Congress has reopened the federal government and most contractors are back to work, but there are lingering logistical, financial and legal issues for vendors to deal with following the 16-day government shutdown.

Contractors are feeling relieved but also full of questions about recovering from the shutdown ordeal. One of the main questions is: Does the government owe you money for shutdown expenses?

Congress voted to reopen the government on Oct. 16 under a Continuing Resolution ending on Jan. 15. They also voted to increase the U.S. debt ceiling through Feb. 7.

Federal workers went back to work on Oct. 17, as did most contractors. Contracting officers authorized the vendors’ returns by either lifting Stop-Work Orders or through other communications.

A major looming issue for contractors is whether they are owed money by the government in the form of equitable adjustments. The government may authorize such adjustments to contracts to compensate for contractor expenses that occurred due to the actions of the government.

Contractors have 30 days from the resumption of work to request an equitable adjustment.

Robert Burton, partner with Venable LLP law firm, said contractors first must determine if the costs they incurred, as a result of a Stop-Work Order, are eligible for equitable adjustments.

“The costs of stop work are generally reimbursable under firm-fixed price and cost-type contracts, Burton told Set-Aside Alert.

On the other hand, the costs of stop-work may not be reimbursable under an indefinite delivery, indefinite quantity contract where the government has already purchased the minimum quantity required, or under a requirements contract, where the failure of requirements to materialize is a risk the contractor accepted, he said.

Even if the costs are presumed to be reimbursable, another key issue is whether the contractor will be able to prove damages, Burton added.

“Contractors that received Stop-Work Orders should definitely file for equitable adjustments,” Burton told Set-Aside Alert. “ Contractors that did not receive Stop-Work Orders also should file for equitable adjustments if they incurred costs because of the shutdown. But, these costs may not be reimbursable depending on the terms of the individual contracts at issue and the ability of the contractors to show a direct relationship between the costs incurred and the Stop-Work Orders.”

Tom Petruska, president of Contracts Unlimited Inc., also recommended that if the contractor received a Stop-Work Order, he or she should file a Request for Equitable Adjustment (REA) for verified costs incurred during the shutdown, including a reasonable profit.

“I would assume that the government will be deluged with REAs to recover the costs incurred, particularly for personnel on stand-by awaiting the resumption of work,” Petruska told Set-Aside Alert.

Even if the contractor did not receive a Stop-Work Order, Petruska advises filing an REA.

“As a general rule, if a contractor did not receive a Stop-Work·Order but nonetheless incurred costs during the shutdown, I recommend that they also file an REA to recover their costs under the constructive-suspension-of work theory, where the government but not the contractor is responsible for the work stoppage... These contractors probably have a reasonable chance of obtaining relief as an adjustment to their contract,” Petruska said. But, he cautioned, voluntary work stoppage would not be compensated.

Mary Pivec and Anthony Anikeeff, attorneys of of the Williams Mullen law firm, offered additional guidance on equitable adjustments in an Oct. 16 article.

“Under a Stop-Work Order, a contractor is required to ‘take all reasonable steps to minimize the incurrence of costs allocable to the work covered by the order during the period of work stoppage,” Pivec and Anikeeff wrote.

Rob Burton: “Contractors that received Stop-Work Orders should definitely file for equitable adjustments.”

     “Upon the end of a Stop-Work Order, if contract work resumes, the contracting officer is required to make an equitable adjustment in the delivery schedule or contract price, or both, if the Stop-Work Order results in an increase in the time required for, or in the contractor’s cost properly allocable to, the performance of any part of this contract,” the attorneys added.

     The total amount to be recovered, if any, will vary from contract-to-contract, and will depend on individual circumstances and the type of contract involved.

     “Within reason, one might prepare to claim a number of expenses that could not be avoided if they are allowable expenses and allocable to your contract, although you must be prepared that some of which ultimately may be denied by the government. If denied, that sets up a potential claim situation,” Pivec and Anikeeff added.

     Keeping good records of expenses is critical; insufficient records are one of the major reasons that claims of this nature are denied.

     When the Stop-Work Order ends, contractors are expected to make a request for adjustment within 30 days after resumption of work.

More information:
Williams Mullen article: http://goo.gl/SRK6pZ
Aronson FedPoint blog: http://www.aronsonblogs.com/gcsg/?p=9513