On Friday, March 20, 2020, the Office of Management and Budget (OMB) issued Memorandum No. M-20-18, titled “Managing Federal Contract Performance Issues Associated With The Novel Coronavirus (COVID-19).” The Memorandum, directed to the heads of all Executive Departments and constituent federal agencies, provides key guidance on maintaining continued contract performance while respecting the need to protect the safety of the contracting community during this unprecedented time. The critical aspects of the Memorandum, accompanied by a contractor “To Do” list, are as follows:
1. Consistent with FAR 7.108, agencies are “strongly encouraged” to work with contractors to evaluate and maximize telework for contractor employees whenever possible. To the extent existing contracts do not provide for telework, the Memorandum explicitly instructs agencies to contemplate modifying the contract to provide for such circumstances. In the event that a contract requires the physical presence of a contractor (g., because the work is performed at a government facility), agencies are directed to “consider being flexible on delivery schedule contract completion dates.”
TO DO: To the extent telecommuting is not presently permitted or already being addressed for the contractual work being done, coordinate with your contracting officer (not just the Contracting Officer Technical Representative (COTR) or Contracting Officer Representative (COR)) – in writing – on the scope and need for contractor employees to telecommute. Document all related correspondence.
2. Agencies should be flexible in providing extensions to performance obligations if a contractor is unable to perform due to interruptions related to COVID-19. In FAQs attached to the Memorandum, OMB specifically cited Excusable Delays clauses codified at FAR 52.249-14, 52.212-4(f), and 52.211-13 as examples of regulations that allow such performance extensions. The FAQs note that if performance is not feasible – even with extensions – contracting officers “should discuss the situation with the contractor to determine if other options are available” and should consider a termination for convenience and re-procurement with no negative past performance repercussions to the contractor unable to perform.
TO DO: Be prepared for a termination for convenience, not because it will definitely happen, but because it puts contractors in the right mindset to collect and track all appropriate costs and impacts including, for fixed-price contracts, (a) allowable costs incurred in the performance of the work, (b) a reasonable profit for work performed, (c) reasonable settlement expenses, and (d) certain “continuing” (post-termination) costs. See FAR 52.249-2.
3. Agencies are encouraged to use special emergency procurement authorities now available as a result the president’s emergency declaration under Section 501(b) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. Section 5121-5207. Consistent with the president’s declaration, agencies are now vested with the authority identified in FAR 18.202, “Defense or recovery from certain events.” Examples of this authority include substantial increases to (i) the micro-purchase threshold (increased from $10,000 to $20,000 for domestic purchases and to $30,000 for purchases outside the United States), (ii) the simplified acquisition threshold (increased from $250,000 to $750,000 for domestic purchases and to $1.5 million for purchases outside the United States), and (iii) the threshold for using simplified procedures for certain commercial items (increased to a ceiling of $13 million).
TO DO: With the government’s focus on crisis purchases, know that there will be ample “receipt checking” after the dust settles. Do not let a dispersed workforce and an eager customer overshadow existing or necessary compliance and supply chain obligations.
4. The Memorandum contemplates that contractors may file requests for equitable adjustments (“REAs”) to receive compensation for increased costs associated with measures taken to protect employees and fight the spread of COVID-19. . It directs agencies to consider each REA on a case-by-case basis, “taking into account, among other factors, whether the requested costs would be allowable and reasonable to protect the health and safety of contract employees as part of the performance of the contract.” Consistent with FAR 31.201-3, the FAQs state that the reasonableness of such costs will be measured by whether the contractor acted as a “prudent person,” took actions consistent with the CDC guidelines, and discussed the actions with the contracting officer or COTR.
TO DO: Ensure the actions taken in response to the pandemic follow the guidelines and guidance provided by the CDC, the OMB, your cognizant federal agency, and the states/communities in which contractor employees are performing their respective tasks. Note that location matters and facilities in different parts of the nation/world may be operating under different rules and requirements.
5. The Memorandum also instructs agencies to consider whether current contracts that address capabilities relating to impending requirements (such as security or logistics) can be “retooled for pandemic response consistent with the scope of the contract.” In particular, the Memorandum points out that agencies “may make changes” to the contract as permitted by, for example, FAR 52.243-1 through -3 or 52.212-4(c). To the extent necessary, agencies are also reminded of their power to suspend work pursuant to FAR 52.242-14 or to stop work altogether in accordance with FAR 52.242-15.
TO DO: Be on the lookout for out-of-scope modifications and cardinal changes. While everyone may feel duty-bound to assist the country in getting through the pandemic, there is very much the possibility that over-eager contractors may be working at risk of not getting paid for the work performed. Be sensitive to customer wants, but be wary of demands that may incur costs that the government will not feel duty-bound to pay.
6. The Memorandum provides that agencies should “practice appropriate social distancing” with contractors and should consider engaging in “virtual activities” regarding acquisitions, including “online industry conferences” and “video proposals.”
TO DO: Push past the fear of being seen as nagging, and remind all employees of the importance of social distancing and the availability of virtual technologies in and away from the workplace; immediately document any contracting officer/COTR/COR guidance on or reticence to these efforts.
7. If a contractor’s active registration in the System for Award Management is set to expire prior to May 17, 2020, the contractor will be afforded a one-time extension of 60 days within which to re-register.
TO DO: Remember that compliance and contractual requirements do not go away in the pandemic. Unless clauses and obligations resident in federal contracts are expressly removed or nullified by the contracting officer, the federal agency, or the executive, they remain present and fully in force. Do not let your guard down in the confusion.
The latest OMB guidance is intended as a navigational beacon assisting agencies as the acquisition community sails through the rough, uncharted waters ahead. And, as in any stormy sea, waves will bring a combination of uneasiness and respite for which all hands must be prepared. To best assist federal customers, it is imperative that the federal contracting community remain calm, ground themselves in their experience, and ask questions of their navigators to ensure they remain on course and compliant with the onrush of changing federal requirements and regulations.