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.

1. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act)

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. 

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