would be allowed time, not money, for excusable delays. The contract defined excusable delays as, among other things, acts of God, epidemics, and quarantine restrictions.

In 2014, while Pernix was working on the rainwater system, an Ebola virus outbreak in Africa spread to Sierra Leone. Pernix, concerned about the safety of its personnel, asked the State Department for guidance on how to proceed. The agency, however, declined to provide any guidance.

After the World Health Organization declared the Ebola outbreak an international health emergency, Pernix unilaterally decided to shut the project down and evacuate the work site. Over the next few months Pernix met with State Department representatives to discuss the ongoing Ebola crisis. Each time the State Department told Pernix that the company was on its own and that the agency would not provide any additional guidance on whether Pernix should restart the project.

In March 2015, after it been off the job for several months, Pernix returned to the worksite. For the safety of its personnel, Pernix expanded its medical facilities on the site and hired a licensed paramedic.

A few months later, Pernix submitted requests for equitable adjustment to the State Department for (1) costs associated with the additional medical facilities, and (2) delays and additional work that Pernix had to perform as a result of the epidemic. The State Department either denied or took no action on the REAs.

Pernix then submitted certified claims for the Ebola-related costs. The State Department denied the claims, and Pernix appealed to the CBCA. The State Department moved for summary judgment on Pernix’s appeal.

The board found that the agency was entitled to summary judgment. Pernix had a firm, fixed-price contract with the State Department. A contractor with a firm-fixed price contract assumes the risk of unexpected costs not attributed to the government. Pernix’s firm, fixed-price contract obligated it to receive only the fixed the price. Indeed, the excusable delay provision of the contract stated that Pernix would only be entitled to extra time, not additional costs for delay. Under its contract, Pernix was obligated to bear any additional costs of contract performance.

Still, Pernix asserted several theories in an attempt to shift the risk of increased costs to the government. First, Pernix alleged there had been a cardinal change. A cardinal change is a breach that occurs when the government makes such a drastic change to the contractor’s work that the contractor is performing duties materially different from those in the original contract. The board, however, rejected the cardinal change theory, finding that the State Department never changed the description of work expected from Pernix. In fact, throughout, the agency had repeatedly stated that it would not direct Pernix on how to handle the epidemic.

Pernix also claimed the government was responsible under a constructive change theory. A constructive change occurs when a contractor performs work beyond the contract requirements. Pernix argued that the demobilization and remobilization of personnel was a constructive change. But this argument failed because the government never specifically instructed Pernix to demobilize or remobilize.

Pernix also argued that there had been a constructive suspension of work. But the board found that this theory relied on a different set of facts than the theories raised in the certified claim. Accordingly, the board lacked jurisdiction to hear this theory.

Pernix is represented by J. Randolph MacPherson of Halloran & Sage LLP and Douglas L. Patin on Bradley Arant Boult Cummings. The government is represented by Erin M. Kriynovich of the Department of State.

04-22-20_5683__PERNIX_SERKA_JOINT_VENTURE (Decision)