The largest single purchaser of construction services in the world is the United States government, which spent an estimated $119 billion on construction contracts in fiscal year 2021.1 As the covid-19 pandemic disrupted lives and the supply chain in early 2020, billions of dollars’ worth of federal construction contracts were stalled as well, causing contractors great uncertainty—and fear that their federal contracts could be terminated for default. Recently contractors have been finally receiving answers regarding when and how covid-19 may be used as an excuse for delays in their federal contracts.
Federal contracts must contain certain provisions dictated by the Federal Acquisition Regulations (FAR), including FAR 52.249-14, the “excusable delay” clause.2 An excusable delay occurs when the failure to perform arises from causes beyond the contractor’s control and without the fault or negligence of the contractor. The FAR enumerates that “epidemics,” “acts of the Government in its sovereign or contractual capacity,” and “quarantine restrictions” are excusable delays, thus seeming to cover delays due to the covid-19 pandemic. But this clause limits relief for contractors, as it only provides a time extension for excusable delays (it does not completely excuse such performance) and does not compensate contractors for expense caused by the delays.
Importantly, excusable delays are not excusable per se. Rather, a contractor has the burden to prove their excuse delayed their performance in fact, without their own fault or negligence.3 Recent decisions by the Armed Services Board of Contract Appeals (ASBCA) and Civilian Board of Contract Appeals (CBCA) reveal the limits federal contractors face in using the pandemic as an excuse for delay when facing termination for default.
In Central Company, the ASBCA ruled in favor of the government’s termination for default, despite Central Company’s claim that covid-19 impacted its ability to perform.4 Central contracted with the Air Force to design and construct a small storage facility at an Air Force base beginning in November 2019. In March 2020, four months into the six-month contract, the government realized that Central was failing to meet deadlines on preconstruction documents and getting approval for design schedules.5 Central generally cited the pandemic as a concern for their ability to perform but never provided meaningful details. In a late-stage communication, Central reported that a subcontractor’s positive test result had caused a quarantine in February, as well as a general statement that their “supplier had to shut down the factory.” Then, when responding to a show-cause notice, Central explained they needed more time because their bank was only open by phone calls, which was extremely slow.
The board held that Central failed to contemporaneously communicate when delays due to covid-19 occurred and failed to show evidence of the actual impact on Central’s performance. Even though Central reported the employee’s positive covid test result, Central reported the event more than a month later and failed to show that the positive test caused a delay beyond Central’s ability to mitigate.6 The board recognized that while a lack of supplies may affect construction, it should not affect the design and submission of preconstruction paperwork, which Central had yet to achieve. Central’s argument that it was delayed due to covid-19 failed because even if it underwent delays because of the pandemic, they failed to allege “that those problems actually delayed Central’s preconstruction work.” Consequently, Central’s challenge to the government’s termination for default was denied.7
In a pair of service contract decisions titled ORSA Technologies, LLC (ORSA), the CBCA considered the effect of covid-19 as an excuse.8 The board held that the contractor failed to show that covid-19 was an excusable delay beyond their reasonable control because the effects of covid-19 were foreseeable when the contract was entered.
In the ORSA cases, the Veteran Affairs Offices requested bids in October 2020 for contractors to provide nitrile gloves, specifically requesting that the gloves be “on hand,” “in-stock,” and “available for immediate delivery.”9 Orsa won awards at two different locations in early 2021 but failed to produce the gloves on hand at the deadlines and was thereafter terminated for default on both contracts. Orsa argued covid-19 as an excuse for delay because the pandemic created a “perfect storm” of events that prevented their on-time delivery, including the shutdown of glove manufacturing facilities, labor concerns, and issues with raw materials, buying, shipping, and inspection. The board rejected Orsa’s argument, finding that Orsa was already aware of the pandemic’s effect on the supply chain and the nitrile glove industry when it entered the contract. Moreover, the contract clearly indicated the contractor’s obligation to have the gloves in stock at the time of award. Orsa’s covid-19 problems “were foreseeable when it entered into the contract,” and therefore were not an excusable delay “beyond the reasonable control of the contractor.”10
What are the key takeaways from Central Company and the Orsa decisions for federal construction contractors? The boards will not automatically consider covid-19 an excusable delay unless a contractor contemporaneously communicates specific evidence of their work delays that cannot be mitigated. Even then, since the pandemic and market conditions are now foreseeable, contractors are facing increasing difficulty claiming that such delays are beyond their control. Before entering into new federal contracts, for construction or otherwise, contractors must assess the current market conditions and potential covid-19 risks, as their ability to argue covid-19 as an excusable delay continues to dwindle.
RACHEL LANTZ is an associate attorney at Eckland & Blando. She graduated from Mitchell Hamline School of Law in June 2022.
Notes
1 Bloomberg Gov’t, BGOV200 – Federal Industry Leaders (2020), https://assets.bbhub.io/bna/sites/3/2021/06/BGOV200_Federal-Industry-Leaders-2020.pdf?utm_campaign=BGOV_Confirmations_Report&utm_medium=email&utm_source=Eloqua.
2 FAR 52.249-14.
3 See Ace Electronics Assoc., Inc., ASBCA Nos. 11781, 11496, 67-2 BCA ¶ 6456.
4 Central Company, ASBCA No. 62624, slip op. (2/2/2022).
5 Id. at 4.
6 Id. at 6.
7 Id. at 8.
8 ORSA Tech., LLC, CBCA No. 7141, slip op. (1/18/2022); ORSA Tech., LLC, CBCA No. 7142, slip op. (1/20/2022).
9 No. 7141 at 10.
10 Id. at 11.