The sovereign acts doctrine provides that the federal government, when sued as a contractor, cannot be held liable for an obstruction to the performance of the particular contract resulting from its public and general acts as a sovereign. The rationale often cited by Courts and Boards for the doctrine is that a government contractor should not benefit more than a private contractor when the government passes a statute or takes other action affecting the public. While there are a number of exceptions, one of the key inquiries is to determine whether the governmental action constitutes a sovereign act, determined by whether the government act is directed at only the contractor or at the public generally.

The doctrine is mostly commonly invoked when a contractor enters into a contract with a federal government agency and, during the course of performance, is delayed by an action taken by another government agency. For example, in one case a contractor was denied recovery of its delay costs pursuant to the sovereign acts doctrine where the contractor was hired by the U.S. Army Corp of Engineers to construct a headquarters building on a base but, as a result of an Army Ranger Commander’s Order, was excluded from the base during performance. The Order was given following terrorists attacks, and was meant to protect the secrecy of private information. See Conner Bros. Const., Co., Inc. v. Geren, 550 F.3d 1368 (Fed. Cir. 2008).

The doctrine was recently applied, in part, in a decision issued by the CBCA in L& L Excavating & Land Clearing, LLC v. Department of Agriculture, finding that the suspension of a timber contract due to lack of government funding and furlough of employees was not an agency breach. In the Appeal, the Appellant sought its lost time expense for the income that would have been received during a three-day shutdown in 2013 resulting from a lack of government funding. In denying the Appeal, the Board found that the Contract Term Adjustment Clause anticipated periods of potential interruptions for sovereign acts or otherwise and provides for time extensions, but not compensation for lost profits or income. The Board went on to find that the sovereign act, implicitly referring to the government shutdown and furlough of employees, does not constitute a breach of contract.

The CBCA’s decision reaffirms the Government’s longstanding right to act in its sovereign capacity, and serves as a reminder that sovereign acts during the course of contract performance can, and often will, impact significantly a government contractor’s schedule, means and methods of performance, and anticipated margins. Because there is no required FAR clause that entitles a contractor to a price adjustment for sovereign acts, contracts may or may not contain language expressly addressing the rights of the parties in the event that a contractor is affected by a sovereign act. This underscores the importance of reading the contract carefully and understanding and assessing potential exposure prior to the submission of a bid or proposal.