During this period of disruption, The Contracting Education Academy at Georgia Tech remains committed to supporting the government acquisition community, including both contracting officials and their contractors. First, and foremost, we urge everyone to follow the guidance from the CDC, as well as state and local government officials, regarding strategies to limit the spread of the coronavirus (COVID-19). (As a Unit of the Georgia Institute of Technology, we comply with its operational directives as well as those of the University System of Georgia.)
To assist you, we are compiling resources and the latest information on navigating the current acquisition environment for contracting officers and contractors alike. This page will be updated as often as daily — whenever new conditions warrant. If you have questions, please feel free to contact us at info@ContractingAcademy.gatech.edu so we can be of assistance to you and post additional information here. In addition, you can follow our news feed of articles concerning the impact of COVID-19 on contracts by clicking here.
The following information is presented in two groups — the first for contracting officials, and the second for contractors. We advise everyone to read both groups of information to fully understand the two perspectives.
The information provided here is not intended to provide legal advice or to be a substitute for legal advice or counsel.
Guidance for Contracting Officers
Allowing Contractor Employees to Telework
On March 20, 2020, the Office of Management and Budget (OMB) identified steps to help ensure “safety while maintaining continued contract performance in support of agency missions, wherever possible and consistent with the precautions issued by the CDC.” The OMB memorandum notes that since many Federal contractors who work side-by-side with the Federal workforce may be unable to access their Federal work sites because of building closures, quarantines, or implementation of social distancing practices, “agencies are urged to work with their contractors … to evaluate and maximize telework for contractor employees, wherever possible.” Noteworthy is the fact that FAR 7.108 instructs agencies to not discourage contractor use of telework. Accordingly, OMB recommends modifying contracts that do not currently allow for telework to provide for that option. If a contract does not lend itself to telework (e.g., because it must be performed at a government facility), OMB recommends that “agencies should consider being flexible on delivery schedule contract completion dates.”
Quarantine Restrictions and Excusable Delays
Government contracts provide for excusable delays, which may extend to quarantine restrictions due to exposure to COVID-19. See, as examples, contract FAR clauses 52.249-14, 52.212-4(f), and 52.211-13 which deal with excusable delays and contract time extensions. In determining the best course of action, Contracting Officers should discuss the situation with their contractors to determine if other options are available (e.g., ability of employees to telework or to find substitute employees). If optional work arrangements with an existing contractor are not feasible, it may be appropriate for the Government to re-procure elsewhere, if that is feasible. Re-procurement actions may be taken for the convenience of the Government (e.g., through use of the relevant Termination for Convenience (T4C) clause or reaching agreement on a no-cost settlement) and without negatively impacting the contractor’s performance rating. Remember, too, that excusable delays that result in adjustments to the contractor’s delivery schedule are not to negatively impact a contractor’s performance ratings.
Contracting Officers should consider contractor Requests for Equitable Adjustment (REA) on a case-by-case basis, taking into account, among other factors, whether the requested costs are allowable and reasonable to protect the health and safety of contract employees as part of the performance of the contract. As a reminder, the standard for what is “reasonable,” according to FAR 31.201-3, is what a prudent person would do under the circumstances prevailing at the time the decision was made to incur the cost (e.g., Did the contractor take actions consistent with CDC guidance? Did the contractor reach out to the Contracting Officer or the Contracting Officer Representative to discuss appropriate actions?).
A Contracting Officer (CO) may make changes to a contract using the appropriate changes clause that applies to the contract. Consult, as applicable, FAR clauses 52.243-1 (Fixed Price); 52.243-2 (Cost Reimbursement); and 52.243-3 (Time & Materials or Labor Hours). Remember that clause 52.212-4(c) dictates that for Commercial Item contracts “Changes in the terms and conditions of this contract may be made only by written agreement of the parties.” If necessary, generally after considering other alternatives, a CO may suspend or stop performance through the use of FAR clause 52.242-14 (Suspension of Work) or 52.242-15 (Stop Work Order).
A helpful guide to managing a request for an equitable adjustment can be found here.
Extending Performance Periods
OMB’s March 20 memo also states that “agencies should be flexible in providing extensions to performance dates if telework or other flexible work solutions, such as virtual work environments, are not possible, or if a contractor is unable to perform in a timely manner due to quarantining, social distancing, or other COVID-19 related interruptions.”
