OMB COVID-19 update

5 min

On March 20, 2020, the Office of Management and Budget ("OMB") issued guidance to all executive departments and agencies regarding the federal government's management of federal contract performance issues arising due to the Novel Coronavirus (COVID-19). Office of Management and Budget, MEMORANDUM TO THE HEADS OF EXECUTIVE DEPARTMENT AND AGENCIES, SUBJECT: Managing Federal Contract Performance Issues Associated with the Novel Corona Virus (COVID-19), March 20, 2020 ("the Memo"). As we all know, the government relies heavily on government contractors to help support federal agencies' missions, including their responses to the COVID-19 pandemic. While recognizing the vital role of government contractors, the Memo highlights that "[t]he health and safety of all Americans, including our Federal contractors, remains the top priority." To that end, the Memo sets forth a number of steps that government personnel should take to protect the safety of both government and contractor employees as well as to ensure that contract performance continues wherever possible in consonance with Centers for Disease Control and Prevention (CDC) guidelines. Obviously, over the coming weeks and months, this will require a delicate balance.

Currently, many federal employees and government contractors work side-by-side on a daily basis performing work that is mission critical. In the current environment, however, many federal government and contractor personnel cannot access federal work sites due to "building closures, quarantines or implementation of social distancing practices." Moreover, even when access is not prohibited, contractors are subject to multiple federal, state, and local recommendations to limit non-essential travel. The Memo urges federal employees to work with contractors to determine whether and under what circumstances telework can be used to perform current contract requirements and to utilize telework to the maximum extent possible.

The Memo also instructs agencies that they should be flexible in their administration of government contracts if telework is not a feasible option for contract performance and, as a result, a contractor may not be able to fulfill its contractual obligations in a timely manner. To the extent performance disruptions occur, agencies should assess whether it should "keep skilled professionals or key personnel in a mobile state for activities the agency deems critical to national security or other high priorities." Further, agencies should also assess "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."

Lastly, the Memo encourages agencies to utilize the emergency procurement authorities at their disposal due to the President's issuance of an emergency declaration under Section 501(b) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. §§ 5121-5207 ("Stafford Act"). "These flexibilities include increases to the micro purchase threshold, the simplified acquisition threshold, [and] the threshold for using simplified procedures for certain commercial items …."  While these flexibilities might not be appropriate in every circumstance, the Memo tells the government workforce that they should feel "empowered" to use them under appropriate circumstances.

Attached to the Memo is a set of "frequently asked questions" that provide additional guidance for the acquisition workforce. Highlights of the "frequently asked questions" include:

  • Agencies are encouraged to work with their contract partners to determine whether telework is feasible under the terms of the contract so that contract performance can continue to the maximum extent possible;
  • To the extent a contract does not permit telework, agencies should modify the contract to permit telework if the work can be performed remotely;
  • If telework cannot be used to perform the contract requirements, agency personnel should be flexible on contract delivery and completion dates;
  • FAR clauses 52.249-14, 52.212(f) and 52.211-13 cover excusable delays which may cover delays arising from COVID-19 quarantine restrictions;
  • If a contractor cannot perform due to COVID-19 issues, the government should consider terminating the contract for convenience or a no-cost termination;
  • Requests for equitable adjustments, including requests to cover the cost associated with implementing CDC-recommended safety measures (such as the closure of an office building when telework is not feasible), should be considered on a case by case basis;
  • Whether work is continued or stopped should be determined on a case-by-case basis;
  • In-person activities (industry days, debriefings, etc.) should be replaced with virtual activities if warranted;
  • Government personnel and their contract partners need to communicate in a transparent and timely manner;
  • Current SAM registrants "with active registrations expiring May 17, 2020 will be afforded a one-time extension of 60 days; and,
  • Agencies should utilize the flexibilities afforded them in FAR 18.202, which increases threshold and makes it easier for agencies to utilize simplified acquisition procedures.
What Should Contractors Do?

Against this backdrop, there are a number of questions that contractors should ask themselves and steps they should take to minimize, to the extent possible, the financial damage arising from the current national crisis. These include:

  • Which, if any, of our company's contracts would be suitable for telework?
  • Does the contract permit my company to telework or will my company need to have its contract modified?
  • Does my company have the needed IT and cybersecurity infrastructure that will enable our employees to work remotely in an effective and secure manner?
  • Does my contract contain an excusable delays provision (e.g., FAR 52.249-14, 52.212 4(f) or 52.211-3), and have I timely notified the Contracting Officer of impending delays?
  • Has the government changed the terms or scope of my contract? When? How? Will it require unforeseen effort, cost, etc.?
  • Am I able track added cost and level of effort as a result of the disruption?
  • Should I file an equitable adjustment or a claim?
  • Can the government modify my contract to address "security, logistics, or other functions" to assist with the pandemic response?
  • Does my company employ any key personnel that the government may want to keep in a mobile state?

Obtaining answers to these questions will enable contractors to prepare for the road ahead, but further inquiries may be needed over time, particularly if stop work orders are issued, or if teleworking or limited access to government counterparts begin to endanger performance. Moreover, documentation will be critical, as is the case after every major crisis and economic stimulus, as audits will follow, sometimes years after the crisis has passed, and these Monday morning quarterbacks will seek to disallow costs if the government's approval and direction is not fully documented and maintained or the government, with 20-20 hindsight believes the costs your company incurred were not reasonable. Indeed, while the work environment is a "new normal," many of traditional government contracting standards will continue to apply and companies must do their best to follow these fundamentals.