By S. Gregory Joy and Alexander Gorelik of Smith Currie & Hancock LLP
Updated: March 25, 2020
[This update reiterates our March 23, 2020 article concerning OMB and CISA guidance for federal contracting officials and addresses the DoD’s recent clarification of that guidance.]
On March 18, 2020, a coalition of federal contracting associations1 sent a letter to leadership of the U.S. House of Representatives and Senate requesting that Congress pass legislation “to encourage the use of flexible work solutions, including telework and virtual work environments, for contractors, as appropriate.” These associations also asked for legislation requiring the Office of Management and Budget (OMB) to provide guidance to federal contracting officers regarding equitable adjustments for contractors unable to access the federal facility required to perform their duties.
While Congress did not specifically direct it, on March 20, 2020, OMB issued such guidance (No. M-20-18) to heads of executive departments and agencies. OMB’s guidance is general, often calling for decisions to be made on a case-by case basis, and is not mandatory. But the guidance encourages agency flexibility in dealing with contractors affected by COVID-19. Here are the more significant details from OMB’s guidance:
- Encourages telework where possible: Agencies are to work with their contractors, if they have not already, to evaluate and maximize telework for contractor employees, wherever possible, consistent with FAR 108.
- Mandates flexibility with time extensions where virus prevents timely performance: Agencies are to be flexible in providing extensions to performance dates if telework or other alternative work solutions are not possible, or if a contractor cannot perform timely due to quarantining, or other COVID-19 related interruptions.
- Encourages flexibility with time extensions where contractor personnel are quarantined: Agencies are encouraged to be flexible with contractors whose personnel are affected by COVID-19. Quarantine restrictions can constitute excusable delays under FAR clauses 249-14, 52.212-4(f), and 52.211-13. Contracting officers are encouraged to discuss quarantines with contractors to determine if other options are available (for example, teleworking or to finding a substitute employee). If other options with the existing contractor are not feasible, it may be appropriate to re-procure elsewhere. In such situations, termination should be taken for convenience of the government, not for default, and without negatively affecting the contractor’s performance rating. Also, excusable delays resulting in adjustments to the contractor’s delivery schedule should not negatively impact a contractor’s performance ratings.
- Considers equitable adjustments for contractors affected by COVID-19: Requests for equitable adjustment should be considered on a case-by-case basis in accordance with existing agency practices. The guidance does not appear to broaden the bases for granting a contractor an equitable adjustment, but does encourage contracting officers to consider, among other factors, whether the requested costs would be allowable and reasonable to protect the health and safety of contract employees as part of the performance of the contract.
“Reasonable” is defined in FAR § 31.201-3: what would a prudent person do under the circumstances prevailing at the time the decision was made to incur the cost (such as whether the contractor took actions consistent with Centers for Disease Control and Prevention (CDC) guidance; and did the contractor contact the contracting officer or the contracting officer representative to discuss appropriate actions.).
- Considers retooling contracts and changes to address and manage COVID-19 issues: Agencies should consider whether contracts that include capabilities for addressing security, logistics, or other functions may be retooled for pandemic response consistent with the scope of the contract.
- Addresses work in buildings closed for social distancing: The decision whether to stop renovation or repair work in a building closed for social distancing should be made on a case-by-case basis. Agencies should consider the health and safety of government and contractor workers in that space under the CDC guidelines and directions of local health authorities.
- No local contractor preferences and set-asides: When an emergency is declared under the Stafford Act, contracting officers are typically expected, to the extent feasible and practicable, to give preference to local firms in the area designated in the emergency declaration. The COVID-19 emergency is a nationwide emergency, however, so local set-asides are not required.
- Addresses in-person meetings, debriefings, inspections: Decisions regarding in-person meetings to be made on a case-by-case basis in line with CDC recommendations and advice or direction from state and local public health authorities. The guidelines encourage social distancing and virtual interactions unless an in-person meeting is essential.
- Systems for Award Management (SAM) Extension: Current registrants in SAM with active registrations expiring before May 17, 2020, will be allowed a one-time extension of 60 days.
CYBERSECURITY & INFRASTRUCTURE SECURITY AGENCY (CISA) GUIDANCE
As the OMB guidance demonstrates, the federal government is very cognizant of the “stay-at-home” (or shelter-in-place) orders that are being implemented across the nation. While there is some case law suggesting that such orders have limited effect for work performed on federal installations, the federal government appears to be deferring to state and local direction regarding the initial response to COVID-19 while identifying essential services that should be exempted from shutdown orders.