Contract modifications (“mods”) are common actions for many contracting professionals. Contract changes may be related to cost, delivery schedule, schedule, fee, terms and conditions, and personnel. In addition, changing technologies, funding, and mission requirements may create the need for changes to a contract. Basically, whenever the Government wants something different than was originally envisioned for the original contract or something unforeseen occurs, a contract modification may become necessary. A helpful article on the subject of contract modifications appears here.
Maintaining a Contractor State of Readiness
Per the March 20 memo referenced above, OMB further advises that “Agencies should take into consideration whether it is beneficial to keep skilled professionals or key personnel in a mobile state of readiness for activities the agency deems critical to national security or other high priorities. Additionally, agencies should also consider whether contracts that possess capabilities for addressing impending requirements such as security, logistics, or other function, may be retooled for pandemic response consistent with the scope of the contract.”
On April 8, 2020, the Department of Defense (DoD) issued Class Deviation 2020-O0013 which authorizes Contracting Officers to use a new cost principle, spelled out in a new clause (DFARS 231.205-79), to implement section 3610 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act (Pub. L. 116-136). The new clause makes the cost of paid leave, including sick leave, allowable as direct charges at the appropriate rates under the contract for up to an average of 40 hours per week. Consult the clause for details as to applicability.
On April 9, 2020, the Under Secretary of Defense issued Implementation Guidance for Section 3610 of the Coronavirus Aid, Relief, and Economic Security Act as well as Frequently Asked Questions.
On April 17, 2020, the Office of Management & Budget (OMB) issued Memorandum M-20-22 which elaborates on the discretionary authority granted by Section 3610 of the CARES Act to reimburse costs of paid leave to federal contractors and
subcontractors. The memorandum provides guidance to Contracting Officers who must balance the need to keep contractors in a ready state with exercising good stewardship. COs are to “carefully consider if reimbursing paid leave to keep the contractor in a ready state is in the best interest of the Government for meeting current and future need” while being “mindful of the challenges faced by small businesses.” COs must “maintain mission focus and evaluate use of section 3610 in the broader context of all strategies to promote contractor resiliency,” be mindful of the restrictions in Section 3610, and work with contractors “to secure necessary documentation to support reimbursement and prevent duplication of payment.” The memo reminds contracting officials they are to process modifications allowing payments authorized by the statute and record them in the Federal Procurement Data System (FPDS) with the designation “COVID-19 3610.”
Application of the Stafford Act
Agencies are being encouraged to leverage the special emergency procurement authorities authorized in connection with the President’s emergency declaration under section 501(b) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. §§ 5121-5207). These flexibilities include increases to the micro-purchase threshold from $10,000 to $20,000 for domestic purchases and to $30,000 for purchases outside the U.S.; the simplified acquisition threshold from $250,000 to $750,000 for domestic purchases and $1. 5 million for purchases outside the U.S.; and the threshold for using simplified procedures up to $13 million for certain commercial items. The increased thresholds are designed to reduce friction between contractors — especially small businesses — and the government, and enable more rapid response to the many pressing demands agencies face. OMB notes that “the availability of these flexibilities does not mean they will always be suitable, and agencies should exercise sound fiscal prudence to maximize value for each taxpayer dollar spent. At the same time, the acquisition workforce should feel fully empowered to use the acquisition flexibilities, as needed, consistent with good business judgment in response to this national emergency.”
Note: Ordinarily, when an emergency declaration is made under the Stafford Act, Contracting Officers are expected to give preference to local firms in the area designated by the declaration. However, the emergency created by the pandemic exists nationwide. As a result, there is no specific locally affected area and, therefore, no action is currently required from the acquisition workforce to create preferences for local firms. The latest OMB guidance indicates that this issue will continue to be reviewed in light of ongoing response efforts, and agencies are encouraged to confer with OMB regarding potential circumstances where application of local set asides may make sense, especially for small business contractors.
