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.
As you might guess, the sovereign acts doctrine has been used recently to justify government acts in response to COVID-19. One recent case from the ASBCA provides a good example of how the government has successfully invoked this affirmative defense to avoid damages for certain delay costs related to a base closure. In APTIM Federal Services, the government contracted with APTIM to do construction work at Arnold Air Force Base. In April 2020, the Commander of the base issued a memorandum closing the base to all “non-operationally urgent” workers in response to the COVID-19 pandemic. APTIM, deemed non-operationally urgent, was prevented from accessing the base until mid-June. Shortly after, APTIM submitted a certified claim in the amount of $99,076 for the two months’ worth of administrative costs incurred while it was unable to access the base. While APTIM was awarded more time to perform due to the base closure, the contracting officer issued a decision denying the monetary claim. APTIM appealed this decision to the ASBCA.
The ASBCA used the two-part test from United States v. Winstar Corp. to determine if the act of closing the base was a sovereign act. To satisfy the test, the act must be (1) public and general in nature, and (2) it must make the government’s performance impossible. Because the closure was not directed at the contractor specifically, the Board found that it was public and general, satisfying the first prong of the test.
Next, the ASBCA found that the government’s performance was impossible. The Board rejected APTIM’s technical reading of “impossibility” and instead applied a four-factor test:
(1) a supervening event made performance impracticable;
(2) the non-occurrence of such event was a basic assumption when the contract was made;
(3) the occurrence of the event was not the fault of the party invoking impossibility; and
(4) the invoking party did not bear the risk of the occurrence.
Applying the test, the Board determined the supervening event of the base closure barred the access to the base, which was a basic assumption at the time the contract was made. The occurrence of the event was not the fault of the government acting as a contractor. Also, the Board concluded in a firm-fixed price contract such as this one, the contractor bears the risk instead of the government.
The Board also drew comparisons to the Federal Circuit opinion in Conner Bros. Constr. Co. v. Green when the Army Corps of Engineers closed a base to its general contractor in response to national security risks post-9/11. The Board considered similar relevant factors, including the fact the act was not aimed at relieving the government of its contractual duty and the act applied to a broader group than just the contractor. Like the Federal Circuit, the Board concluded the base closure in this case was a general act that was incidental to a larger government objective of promoting national security
Contractors seeking to claim costs associated with COVID-19 related closures should be aware that the government may seek to invoke the sovereign acts doctrine as an affirmative defense. Indeed, the government has been successful in doing so on more than one occasion. This is especially relevant for contractor’s in fixed-priced contracts because they bear the risk. Although money damages for COVID-19 delays may be hard to recover, contractors should at least be able to claim additional time to complete the work.
Written with the assistance of Emily Loftis, a summer associate in the Husch Blackwell LLP Washington, DC office.