The construction industry has seen increased costs and contract performance concerns resulting from the impacts of COVID-19. For construction firms contracting with the government, it is critical to understand how to positon the firm to recover increased costs. Following are four key recovery strategies to better prepare you before filing a claim or request for equitable adjustment (REA).
1. Understand How Contract Provisions Help
Carefully examine the contract to identify provisions that may excuse delays or provide for recovery in the case of increased costs. While each situation is fact and contract specific, the Federal Acquisition Regulation provisions included in your contract may help justify your claims. Among those are provisions relating to force majeure or excusable delay, directives to stop work, continuation of essential services, and the changes clause. These clauses may be applicable in situations where a contractor was unable to complete work in a timely manner because of site closures or personnel shortages outside of their control. Other provisions like the rated order clause may help secure necessary supplies. And finally, to the extent the contracting officer may have approved changes to contract performance, the applicable changes clause may be helpful.
2. Be Meticulous About Recordkeeping
To preserve potential claims and defenses, construction contractors affected by the COVID-19 pandemic should take steps to document the impacts on costs and contract performance, including no access to facilities, delays by suppliers, or shortages of materials. Meticulous documentation will serve as supporting evidence for claims or REAs seeking potential price adjustments or schedule extensions. It is critical that contractors go the extra mile to document conversations with contracting officers and seek approval for adjustments in writing. For recordkeeping purposes, organize documentation that will accompany any future claim or REA, and set up a document repository where copies of supporting documents—such as project correspondence, vendor invoices, or payroll records—can be easily saved and retrieved.
3. Maintain Clear and Consistent Communication
With COVID-19 impacting supply chains, contractor workforces, designer personnel, and the availability of government inspectors, it is important to regularly communicate delays and increased costs to the contracting officer, prime and subcontractors, as well as designers and suppliers. Assess the actual and potential impacts on contract performance and discuss how to potentially mitigate project disruptions. Consider submitting a claim or REA as soon as possible in case there is limited funding to adjust contract prices.
4. Use Section 3610 of the CARES Act and Amendments Thereto
Section 3610 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act is situated to assist government contractors with paying employees impacted by site shutdowns. The provision was extended through March 31, 2021, under the Consolidated Appropriations Act of 2021. Contractors should continue to use these provisions, in conjunction with considering use of paid leave for employees under the Families First Coronavirus Response Act when possible.
Use of Section 3610 is at the discretion of the contracting agency. However, when contractors can see performance issues on the horizon, it is beneficial to lay out all options with the contracting office in advance. Should Section 3610 use be approved, it is important to document specific costs attributable to payment. The Office of Management and Budget suggests requests for reimbursement of paid leave costs under Section 3610 of the CARES Act may require documentation “beyond that normally submitted to support costs.”
During these uncertain times, equip your construction firm with these recovery strategies, which could ultimately result in a successful claim or REA.
