On April 22, 2020, the Civilian Board of Contract Appeals (“CBCA”) issued a decision denying a contractor’s claim for the costs of demobilizing from a construction site due to concerns about performing work during an Ebola virus outbreak. Appeal of Pernix Serka Joint Venture v. Department of State, CBCA No. 5683 (April 22, 2020). This decision is an important indicator of the position that the Federal Government may take in response to claims submitted in response to COVID-19 delays and disruptions on government construction contracts.
The U.S. Department of State (“DOS) awarded the contractor a fixed-price contract to construct a rainwater capture and storage system in Freetown, Sierra Leone. The contractor became concerned about the potential impact of the spread of the Ebola virus in Sierra Leone and its ability to support its personnel should they need to be evacuated from the country. The contractor requested instructions or agreement from DOS on how to move forward with the project. DOS declined to provide any instructions stating in part that any decision whether to stay or leave rested solely on the contractor’s shoulders.
Very shortly thereafter, the World Health Organization declared the outbreak an international public health emergency and the contractor decided to shut the project down and evacuate most of its personnel from Sierra Leone. The contractor advised DOS of its decision to temporarily shut down the project work site. At that time, DOS was continuing its own operations in Sierra Leone and had not removed its personnel from the country – although it had begun removing eligible family members of its staff.
DOS acknowledged the contractor’s decision to shut down and the concerns that prompted the shutdown. However, DOS advised the contractor that, since the contractor took this action unilaterally based on circumstances beyond the control of either contracting party, DOS believed that there was no basis for an equitable adjustment for the additional costs the contractor might incur in connection with the contractor’s decision to stop work.
Despite repeated requests, DOS never provided the contractor with any directions or instructions on how to proceed and never ordered the project to be shut down. As the contractor later explained:
We felt we were cornered to make a unilateral decision to save our people’s lives essentially, and it felt like it was a chicken game with the Government. They waited us out until we had to leave, and then immediately you get a response that says this is unilateral.
The project site was shut down for more than six months, during which time the contractor provided limited staff. When the contractor remobilized, it employed additional health and safety measures, including expanding its health facilities and employing full time medical staff.
The contractor ultimately submitted a claim for additional life safety and health costs incurred due to differing site conditions, disruption of work, and the need to maintain a safe work site, as well as for additional costs incurred resulting from the disruption of work and the need to demobilize and remobilize at the site. DOS denied the claim finding there was no contractual basis for a price adjustment. DOS, however, had given the contractor a time extension of 195 days – the amount of time requested by the contractor. The contractor appealed the final decision and DOS moved for summary judgment. The CBCA granted the motion.
The CBCA held that the Default clause, FAR 52.249-10, explicitly addressed how acts of God, epidemics, and quarantine restrictions were to be treated – the contractor was entitled to additional time, but not additional costs. The CBCA stated that the contractor had not identified any clause in the contract that served to shift the risk to DOS for any costs incurred due to an unforeseen epidemic and rejected the contractor’s arguments that there was a cardinal change or a constructive change. It also found that DOS was not required to provide the contractor with direction on how to respond to the Ebola outbreak. As this was a firm, fixed-price contract, the CBCA concluded that the contractor bore the additional costs of contract performance even if the contractor did not contemplate those measures at the time it submitted its proposal or at contract award.
This decision is an important indicator of the position that the Government may take when dealing with claims submitted by contractors in response to COVID-19 – the contractor is entitled to time, but not money. It demonstrates the crucial role that government direction may play in determining whether the Government will bear any financial responsibility for contractor actions taken in response to COVID-19 concerns, especially shutting down a project site. Establishing that the contractor’s actions were the result of the Government’s contractual actions will be critical to such recovery.