Unlike private parties in a contract, the government has several unique rights that allows it to avoid its contractual obligations in certain circumstances. We have written about the government’s right to terminate contracts for convenience. But the government may also avoid contract liability by invoking the sovereign act doctrine as a defense. This defense is available where government’s obstruction to the contract is considered a public and general act as a sovereign.
On December 7, 2021, the U.S. District for the Southern District of Georgia, in Georgia v. Biden, No. 1:21-cv-163, granted a preliminary injunction that temporarily stayed the Biden administration’s vaccine mandate for federal contractors and subcontractors “in any state or territory of the United States of America.” The case was initially brought by Georgia, Alabama, Idaho, Kansas, South Carolina, Utah, and West Virginia. The Associated Builders and Contractors (ABC), a national trade organization, intervened on the side of the plaintiffs. The seven states and ABC requested a preliminary injunction staying Executive Order (EO) 14042 and associated FAR clauses and Guidance, which require federal contractors and subcontractors to have their employees provide proof of vaccination in order to work on or in connection with federal contracts and also impose mask and social distancing requirements. The court granted the preliminary injunction and stayed the federal contractor vaccine mandate nationwide.
There are new developments regarding the federal contractor COVID mandate as of November 10, 2021. The most important is that the deadline for compliance appears to have been pushed back from December 8, 2021 to January 18, 2022.
President Biden’s September 9, 2021 Executive Order 14042, Ensuring Adequate COVID Safety Protocols for Federal Contractors, directs the federal Safer Federal Workforce Task Force (“Task Force”) to develop COVID-19 workplace safety guidance for federal contractors and subcontractors providing services to or for the federal government. The Executive Order requires the guidance to apply broadly, not only to contracts governed by the Federal Acquisition Regulations (“FAR”), but also to “contracts and contract-like” instruments not covered by the FAR. The Executive Order also directs the Federal Acquisition Regulatory Council to develop new contract clauses that will incorporate the Task Force’s guidance into new and newly-amended federal contracts.
On September 9, 2021, President Biden held a press conference introducing the administration’s “Plan to Stop the Delta Variant and Boost COVID-19 Vaccinations.” At this conference, the President announced a pair of executive orders that mandate COVID-19 vaccinations for (1) employees of the executive branch of the federal government and (2) employees of federal contractors and subcontractors, and also announced a forthcoming Emergency Temporary Standard (ETS) issued by the Occupational Safety and Health Administration (OSHA) regarding vaccinations and/or routine testing for employers with more than 100 employees.
On July 29th, 2021, President Biden announced additional efforts to increase COVID-19 vaccination rates and to protect the federal workforce, including strengthening safety protocols for federal employees and contractors. Under the Biden Administration’s new guidance, in areas of high or substantial transmission of COVID-19, federal employees, contractors, and visitors must wear a mask inside federal buildings with limited exceptions. Individuals who are not fully vaccinated must wear a mask regardless of community transmission level.
We previously looked at whether the COVID-19 pandemic is an excusable delay that would give contractors relief from delivery deadlines and schedule commitments. But many contractors impacted by Coronavirus may see their costs of performance increase due to agency instructions intended to control the spread of the virus. Today we review potential avenues for recovering those costs.
The first potential avenue for recovering Coronavirus impact costs is the recently passed CARES Act (Pub. L. 116-136). Section 3610 of the CARES Act allows agencies to reimburse contractors for paid or sick leave costs that they incur to pay their employees when a site is impacted by Coronavirus. This reimbursement authority applies where (i) employees or subcontractors are unable to perform work on a federally approved site “due to facility closure or other restrictions;” and (ii) those employees or subcontractors cannot telework because their duties cannot be performed remotely.
But this reimbursement authority is subject to some very specific limitations. First, the CARES Act does not require that agencies reimburse these costs. It just gives agencies discretion to do so and allows them to use any available appropriations. Contractors seeking reimbursement under this avenue will need to affirmatively request reimbursement and provide the agency with compelling reasons to exercise its discretion.
Second, the agency’s reimbursement authority is limited to “the minimum applicable contract billing rates not to exceed an average of 40 hours per week,” and is only for leave that is paid by the contractor to “keep its employees or subcontractors in a ready state, including to protect the life and safety of Government and contract personnel.”
Third, any reimbursements received pursuant to § 3610 of the CARES Act must be reduced by the amount of payroll tax credits the contractor is allowed under Division G of the Families First Coronavirus Response Act (Pub. L. 116-127).
On April 9, 2020, the Office of the Under Secretary of Defense for Acquisition and Sustainment issued Implementation Guidance for § 3610 of the CARES Act. The guidance emphasizes the need for documentation to show how leave costs are “identified, segregated, recorded, invoiced, and reimbursed.” It also notes that implementation will vary based on the contract type and suggests creation of a separate line item (or series of line items) to track CARES
§ 3610 costs.
Affirmative action requirements waived for contracts specifically related to COVID-19 relief
As in past times of national emergency, the Office of Federal Contract Compliance Programs has stepped up to exempt certain new federal supply and service contractors and subcontractors from having to comply with most OFCCP requirements over the course of the contract. Announced March 17, OFCCP calls the action the “National Interest Exemption.” Contractors providing supplies and services specifically related to COVID-19 relief must still abide by OFCCP’s non-discrimination and non-retaliation obligations and are subject to OFCCP complaint investigations. The exemption extends to the obligations of all three laws enforced by OFCCP: Executive Order 11246, § 503 of the Rehabilitation Act, and § 4212 of VEVRAA.
Federal agencies and contractors are working hard to address the realities of the COVID-19 pandemic. In some cases, work must stop. In others, the work will increase or change dramatically. While contractors should look to contracting officers for guidance with respect to specific contracts, agency-wide guidance documents are beginning to shed light on the government’s expectations. We will be using this blog entry to collect and share agency guidance on performance of government contracts during the Coronavirus pandemic.
Department of Defense—
Department of the Army—
In response to the growing Coronavirus pandemic, President Trump announced that the federal government will invoke the Defense Production Act to obtain necessary medical equipment and supplies from private industry. In this post we address some of the most frequently-asked questions about the DPA.
What is the Defense Production Act?
Originally conceived during the Korean War, the DPA allows the President to divert goods and supplies from civilian use to promote the national defense. This authority is not limited to sourcing aircraft parts or ammunition, or to supporting active military operations. The text of the Act expressly extends to matters involving “national economic security and national public health or safety.”
The Defense Priorities and Allocations System regulations in 15 C.F.R. Part 700 implement the Defense Production Act. The DPAS regulations provide detail about how the government will issue rated orders and what contractors and commercial suppliers must do to respond.
How does the government prioritize orders for specific supplies?
The government specifies the relative priority for specific supplies by issuing a “rated order,” which may be designated “DX” or “DO.” A DX order has the highest priority. It must be fulfilled before any other DO or unrated order. A DO rated order must be fulfilled before an unrated order. A rated order must be fulfilled first, even if it means the contractor must divert items already in process or ready for delivery under another contract.