Key Elements of Contract Administration: Communication and Transparency
The need for alternate work locations, travel restrictions, and schedule changes are just a few of the disruptions caused by the pandemic that affect contract work. In a March 10, 2020 memo, the DoD’s Acquisition and Sustainment Office stresses that “communication between the Government and contractors is key to total workforce safety and mission continuity …. contracting officers should be as transparent as possible as they make decisions potentially impacting contracting performance or contractor personnel …. [They should] share information and discuss COVID-19 concerns … and ask their contractors to identify potential impacts to the welfare and safety of their workforce or contract performance ….” The full text of this guidance can be found here.
DoD Emergency Acquisition and Preparedness
Defense Pricing and Contracting (DPC) has established a website that contains all the latest COVID-19 announcements, memorandums, class deviations, Acquisition & Sustainment memorandums, OMB memorandums, Military Component memorandums, Dept. of Labor’s Limited Exemption and Waiver from Certain Federal Contracting Federal Acquisition Regulation (FAR) Requirements, and Coronavirus Disease 2019 (COVID-19) Emergency Acquisition Flexibilities.
In addition, DoD’s numerous messages related to COVID-19 on the general subjects of telework, travel, health and safety, and more are located here.
Tracking COVID-19 Contract Spending
A new National Interest Action (NIA) Code has been added to the NIA field in the Federal Procurement Data System (FPDS) as a means of tracking acquisition costs of the multiple Federal agencies involved in the response to COVID-19. The NIA Code is to be used strictly for reporting purposes related to COVID-19 and involves the exercise of the emergency authorities identified in FAR 18.2.
In addition, contracting officials are encouraged to use the terms “COVID-19” or “Coronavirus” in their solicitation and related documentation to support easy key word searching for sharing buys when possible and recording contracts once awarded.
The Defense Production Act
The Defense Production Act (DPA) was invoked on March 18, 2020 by the President in the fight against COVID-19. The Act gives the Federal Government broad authority to direct private companies to meet the needs of the national defense. Specifically, the Act authorizes the President to require companies to prioritize government contracts and orders seen as necessary for the national defense, with the goal of ensuring that the private sector is producing enough goods needed to meet a war effort or other national emergency. As of March 24, 2020, the President activated the Defense Production Act to secure coronavirus testing kits. The Government also intends to insert DPA language into contracts for the acquisition of protective masks.
The Defense Priorities and Allocations System
The Department of Defense (DoD) maintains a system called the Defense Priorities and Allocations System (DPAS). The goal of DPAS is to ensure that Government and industry users are thoroughly familiar with the priorities and allocations authority of the Defense Production Act to assure the timely availability of industrial resources to meet current and future national security and emergency preparedness requirements.
All prime contracts, subcontracts or purchase orders in support of an authorized DPAS program are given a priority rating. A DX rating is assigned to those programs of the highest national priority. A DX rated contract takes priority over a DO rating which, in turn, takes priority over an unrated order. An unrated order is a commercial order or a DoD order that is not ratable.
Resources and information related to the DPAS and how it relates to the Defense Production Act can be found at: https://www.dcma.mil/DPAS.
GSA and VA Federal Supply Schedule Purchasing
Based on the President’s emergency declaration, full access to order against Federal Supply Schedules (FSS), including VA Schedules, is available to State and Local Governments. In addition, it is important to know that even though a FSS vendor may have elected to not participate in Disaster Recovery Purchasing, there is nothing that prohibits FSS vendors from accepting disaster recovery orders under the current circumstances.
When buying, Contracting Officers know that existing Government sources of supply and contracting vehicles, such as the FSS, should be considered first. For coronavirus-related purchasing, here are two helpful links:
The Disaster Relief product and service page on GSA Advantage: https://www.gsaadvantage.gov/advantage/search/specialCategory.do?cat=ADV.DR, and
The Industrial Products and Services page on GSA Advantahe: https://www.gsa.gov/buying-selling/purchasing-programs/gsa-schedules/gsa-schedule-offerings/consolidated-schedule/industrial-products-services-category
Trade Agreements Act (TAA) Waivers for Certain Federal Supply Classes
Due to the COVID-19 pandemic, demand for certain critical and essential supply items has increased to the point that many FSS contractors are unable to meet Federal demands with TAA-compliant products. To address this, the GSA has issued an exception determination citing non-availability as the basis for temporarily allowing the procurement of non-TAA compliant products under FSS contracts for certain Federal Supply Classes (FSCs). See SPE Memo SPE-2020-11 for specific conditions and limitations for using this authority. Agencies are encouraged to contact contractors prior to placing orders to confirm availability. Non-TAA items that have been temporarily allowed for depleting products will be identified in the description and the Country of Origin (COO) field of the FSS contract.
