Contractor Recovers COVID-19-Related Additional Costs

Construction and Procurement Law News, Q3 2023

Client Alert

Author(s) ,

The Armed Services Board of Contract Appeals (ASBCA), in the case of StructSure Projects, Inc., recently granted COVID-19-related costs to a contractor under a fixed-price contract. The key facts, holdings, and takeaways from this noteworthy case are discussed below.  

The Facts

The government awarded the contractor a fixed-price task order for design and alteration services. The task order required the contractor to provide temporary facilities for the government to use while work was being performed and included a specific contract line-item for those facilities.

After the COVID-19 pandemic hit, the government designated the contractor’s work as non-mission essential and, thus, suspended the contractor’s access to the site for 44 days. The government, however, continued to use the facilities provided by the contractor during the suspension period.

The contractor submitted a claim seeking recovery of out-of-pocket rental costs incurred for the facilities resulting from the restricted access to the site, but the government denied the claim. The contractor thus filed an appeal at the ASBCA. 

The Holding

The ASBCA held that, while the contractor may have assumed the risk associated with the scope of the fixed-price task order, the government modified the task order’s scope, thus requiring the contractor to supply the temporary facilities for an extended period. In so holding, the ASBCA rejected the government’s “sovereign acts defense,” which generally protects the government from having to pay additional contract costs incurred as a result of a sovereign act of the government that is (1) “public, general, and only incidentally falls upon the contractor,” and (2) makes it impractical or impossible for the government to render performance under the contract.

More specifically, the ASBCA found that the sovereign acts defense did not apply because the government’s decision to suspend the contractor’s access to the site did not render supplying the temporary facilities impossible. Rather, the ASBCA noted, the government continued to use the facilities throughout the entire 44-day suspension period.

The Takeaway

Recovering additional costs incurred as a result of the COVID-19 pandemic has, so far, been difficult for federal contractors working under fixed-price contracts. The ASBCA’s decision in StructSure Projects, Inc., however, demonstrates that contractors do, in fact, have a potential avenue for recovery of COVID-19-related additional costs where the government changed the contractor’s work and/or continued to receive the benefit of the contract during a COVID-19-related delay. Accordingly, contractors who experienced COVID-19-related additional costs should consider whether the ASBCA’s recent decision may provide them with a potential path to recovery.