Government Contractors Should Be Prepared to Invoke the Excusable Delays Clause

The coronavirus pandemic is adversely affecting the economy and government contracting is no exception. Aprio predicts that some contracts will be terminated and many contractors will be issued stop-work orders for nonessential employees, especially for work done at government facilities. However, it is also likely there will be contracts the government wants to continue that the contractor cannot perform due to the pandemic. While nonperformance would normally result in a termination for default, these are not normal times.

FAR 52.249-14 Excusable Delays is required to be included in cost-reimbursement contracts and all time and material or labor hour contracts. Per that clause, contractors shall not be in default if the failure to perform is due to, among other causes, epidemics or quarantine restrictions. FAR 52.249-8 Default (Fixed Price Supply and Service) and FAR 52.249-9 Default (Fixed Price Research and Development) both contain the same exculpatory language. FAR 52.212-4 (f), Contract Terms and Conditions-Commercial Items, also excuses lack of performance due to epidemics or quarantines but adds a requirement to notify the contracting officer about the event, what remediation steps are planned, and when the event is over. Prime contractors may flow down these clauses or include their own version of an excusable delays clause in their subcontracts.

Though the commercial clause is the only one that requires the contractor to notify the government, Aprio recommends contractors notify the contracting officer anytime the pandemic threatens their ability to perform the contract. It is also important to document the reasons the contract could not be performed. The reason performance was delayed may be obvious now but may not seem so clear later when things have calmed down. At a minimum, contractors should document what guidance or direction was received from local, state, federal, or international governments and when and how that direction affected performance. Non-government reasons for delay, such as disruptions in the supply chain or the work force caused by the pandemic, also need to be documented. Emails, updates, formal letters, meeting minutes and memos to the file can all be used as supporting documentation.

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