On April 6, 2020, the Civilian Agency Acquisition Council (CAAC) issued a Class Deviation from the Federal Acquisition Regulation (FAR) to provide for accelerated payments to small business contractors and subcontractors; it can be found here. In addition, on April 15, 2020, the CAAC issued another Class Deviation regarding Customary Progress Payment Rates Based on Costs; it can be found here.
Fraud and Price Gouging
The General Services Administration (GSA) has received reports of companies fraudulently claiming to be GSA vendors attempting to exploit legitimate COVID-19 concerns to mislead Federal consumers into paying exorbitant prices for products associated with COVID-19. If a supplier claims to be a GSA vendor, please verify by checking prices and details on GSA Advantage or validate the contract number and supplier details on GSA eLibrary vendor database. In a bulletin posted on March 19, 2020, GSA stated: “Even if information seems credible, take a moment to verify.” Questions or reports of suspect fraudulent activity or price gouging with companies claiming to be GSA vendors, can be directed to GSA’s National Customer Service Center at (800) 488-3111 or email NCSCcustomer.firstname.lastname@example.org.
Guidance for Government Contractors
Preventing Workplace Exposure and Risks
The CDC has created interim guidance to help prevent workplace exposures to COVID-19; it is available here. CDC guidance specifically applicable in healthcare settings is here.
On March 9, 2020, the Occupational Safety and Health Administration (OSHA) issued COVID-19 guidance to help employers and workers “identify risk levels in workplace settings and to determine any appropriate control measures to implement.”
Identifying Critical Infrastructure Industries
White House guidance states that “If you work in a critical infrastructure industry … you have a special responsibility to maintain your normal work schedule.” The Cybersecurity and Infrastructure Security Agency (CISA), a unit of the Department of Homeland Security, has developed an initial list of “Essential Critical Infrastructure Workers” which can be found here. CISA developed this list to assist federal, state and local agencies prioritize activities related to continuity of operations and incident response, including the appropriate movement of critical infrastructure workers within and between jurisdictions.
Notably, CISA’s guidance states that “when continuous remote work is not possible, businesses should enlist strategies to reduce the likelihood of spreading the disease. This includes, but is not necessarily limited to, separating staff by off-setting shift hours or days and/or social distancing. These steps can preserve the workforce and allow operations to continue.”
The Dept. of Defense, in a Mar. 20, 2020 memo to industry, further defines what it calls “Essential Critical Infrastructure Workforce for the Defense Industrial Base” to include “workers who support the essential products and services required to meet national security commitments to the Federal Government and the U.S. Military …. These include personnel working for companies, and their subcontractors, who perform under contract to the Department of Defense providing materials and services to the Department of Defense and government owned/contractor-operated and government-owned/government-operated facilities …. Companies aligned with the essential critical infrastructure workforce definition are expected to maintain their normal work schedules.”
Added together, the Federal Government’s recent announcements mean that Government contractors, subcontractors, and suppliers who are a part of the country’s “critical infrastructure sector” allow their employees to continue reporting to work even if local and state governments order citizens to stay home amid the COVID-19 outbreak
System for Award Management (SAM)
By OMB directive, current registrants in SAM with active registrations expiring before May 17, 2020 are being given a one-time extension of 60 days to renew their registrations.
Excusable Delay Provisions
COVID-19 may create difficulty for a contractor to perform on schedule. Contractors should check to see whether their contracts or subcontracts contain clauses that would excuse delays; e.g., FAR 52.249-14 (Cost Reimbursement and Time & Materials); FAR 52.249-8 (Fixed Price); and FAR 52.212-4 (Commercial Items). Because they specifically cite “epidemics” and “quarantine restrictions,” these so-called “excusable delay clauses” could prevent a contractor from being terminated for default for failing to meet the schedule. Contractors should keep good records of any impacts caused by the pandemic condition, advise their Contracting Officers of the facts as soon as possible, and be prepared to adapt to a new schedule or other contract changes.
