COVID-19 Contract Performance & Guidance

Date Published:  April 17, 2020                                                                                     Episode #127

 

 

Welcome to Federal Contracting Made Easy (FCME), where we take the complex world of Government Contracting and break it into simple steps that anyone can master.  We are on episode number 127, and we are going to look at the COVID-19 Contract Performance & Guidance.

Essential Business and Operations

The government must restrict contract performance to those "Essential Business and Operations" contracts. But what is the definition of Essential Business and Operations? The following meets the government's requirements:

Groceries & Medicine; Food, beverage, and licensed marijuana production & agriculture; Organizations that provide charitable and social services; Religious entities Media; First Amendment protected speech; Gas stations and businesses needed for transportation; Financial and Insurance Institutions Hardware & Supply Stores; Critical trades; Main, post, shipping logistics, delivery and pick-up services; Educational institutions; Laundry Services; Restaurants (Take out only) Supplies to work from home; Supplies for essential businesses and operations; Transportation; Home-base care and services; Residential facilities and shelters; Professional Services; Manufacture, distribution, and supply chain for critical products & Industries; Critical labor union functions;

 

 

Hotels and motels; and Funeral Services.

 

Next, we will look at Shelter-in-place.

Shelter-in-place

Shelter-in-place orders are handled differently depending on the state. Some states require all non-essential businesses and operations to stop. Others have stated that non-essential businesses may continue to conduct Minimum Basic Operations.

Minimum Basic Operations

What does Minimum Basic Operations mean? Any activity to maintain the value of the company's inventory or preserve the condition of a company's' physical plant and equipment. Also, the following functions: security, payroll, and employee benefits or related functions. Lastly, any activity to facilitate employees working from home.

Review Contracts

As we have discussed in earlier blogs, you must review your contract clauses. Especially if you find that your business does provide essential services, but you cannot perform them due to interruptions in the supply chain, or decreased laborers. What should you be looking for? That is coming up next.

Force Majeure Clause

Review your contracts for a "Force Majeure Clause." A Force Majeure Clause allows for an excusable delay. What is an excusable delay? According to the Federal Acquisition Regulation (FAR) 52.249-14, an excusable delay includes, among other things, acts of God, fires, floods, epidemics, quarantine restrictions, strikes, freight embargoes, and unusually severe weather. So you see, this clause fits the epidemic happening in the world today.

No Force Majeure Clause

If your contract does not contain a Force Majeure Clause, you may also seek relief through other common law doctrines of impossibility and impracticability. These doctrines may not fit all contracts, so check with your attorney.

File an Insurance Claim

Lastly, you could review your insurance policy as it may contain a provision for relief in this situation. Also, talk to your contracting officer. They understand the present situation and will work with you. Remember that failure to perform the contract result in a default, which brings significant ramifications.

Defense Production Act

President Trump invoked a wartime law that makes supplies to the Federal Government the top priority. Specifically, for medical equipment and supplies.  The government has the authority to go to the top of the line and force contractors to prioritize the sales of goods to the government before selling to consumers or other private purchasers.

DX and DO Ratings

You must review any active or new government orders for DPAS ratings. These DPAS orders will include a field indicating the level of DPAS rating. The rating is either "DX" or "DO." DX orders are higher than DO orders. DO orders must be prioritized over non-DPAS orders.

 

Make sure that you review your orders for these DPAS rating and pay attention as you must respond within a set timeframe to the agency.

Small Business Loans

We have discussed SBA Small Business loans in detail in previous episodes. SBA Disaster loans and Payroll Protection Program (PPP) loans are available to small businesses. Please be patient as SBA is experiencing a high volume, and the application process can take up to 21 days.

Eight Recommendations

Preparation is key.  

Spend your time now researching your contracts to determine the types of relief contained for pandemics and natural disasters. Review your contracts to determine if they contain DPAS. Plan now to comply with state/federal law. Keep track of incurred costs over and above the contract for compliance. Communicate with your contracting officer and let them know your current capabilities and any accommodations that might be required. Submit requests for equitable adjustment as soon as possible to your contracting officer. Update your sick leave policies and reinforce key messages to your employees. Example: stay home when they are ill or have any COVID-19 symptoms. Be prepared to change business plans if needed to maintain critical operations. Summary

 

Please take the time now to review your contracts for the Force Majeure clause or other common law doctrines of impossibility and impracticability. Also, consider reviewing the eight steps listed above to help prepare your business.

 

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