Costs of the Government Shutdown
The U.S. federal government shutdown continues in the absence of a continuing resolution from Congress to provide the required funding to operate. Most federal government contractors are in one of three situations:
- They have been told to stop working.
- They are unable to work because of closed government facilities.
- They are working with enough funding for a short period.
Of course, there are still many contractors who have been given no direction from the government as to their contract status.
What should I do?
Contractors should take several steps now, and as the shutdown continues, to put themselves in the best position possible for when the government fully resumes operations, which despite the circumstances is inevitable.
- Contractors should continue to perform their contracts until contracting officers issue a written stop-work order instructing them to cease work.
- Contractors, without direction, should contact their contracting officers to request direction and advise that work will continue until the Government directs them to stop or work can’t continue until the Government re-opens.
- Contractors should develop a plan to mitigate the costs of a work stoppage.
- Contractors should ensure that all costs related to the stoppage of work are fully documented.
Will I be paid?
Maybe. It largely depends on the type of contract (cost reimbursement or fixed price), the work that is being performed and the source of the contract funding. The Sovereign Acts Doctrine is likely to foreclose a contractor's recovery of costs related to work stoppage under a fixed price contract. The government uses the Sovereign Acts Doctrine to defend against its liability for costs when the government enacts a law or takes action that, by its nature but not intent, affects the performance of a government contract, i.e., when the government is acting as the sovereign rather than a buyer. The shutdown is such an action. For a contractor in a cost reimbursement contract, as long as the stop-work order is in writing and is signed by an authorized individual, reimbursement for costs is more likely. See Raytheon STX Corp. v. Dep’t of Commerce, GSBCA No. 14296-COM, 00-1 BCA ¶ 30,632 (awarding costs in a cost reimbursement contract incurred during 1995-96 government shutdown).
There may be an exception to the Sovereign Acts defense if the government has guaranteed a contractor access to government facilities. In Raytheon, the General Services Board of Contract Appeals (GSBCA) — now the Civilian Board of Contract Appeals — recognized that the defense does not bar government liability when the government represents to a contractor that accessibility would be guaranteed because the accessibility guarantee carries with it an “implied promise” that the government will carry the incurred cost if the facilities are not accessible.
What if I’m not paid?
Even if contractors can’t recover costs during the shutdown, most contractors, irrespective of contract type, should be entitled to an excusable delay for performance. An excusable delay is a delay in the performance of a contract that is caused by an event that is outside a contractor’s control and is no fault of the contractor or any of its subcontractors. Excusable delays are identified in the Termination for Default clauses and in the Excusable Delays clause at FAR 52.249-14. Examples include:
- Acts of God or of the public enemy.
- Acts of the government in either its sovereign or contractual capacity.
- Fires, Floods, Epidemics, Unusually severe weather.
- Quarantine restrictions.
- Freight embargoes.
If the government intends to use the Sovereign Acts Doctrine to defend itself from claims for costs, it will not be able to rely on the same principle in a contractor’s request for an excusable delay, which will result in an extension of the contract term or delivery schedule.
In essence, contractors should continue to perform until told otherwise. If they are concerned about whether or not they should continue, they can always ask the government to confirm either continued performance or a shutdown — and they should document all of their communications with the government. In addition, contractors should mitigate costs whenever and wherever possible and should track all shutdown-related costs in case those costs can be recovered through an equitable adjustment filed after the shutdown ends.
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