Thursday, July 10, 2014

Government Caused Delays, Disruptions, and Other Encumbrences

Sometimes, not too often but often enough, the Government needs a contractor to temporarily stop working on a contract. Unless these orders to curtail performance are short-lived, these actions almost always end up costing contractors more money. There are two mechanisms available to the Government to stop work; suspension of work (covered in FAR 52.242-14) and a stop-work order (covered in FAR 52.242-17)

A suspension of work usually applies to construction or architect-engineer contracts and may be ordered for a reasonable period of time. If the suspension is unreasonable, the contractor may submit a claim for increases in the cost of performance. No additional profit is allowed on increased costs.

Stop work orders on the other hand are used in negotiated fixed-price or cost-reimbursement supply, research and development, or service contracts if work stoppage is required for reasons such as advancement in the state-of-the-art, production or engineering breakthroughs, or realignment of programs.

Generally, a stop-work order will be issued only if it is advisable to suspend work pending a decision by the Government and a supplemental agreement providing for the suspension is not feasible. Stop-work orders are not be used in place of a termination notice after a decision to terminate has been made.

After issuing the stop-work order, the contracting officer should discuss the stop-work order with the contractor and modify the order, if necessary, in light of the discussion.

As soon as feasible after a stop-work order is issued, but before its expiration, the contracting officer must terminate the contract, cancel the stop-work order, or extend the period of the stop-work order if it is necessary and if the contractor agrees.

The clause at FAR 52.242-17, Government Delay of Work, provides for the administrative settlement of contractor claims that arise from delays and interruptions in the contract work caused by the acts, or failures to act, of the contracting officer. This clause is not applicable if the contract otherwise specifically provides for an equitable adjustment because of the delay or interruption; e.g. when the Changes clause is applicable.

As we indicated earlier, Government-caused delays invariably cause increase costs to the Government. In a construction project, even one day increases costs because idle crews must still be paid. Contractors faced with a suspension of work or stop work order should immediately modify their accounting systems to begin collecting costs incurred during the delay period in order to support subsequent claims or equitable adjustment proposals.

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