On the heels of the Office of Management and Budget’s (OMB) memorandum encouraging agencies to consider requests for equitable adjustment (REAs) for increased costs related to COVID-19, the U.S. Department of Defense (DOD) issued a similar memorandum for defense agencies on March 30, 2020. (Our summary of the OMB memo can be found here.) The DOD memo outlines three ways defense agencies can work with contractors during this challenging time:
- The DOD memo reminds the defense community that delays related to COVID-19 are likely excusable under standard clauses included in DOD contracts, and contractors that are unable to perform due to events beyond their control will not be in default and should not receive negative performance ratings.
- The DOD memo recognizes that COVID-19 impacts on performance may also increase the cost of performance, and reiterates that contracting officers should consider requests for equitable adjustment (REAs) on a case-by-case basis.
- The DOD memo highlights Section 3610 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which authorizes agencies to reimburse contractors for the cost of paid leave incurred to keep contractor or subcontractor personnel in a “ready state” to the extent the contractor or subcontractor personnel were (a) unable to access a government facility or site and (b) were unable to telework because their job duties could not be performed remotely. The memo states that DOD will provide implementing guidance for Section 3610 as soon as practicable.
DOD’s memorandum is available here.
DOD’s memo provides helpful guidance for contracting officers and federal contractors; contractors may want to share the memo with their contracting officers when they are seeking guidance about how the COVID-19 crisis will impact their contracts. In addition to discussing the DOD memo with their contracting officers, government contractors should also be proactive in preparing to continue operations under lockdown conditions. Contractors should immediately begin evaluating all of their operations across the United States to determine whether they are considered essential. Where they have operations in a state that has issued a lockdown order that does not clearly cover those operations, contractors should follow instructions to apply for essential status immediately. If they have operations in a state that has not yet issued a lockdown order, they should assume that one will be issued and be prepared to apply for essential status, if necessary.
In addition, contractors should communicate with their contracting officers regarding telework where practicable even if not currently permitted under the contract. If contractor employees are unable to telework, contractors should seek specific written direction from their contracting officers stating that their work and employees are exempted from the applicable lockdown restrictions, even if the business is explicitly covered.
For more information, contact OFP’s Corporate Group.
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