An advisory memorandum that the Cybersecurity & Infrastructure Security Agency (CISA) issued on March 19 confirms this fact. The memorandum, issued to identify “essential critical infrastructure workers during the COVID-19 response” for state and local officials, explicitly states that the agency “recognize[s] that State, local, tribal, and territorial governments are ultimately in charge of implementing and executing response activities in communities under their jurisdiction, while the Federal Government is in a supporting role.”
CISA offers “state, local, tribal, and territorial jurisdictions and the private sector” a list to assist with “defining essential critical infrastructure workers.” The memorandum caveats that the list is not exhaustive and “is advisory in nature.”
Notably, CISA’s list includes only a few categories of construction and government work. Many recent state and local orders closely mirror CISA’s list of “Essential Critical Infrastructure” in their exclusions, however. For example, public works construction and government/military contractors with national security commitments are exempt under several orders.
Of course, each order may not exclude all types of work in these categories. Federal contractors, specifically, must be aware that the mere fact that they support the federal government will not allow them to proceed, if the state or another local authority directs otherwise. Instead, the specific local direction will usually control. Therefore, contractors must carefully review the state, county, and local orders for each location where they have projects.
The Department of Defense has issued guidance in the past few days that apparently distinguishes types of “Essential Critical Infrastructure” work that DoD believes should be subject to state and local orders from other “Essential Critical Infrastructure” work DoD believes should not be subject to such orders. DoD’s guidance appears to give priority to state and local orders regarding COVID-19 response but strongly indicates which items of “Essential Critical Infrastructure” work DoD considers should be exempted from such orders.
The guidance appears to provide that “rated orders” under the Defense Production Act (DPA), should be considered exempt from state and local stay-at-home orders, as rated orders directly support mission readiness or national security. A rated order is a contract or order placed in support of a national defense program, pursuant to section 101(a) of the DPA. To be a rated order, a contract or order must include four elements:
- A priority rating (of DO or DX);
- Specific delivery quantities and dates;
- A statement identifying the governing federal regulation; and
- The signature of a contracting officer, certifying the rated order.
In contrast, the DoD guidance states “[c]ontractor personnel performing under unrated contracts that do not directly support mission readiness or national security are not to be considered elements of the Essential Critical Infrastructure Workforce.” So DoD appears to be recommending that unrated work is not exempt from state and local orders. DoD’s guidance also indicates, however, that the Senior Procurement Executives and their associated Heads of Contracting Activities, Program Executive Officers, and unit commanders/directors are permitted to determine if an unrated order directly supports mission readiness or national security, suggesting that such unrated orders should also be exempt from state or local restrictions.
Where there is conflict between state or local orders and federal guidance, and if contractors believe their activities should be exempted under the DoD guidance as “Essential Critical Infrastructure” work, contractors should bring evidence of (1) the DPA rating for their contract and (2) the DoD’s new guidance to the attention of their state or local authorities. They should also make sure to comply with the DPA’s notice provisions (15 CFR 700.13(d)(3)), if a delay becomes inevitable. If the issue continues, contractors should also seek “special priorities assistance” under the DPA (15 CFR 700.50(a)) from the contracting officer, Delegate Agency, or where applicable, the Department of Commerce.
While these guidance memoranda are helpful, we urge federal contractors to remember that the agencies they work with and each contracting officer may have their own interpretations.
1 Associated General Contractors of America, U.S. Chamber of Commerce, American Council of Engineering Companies, Center for Procurement Advocacy, Commercial Spaceflight Federation, Computing Technology Industry Association, Information Technology Industry Council, National Defense Industrial Association, and Professional Services Council.
S. Gregory Joy is a partner in the Atlanta office of Smith Currie & Hancock LLP. He has divided his practice between public and private contracting, having handled hundreds of construction, commercial and government contracts cases since 1984. Joy has represented owners, prime contractors, subcontractors and suppliers throughout the United States, as well as the Caribbean, South America, Saudi Arabia and Guantanamo Bay, Cuba. He can be reached at email@example.com or 404.521.3800.
Alexander Gorelik is an Associate in Smith Currie’s Washington DC office. He is a Certified Professional Contract Manager (CPCM). His practice focuses on government contracts and construction litigation, including the representation of owners, architects, engineers, general contractors, subcontractors, and suppliers. He can be reached at firstname.lastname@example.org or 202.735.2446.