Learning from a contractor dispute from an earlier virus threat

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A contractor was working in a zone infested with a dangerous virus. The World Health Organization declared a public health emergency. The contractor was able to get a delay from the contracting officer, but not much more. Another lesson from, the ebola outbreak in 2015. With lessons learned, Federal Drive with Tom Temin spoke to procurement attorney Joseph Petrillo of Petrillo and Powell.

Interview transcript: 

Tom Temin: Joe this case really does have echoes of today, even though it was in another country in another time. But tell us about this case.

Joe Petrillo: Sure. This involves a contract by the State Department awarded to a company called Pernix Serka Joint Venture to create by construction a rainwater capture and storage system in Freetown, Sierra Leone, and it was being performed in the latter part of 2013 into 2014. In March of 2014, an Ebola outbreak occurred in neighboring Guinea, and four months later, it had spread to Sierra Leone and the capital Freetown. This was obviously a big problem for the contractor. And by August, it had asked for guidance from the contracting officer. And the contracting officer basically said, well obviously your safety of your workers should be of utmost concern, but the decision about what you’re gonna do, you’re going to stay, leave, that rests entirely on your shoulders. On August 7, the contractor gave notice of delay and the next day three things happened. The World Health Organization declared an international public health emergency, the State Department decided to evacuate family members of embassy personnel from Freetown, Sierra Leone, and the contractor decided it had to shut down operations. It demobilized, brought a lot of its people out of the country and notified the State Department. Contracting officer replied fine, we understand why you’re doing this but you’re going to get an extension of time and no extra funds to perform the contract. And that decision or that stance was based on a fairly standard contract clause that appears in most government contracts, and it lists a variety of excusable delays. And among those excusable delays, these are basically the kinds of things you’ll find in a force majeure clause in a commercial contract. They list epidemics and quarantine restrictions. So clearly the same kind of situation you found in Ebola and the Ebola outbreak in Africa and you’re finding around the world today with COVID-19.

Tom Temin: So the contractor got at least the extension without the penalty, or, you know, they, they realized they could delay the work. I mean, everyone understood that, but no other compensation. So what happened next?

Joe Petrillo: Well, you know, the contractor had a fairly significant set of additional costs because of this demobilization and it submitted claims to the contracting officer, they tried to negotiate for years and years. And finally, it went to the Board of Contract Appeals and asked for relief from the Board of Contract Appeals. And again, the basic obstacle it faced was this distinction in the contract between excusable delays which give you time, but not money, and compensable delays which give you both. And so in this particular case, the, you know, the contractor tried some various theories, it said there was a cardinal change or a change in the contract, you know, but those theories foundered on the fact that the contracting officer had never directed a contractor to do anything in particular, and told the contractor right and stop work and told the contractor what to do, and the Ebola outbreak was not something that was the fault of the government in its contractual capacity. So, bottom line is the contractor was denied relief in the appeals process, and so far as i know it hasn’t gotten any.

Tom Temin: I guess the question then is in the current situation, what should contractors try to seek? And can you get around a contract clause that doesn’t have compensation in it? Can that be altered in light of what’s going on?

Joe Petrillo: Well, we’ve got a couple of possibilities for the contractor. And it’s not necessarily an easy path to take. If the contract has a stop work order clause, the government can issue a stop work order and that does provide for compensation to the contractor. Under some circumstances, suspension of work was can but there are additional obstacles there which make a less likely route for relief. And then you’ve got the CARES Act, which has section 3610, that’s going to permit the government to provide compensation to the contractor if it needs to pay its employees during a period when they can’t work in order to keep them available to work on government contracts. Now that sketches out the basic idea, but it’s being implemented in different ways by different agencies, you should consult the guidance of the specific agency. And it does require some discretion and affirmative action by the government to get the contractor relief.

Tom Temin: So this sounds like one of those instances where there’s a law and a desire and kind of a trend that sometimes founders at the doorstep of contracting officers.

Joe Petrillo: Yeah, I would be very surprised if this were administered in any, you know, extremely uniform or automatic way. I think it’s going to be on a case by case basis and contractors are going to have to try to work with their contracting officers to get appropriate relief so that they can keep their workforce ready to go when things start up again.

Tom Temin: Alright, so I guess that leads to the bigger question, what does the contracting scene look like to you and your clients right now, given all that’s going on?

Joe Petrillo: Well, there’s a lot of ferment and there’s a lot of variation of how things are working out. But one thing I think is, I hope clear from the situation we’re in, and that is that the acquisition function is not some little sideshow and in various agencies, it’s an extremely important function. When you need to get things done under difficult circumstances, when you need additional equipment that you may not have stocked, it’s the acquisition workforce you turn to, and it’s their expertise that’s going to get that for you. I mean, I’ve seen some complaints by higher ups in government that, you know, they’re not supply clerks who didn’t take the job to be a supply clerk — and I think the idea that this is a some automatic clerical boring function, I hope that idea has been scotched because it takes skill, especially under difficult circumstances, to get the stuff you need quickly and at a good price.

Tom Temin: Joseph Petrillo is a procurement attorney with Petrillo and Powell. As always, thanks so much.

Joe Petrillo: Thank you Tom.