Column: Requests for Equitable Adjustment and Claims in the COVID-19 Environment

      COVID-19 has upended our lives and impacted small businesses of all stripes. Small business government contractors are not immune to these impacts, and many have found themselves experiencing disruptions, delays, stop work orders, changes and even terminations due to the pandemic.

     Unfortunately, under these circumstances, contractors may find themselves in disputes with government customers over additional costs, contract interpretation, or deliverable schedules. Right now, it is critical that contractors take appropriate measures to protect themselves and review the basics of both the Requests for Equitable Adjustment (REA’s) as well as the formal claim process.

      First, contractors should familiarize themselves with all relevant COVID-19 related guidance from the government. Early on in the pandemic, the federal government signaled that it was willing to be flexible with contractors and liberal in its application of various applicable Federal Acquisition Regulation (FAR) clauses.

      For example, a March 20th memo issued by the Office of Management and Budget encouraged contracting officers throughout the government to leverage the FAR’s excusable delays, changes and other applicable clauses to address COVID-19 related performance issues. Many of these FAR clauses expressly provide for equitable adjustments, and contractors should be thoroughly aware of how they apply to their particular situation.

      The government also has provided new avenues of relief such as Section 3610 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which provides for reimbursement of paid leave in certain circumstances. Additionally, and likely most importantly, contractors should review closely all local guidance and directions offered directly from their applicable contracting agencies.

      With all of this in mind, when facing potential delays and/or additional costs, contractors should be proactively providing contractually-required notices and generally being open and transparent with contracting personnel. Contractors also should document comprehensively all business impacts through correspondence with the agency and documenting evidence of delays and additional costs including (if possible and when directed) segregating such costs. Regardless of which avenue contractors choose to later seek contractual relief, properly documenting and communicating now will be critical to later success. Finally, contractors should begin considering whether filing a REA or a formal claim would be most appropriate—this is a decision that should be carefully considered.

      A REA is an informal request, submitted to the contracting officer as part of contract administration, for additional compensation (in time and/or money) the contractor believes it is owed. While the REA is “informal,” contractors should ensure that assertions for relief are both clearly supported by adequate documentation and solid arguments in favor of entitlement.

      REAs must be submitted before contract close-out, and generally, contractors should provide written notice to the contracting officer within 30 days of the change or other event of which the right to an equitable adjustment arises. The REA process is often less costly and may be advisable where the contractor believes the contracting officer would be more receptive to providing relief. One potential drawback, though, is that because of REAs’ informal nature contracting officers may sometimes delay decision on the REA, thus delaying potential compensation for the contractor.

      A contractor also may choose to file a formal claim pursuant to the Contract Disputes Act. This process first involves the submission of a claim to the contracting officer within 6 years of when the claim accrued. It must clearly and unequivocally put the contracting officer on notice of the claim, request a contracting officer’s final decision, and if applicable, contain an appropriate certification from the contractor. The contractor then may appeal a denial to either the applicable Board of Contract Appeals or the Court of Federal Claims.

      There are many reasons a contractor may choose to file a formal claim. For one, the government must respond to a formal claim and therefore the formal process better keeps the ball moving toward resolution. However, the contractor should understand the more adversarial nature of the claims process. Filing a claim may be more advisable if there is already a clear dispute as to the contractor’s request for relief and communication/negotiation between contractor and agency has already broken down somewhat.

      The effects of COVID-19 likely will make dealing with either the REA or claims process an unfortunate fact of life for many government contractors in the coming months. Good practices during contract performance and careful weighing of considerations for how to pursue relief will help ensure the best possible outcome.

To learn more about this incredibly important and highly relevant topic, Paul Hawkins and Brad Reaves of ReavesColey PLLC will be conducting in-depth training on the REA and Claims process including specific COVID-19 related considerations in a Set-Aside Alert live webinar on May 7th at 1 pm Eastern time. For more information and a sign-up link, see https://conta.cc/2xD9zzX. We hope you can join us then for a great training event!

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Column: Requests for Equitable Adjustment and Claims in the COVID-19 Environment

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