• Federal Government Partial Shutdown Update No. 2
  • October 14, 2013 | Author: Steven L. Reed
  • Law Firm: Smith, Currie & Hancock LLP - Washington Office
  • With the shutdown now well into its second week and no end in sight, where do Federal contractors stand?

    Department of Defense (DoD) contractors appear to be in the best position since most DoD civilian employees were returned to duty as of October 7, 2013. However, there is confusion concerning whether the employees will be furloughed again since the legislation that was passed to pay the employees may not cover expenses for facilities and equipment.

    If a DoD contract or task order was awarded prior to October 1, 2013, it is financed by previously available funds that allow for performance going forward. If a contract or task order is not yet awarded or is funded by incremental funds (the solicitation should have an Availability of Funds type provision), then award and performance will be delayed until Congress passes an Appropriations Act or a Continuing Resolution. There may be exceptions (which agencies may refer to as “exempt” contracts) that may allow for award or performance even if awarded on or after October 1, 2013, or even if funded with incremental funds. Such contracts are operating on expired funds or otherwise available funds. Those funds could include multi-year or indefinite appropriations, emergencies to protect life and/or property, discharging presidential, national security, or foreign affairs activities, or other limited support activities that may continue. A funding indication in a contract is typically a long alpha-numeric string citation that is decipherable only by financial personnel in the government. Contractors should follow government direction or inquire of government officials if uncertain whether funding is available or the contract is exempt.

    For non-DoD agency contracts, if a contract or task order was awarded prior to October 1, 2013, it is financed by previously available funds that allow for performance going forward. The issue will be that government employees administering the contract may be furloughed such that submittals are not reviewed and approved, including payment requests.

    Regardless of the agency, contractors should anticipate the possible impact of the lack or delay of key approvals or observations (inspections) by government employees that may be furloughed. If work is going to be "covered up," document the work with ample photos and videos. Consider obtaining verification by a third party that the work is compliant with the contract. If a delayed approval will impede and/or delay work, notify the Contracting Officer in writing.

    If directives or instructions are received from the government relative to the partial shutdown and a specific contract or solicitation or procurement information in general that affects a contract or solicitation, get it in writing or, at the least, confirm the directives in writing to the CO. If the directive did not come from the CO, confirm the directive back to the CO in writing. Seek written clarification if any directive is ambiguous or incomplete, such as a government reference to the FAR but without reference to a specific part of the FAR. Given that some government employees may be furloughed and some not, ask in writing for specific authorized persons from which guidance may be obtained during the partial shutdown. Always remember that only the CO has authority to bind the government in most cases.

    Keep detailed records of extra costs and/or time caused by the partial shutdown or directives related to the partial shutdown, if any, such as de/remobilization or delayed access to the site. If a directive is general in nature, be prepared to show the connection (causation) to extra costs or time. The government generally does not have to pay extra costs caused by a sovereign act of the government that affects all contractors more or less equally; however, a non-compensable time extension may be allowed. If work is stopped, ask the CO for a suspension of work/stop work order under the contract. The government need not issue such a directive, but ask and document that request.

    Some contractors are being directed to continue but warned that payments may be delayed. The standard FAR Disputes provision (FAR 52.233-1) requires that work continue while any dispute is resolved. Contractor duties under safety requirements and labor provisions, such as Davis-Bacon, continue. Share information with subcontractors in an attempt to keep work moving forward even if payment may be delayed. Review flow-down provisions in subcontracts that address disputes resolution and payment requirements.