Changes to a contract are typically called contract “modifications” by the Government. A Contracting Officer may make a change to a contract (i.e., modify a contract) related to COVID-19 conditions. Changes may be made by the Government through the issuance of a “change order” or because of what is called a “constructive change,” the latter occurring when action or inaction by the Government constitutes a modification of the contract. The clauses FAR 52.243-1 (Fixed Price), 52.243-2 (Cost Reimbursement), and 52.243-3 (Time & Materials or Labor Hours) provide contractors the ability to obtain an equitable adjustment for increased or changed work. Just as with claims for excusable delays, contractors should provide timely notice to their Contracting Officer.
The new Coronavirus Aid, Relief, and Economic Security (CARES) Act includes a provision — Section 3610 — that provides a new form of relief for contractors facing delays and additional costs as a result of employees being unable to work due to quarantine restrictions. Section 3610 of the CARES Act allows for the modification of contracts to reimburse contractors for the costs of providing “paid leave … to keep [their] employees or subcontractors in a ready state” if they are unable to enter a worksite due to closures or quarantine restrictions resulting from COVID-19. As noted in the “Guidance for Contracting Officers” above, the Defense Pricing and Contracting (DPC) office is issuing various pieces guidance on how to treat the special contractual circumstances arising from the pandemic. Contractors should regularly check the DPC webpage for updated guidance on subjects such as what the reimbursable rate is and how to apply for reimbursement. Other federal agencies are likely to mimic DoD guidance.
Specifically, Section 3610 of the CARES Act authorizes reimbursements if a contractor’s employees or subcontractor employees:
Cannot perform work on a government-owned, government-leased, contractor-owned, or contractor-leased facility or site approved by the federal government for contract performance due to closures or other restrictions; and
Are unable to telework because their job duties cannot be performed remotely during the public health emergency declared on January 31, 2020, for COVID–19.
Reimbursement is authorized only:
At the appropriate rates under the contract for up to an average of 40 hours per week; and
For contractor or subcontractor payments made for costs incurred, not otherwise reimbursable, not earlier than January 31, 2020, and not later than September 30, 2020.
A new provision, DFARS 231.205-79, implements these reimbursements in DoD contracts. Implementation guidance issued on April 9, 2020 spells-out how the reimbursements are to be treated by contract type, what is required to support contractor claims, and limitations. For non-DoD contracts, the Office of Management & Budget (OMB) issued guidance for reimbursing contractors “at the minimum applicable contract billing rates not to exceed an average of 40 hours
per week any paid leave including sick leave” in order to maintain contractors “in a ready state.” The April 17, 2020 OMB guidance can be found here.
Obligation To Perform
Even in tough times and under difficult conditions, contractors are expected to perform. For instance, even when a change to a contract occurs and the contractor has a claim for increased costs, contract performance must continue while the claim is pending. This includes complying with any decision of the Contracting Officer — even if the contractor disagrees with that decision. That is why it is very important for contractors to document any increased costs associated with new or changed work and to communicate with the Contracting Officer, in writing, as to why the work being directed constitutes a contract change as defined in the “changes” clause of the contract.
The Defense Priorities and Allocations System
As discussed in the section above entitled “Guidance for Contracting Officers,” the Department of Defense (DoD) maintains a system called the Defense Priorities and Allocations System (DPAS). The purpose of DPAS is to assure the timely availability of industrial resources to meet current national defense and emergency preparedness program requirements and to provide an operating system to support rapid industrial response in a national emergency. The DPAS is specifically used whenever the Defense Production Act (DPA) is invoked and activated by the President. As of March 24, 2020, the DPA has been activated to acquire coronavirus testing kits and certain personal protective equipment (PPE) for medical professionals. Through the DPAS, orders placed pursuant to the DPA (including all prime contracts, subcontracts, and purchase orders) are likely to be given a priority rating. A DX rating is assigned to those programs of the highest national priority. The next highest rating is DO, followed by unrated orders. When a contractor accepts a rated order, it is obligated to meet the DPAS contractual requirements. If a contractor is unable to meet the required delivery schedule of a rated order, the contractor should not accept the order. To familiarize contractors with the DPAS, the rating system, and program requirements, DoD has created an orientation which can be downloaded here.
