In the wake of the tragic Francis Scott Key Bridge collapse, businesses that rely on the Port of Baltimore (“Port”) are grappling with impacts to their contracts and supply chains.  The Port suspended waterway traffic until further notice, shutting off one of the busiest ports on the East Coast indefinitely.  Major commodities that travel through the Port include ground vehicles and their parts, electronics, construction materials, and steel—all things that federal contractors may need to perform their scopes of work.  Thus, the Port closure will undoubtedly impact some government contracts—both directly, for contractors performing work near or through the Port, and indirectly, through supply chain delays. Performance delays can lead to termination for default—something no contractor wants on its record.

So what should government contractors do if the Port closure impacts their federal contracts?  As a general rule, federal contractors should take immediate and affirmative steps to protect their rights once they become aware that the Port closure—or any other unforeseen circumstance beyond their control—will impact their contract performance.  This includes notifying their contracting officers of the delay and keeping detailed records of additional costs and time attributable to the Port closure.  Contractors might also seek out alternative means to perform their contracts on schedule—whether by switching suppliers or rearranging the project tasks.  Absent a government order suspending, stopping, or terminating contract work, contractors have a duty to proceed with contract performance.  Further, contractors ultimately will be responsible for proving their entitlement to a contract adjustment, i.e., proving that performance as planned was impossible despite their best efforts.

With that general guideline in mind, there are several key FAR clauses that contractors should know, discussed below.  

Obtaining an Extension

Contractors facing performance delays may be entitled to an extension under the FAR.

FAR 52.249-14.  For cost reimbursement, time-and-material, and labor-hour contracts, the FAR provides for Excusable Delays under FAR 52.249-14.  FAR 52.249-14 states that, for causes beyond the contractor’s and its subcontractors’ control—including “acts of God” and freight embargoes—the government will not hold the contractor in default because of any failure to perform.  There is a strong argument that delays obviously caused by the Port closure are excusable as an act of God, or something akin to a freight embargo.  FAR 52.249-14 allows contractors to claim a time extension to complete work under the contract but does not entitle them to any monetary compensation. 

FAR 52.212-4.  Commercial products and services contracts likely contain FAR 52.212-4 Contract Terms and Conditions—Commercial Products and Commercial Services, which allows for excusable delays including those caused by delays of common carriers.  Contractors must notify the contracting officer in writing as soon possible after the start of any excusable delay, try to mitigate the delay, and notify the contracting officer again when the delay is resolved.

Avoiding Liability

In some cases, termination may be unavoidable. The FAR offers some protections to contractors who are terminated through no fault of their own.

FAR 52.249-8, -9, -10.  If a contractor is unable to complete its scope of work due to circumstances beyond its control, the FAR may also limit the contractor’s responsibility for additional costs the government incurs to complete the job.  For fixed-price supply and service contracts, FAR 52.249-8 Default provides that the contractor will not be held responsible for excess costs if it fails to perform due to circumstances beyond its control and the control of its subcontractors.  If the government terminates a contractor for default but determines that the default was excusable due to such uncontrollable circumstances, the termination will be treated as a termination for convenience. 

FAR 52.249-9 contains a similar allowance for fixed-price research and development contracts.  FAR 52.249-10 covers excusable delays on fixed-price construction contracts, provided that the contractor notifies the Contracting Officer in writing of the cause within 10 days of the start of the delay.

Best Practices

In addition to consulting their contracts, government contractors should consider the following best practices when faced with delays or performance problems due to the Port of Baltimore closure—or any other unforeseen circumstance beyond their control:

Provide Timely Notice.  All remedy-granting FAR provisions require the contractor to provide notice to the government.  Contractors should not assume the Contracting Officer is aware of any delays. They should notify the Contracting Officer as soon as possible after delays arise and provide updates as the situation evolves.

Document, Document, Document.  Contractors must prove project delays and performance difficulties were out of their control.  While keeping good records is always a best practice, it will prove even more important in the event of a dispute with the government over project delays.  This documentation may include, for example, records of the contractor’s attempts to alleviate delays associated with the Port closure, even if those attempts are unsuccessful.

Consult a Government Contracts Attorney.  Good counsel can help contractors understand their contractual rights and develop a game plan to avoid termination when unforeseen circumstances make performance difficult.  Government contracts also may provide recourse and responsibilities beyond those FAR clauses listed above, and knowing these parameters is critical to achieving the best outcome possible.

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