CARES Act: “Maintaining the resilience of our Federal contracting base”

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In the wake of the COVID-19 pandemic response, government contractors have experienced varying degrees of work disruption. As highlighted recently by the Office of Management and Budget (OMB), “Federal contractors play a vital role in helping agencies meet the needs of our citizens, including the critical response efforts to COVID-19.” OMB noted that (1) safety, (2) continued contract performance in support of agency missions, as well as (3) “maintaining the resilience of our Federal contracting base” are important governmental goals during the COVID-19 pandemic.

Part of maintaining the federal contracting base’s resilience includes ensuring contractors can keep working, and if not, that contractors do not go out of business due to COVID-19 related work disruptions. In furtherance of this goal, OMB outlined measures in its March 20, 2020, memorandum concerning the management of federal contract performance issues, such as maximizing telework and virtual work environments, providing flexibility through performance extensions, and considering requests for equitable adjustment (or REAs) to cover allowable and reasonable costs to “protect the health and safety of contract employees as part of the contract.”

The OMB policy memorandum — which encourages federal procurement officials to “feel fully empowered to use the acquisition flexibilities, as needed” — is not the only resource available to contractors. Congress, through the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), included relief to federal contractors, including payments to some contractors that are prevented from working due to COVID-19 related safety measures. Specifically, section 3610 of the CARES Act provides:

Notwithstanding any other provision of law, and subject to the availability of appropriations, funds made available to an agency by this Act or any other Act may be used by such agency to modify the terms and conditions of a contract, or other agreement, without consideration, to reimburse at the minimum applicable contract billing rates not to exceed an average of 40 hours per week any paid leave, including sick leave, a contractor provides to keep its employees or subcontractors in a ready state, including to protect the life and safety of Government and contractor personnel, but in no event beyond 9/30/2020. Such authority shall apply only to a contractor whose employees or subcontractors cannot perform work on a site that has been approved by the Federal Government due to facility closures or restrictions, and who cannot telework because their job duties cannot be performed remotely during the public health emergency for COVID-19 [emphasis added].

The authority provided through this provision of the CARES Act permits contracting officers to pay contractors even when they are not performing, although when this authority applies and can be utilized will require a case-by-case analysis.

  • First, the authority only applies to (1) employees of a contractor or subcontractor who cannot perform due to facility closures or restrictions and (2) who cannot telework. In this connection, contractors should be proactive in pursuing the ability to telework, in accordance with the OMB memorandum policy discussed above, and adequately document measures taken in this regard.
  • Second, the authority is not mandatory and is subject to an agency’s discretion. Again, contractors should be proactive in communicating with their contracting officials and in documenting the efforts taken to perform through disruption. If contractors have attempted to negotiate the ability to perform through OMB’s flexible policy recommendations, but still cannot perform as described in the CARES Act, they may be more persuasive in convincing an agency to provide “ready state” reimbursement under section 3610.

The relief provided through OMB guidance and the CARES Act is welcome news to the many federal contractors who are experiencing contract disruption. This potential relief, however, is not guaranteed. Navigating the application of the guidance and the CARES Act as they relate to specific contract terms will take a thorough understanding of the contract in question and applicable law. And, even then, a contractor will have to rely on the government’s discretion and goodwill to obtain actual compensation, which heightens the importance of maintaining strong relationships with government representatives on your federal projects.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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