DoD Progress Payments
In a memorandum issued on March 22, 2020, DoD announced that progress payment rates for defense items under contract will increase from 80 percent of cost to 90 percent for large businesses, and from 90 percent to 95 percent for small businesses. Details are located in this Class Deviation. The Defense Contract Management Agency is working on mass modifications to contracts where applicable. In addition, DoD has announced it is accelerating payments through several means to prime contractors and, in turn, directing prime contractors to expedite payments to subcontractors.
Sales through GSA and VA Federal Supply Schedules
Contractors who are approved to sell products and/or services through GSA Schedule contracts must be prepared to provide GSA and government customers with order status, including shipment information. On March 17, 2020, GSA reminded vendors of this contractual requirement via this communication. Contractors should remember that only Federal Contracting Officers or Contracting Specialists have the authority to place orders or modify the terms and conditions of a Federal Supply Schedule contract. Contractors should not accept orders or direction from unauthorized Government representatives or parties outside Government.
Based on the President’s emergency declaration, full access to orders against Federal Supply Schedules (FSS), including VA Schedules, is available to State and Local Governments (including territorial and tribal governments). Vendors may accept, but are not obligated to accept, FSS orders from State and Local Governments. In addition, it is important to know that even though a FSS vendor may have elected to not participate in Disaster Recovery Purchasing, there is nothing that prohibits FSS vendors from accepting disaster recovery orders under the current circumstances. As of March 20, 2020, the VA issued supplemental guidance to VA FSS vendors; that guidance can be found here.
CARES Act Business Loans
The Coronavirus Aid, Relief and Economic Security Act (CARES Act) was signed into law on March 27, 2020, and it makes available stimulus money to help companies stay in business. Various loans, some of which transform into grants, are available under Title I and Title IV of the CARES Act.
Under Title I, there are three types of loans available: the Paycheck Protection Program (PPP); the SBA Express Loan (an existing program modified by the CARES Act); and the SBA Economic Injury Disaster Loan Program (also an existing program modified by the CARES Act).
Under Title IV, four pools of funds are created to use for loans, loan guarantees, and other investments, to provide liquidity to eligible businesses. Eight different programs were announced in April 2020, including the Main Street Lending Program (MSLP), the Primary Market Corporate Credit Facility (PMCCF), and the Secondary Market Corporate Credit Facility (SMCCF).
To assist businesses in understanding each of the CARES Act loan programs summarized above, and to help you determine your eligibility, details can be found in this document: CARES Act – Title I and Title VI Loans
Advice for Small Businesses
On March 11, 2020, the Small Business Administration issued Frequently Asked Questions guidance on the impact of the COVID-19 outbreak for small businesses performing on federal procurement contracts. This can be downloaded here.
The Families First Coronavirus Response Act (FFCRA)
The FFCRA’s emergency leave protections are mandated to be implemented by April 2, 2020. Two provisions of the FFCRA have a particular impact on employers with fewer than 500 employees. Employers covered by the FFCRA will be responsible for paying two types of emergency leave:
New paid leave under the Family and Medical Leave Act (FMLA). It is calculated based on the number of hours the leave-taking employee would normally be scheduled to work, and the amount cannot be less than two-thirds the employee’s regular rate of pay. The FFCRA provides that this amount will not exceed $200 per day and $10,000 in total.
The FFCRA’s new paid sick leave provision. This provides qualifying full-time employees 80 hours of such leave. Part-time employees are entitled to time equal to the number of hours they work on average over a two-week period. The leave does not carry over from one year to the next, and the payment is calculated based on the employee’s “required compensation” (i.e., the employee’s regular rate of pay or the federal, state or local minimum wage, whichever is greater) and the number of hours the employee would otherwise be scheduled to work.
A good article on this topic can be found here. Questions & Answers can be found here. The full text of the FFCRA is here.
A Few Calming Words for Contractors
Back in October of last year, contracting experts were calm and optimistic about the boom industry was experiencing. But they decided it would be wise to develop tips for an inevitable slow down. Here’s an article worth reading.