2013 FEDCON SUMMITGovernment Contract Disruptions, Delays

and Changes

Presented By:

David L. HaydenSmith, Anderson, Blount, Dorsett, Mitchell & Jernigan, LLP

& Paulanne Page (Team Leader, NCMBC)

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AGENDA • Captain Phillips and the Maersk Alabama• Disruption-What is the impact • Delay-When is it compensatory?• Change Orders• Questions

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Disruptions Example: Differing Site Conditions (DSC)

• FAR 52.236-2– Allows equitable adjustment if contractor provides

prompt, written notice of DSC– Ensure clause is in contract or remedy not available – Type I DSC (Relies on contract representations)– Type II DSC (Unusual & unknown physical conditions)

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TYPE I DSC

• FAR 52.236-2(a)(1) Contractor must prove:– Contract implicitly or explicitly indicated particular site

condition– Reasonable interpretation and reliance by contractor

on site conditions– Latent or subsurface conditions differed materially

from those indicated in contract– Costs were attributable solely to differing site

conditions.

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TYPE II DSC

• FAR 52.236-2 (a)(2) Contractor must prove:– Conditions encountered were unusual physical

conditions that were unknown at the time of contract– The conditions differed materially from those

ordinarily encountered

• Acts of nature after contract award are not DSC• Contractor cannot create its own DSC• Contractor may not recover if reasonably discoverable• It is harder to show Type II vs. Type I DSC

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Delays Due to Suspension of Work 

FAR 52.242-14: The KO may suspend, interrupt, or delay work for the government’s convenience

• Delay is compensable if:– It is unreasonable– The KO orders it– The contractor has not caused the suspension by its negligence

or failure to perform– The cost of performance increases because of KO order

• See also FAR 42.13 Suspension of Work, Stop-Work Orders, and Government Delay of Work

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Delays Due to Suspension of Work 

• Contractor may be entitled to a performance period extension even if the delay is reasonable.

• Profit is not recoverable• Delay costs limited to 20 days unless contractor notifies

the Government (KO)

• Is delay due to federal government shutdown unreasonable?

Connor Bros. Const. Co., Inc. v. Geren, 550 f.3d 1368 (Fed. Cir. 2008)

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Loss of Efficiency • Disruption caused by government changes and/or delays

may cause a loss of efficiency to the contractor• Contractor may recover for loss of efficiency if it can

show:– Increased cost– Government was responsible

Luria Bros. & Co. v. United States, 177 Ct. Cl. 676, 369 F.2d 701 (1966)

TYPES OF DELAY/DISRUPTION

• Excusable – delay is not the result of actions or inactions by either party at contract.

• Delay arises from unforeseeable causes beyond the control and without the fault or negligence of the Contractor.

(FAR 52.249-10 -- Default (Fixed-Price Construction)

• Inexcusable – delay caused by the contractor• Examples include failure to coordinate work, too few

workers, and low productivity.

DELAY/DISRUPTION = CHANGE ORDER?

• Compensatory – a delay caused by actions or inactions by one of the contracted parties that results in financial injury to the other party at contract.• The burden of proving a compensable delay is borne by the

contractor.

• Government caused delays = equitable adjustment/claim• The contractor must prove the extent of the government-

caused delay, and its increased costs, to prove its injury, and there was no concurrent delay.

• Contractor caused delays = liquidated damages • The Government must prove the extent of contractor caused

delay, and there was no concurrent delay.

CHANGE ORDERS• Differing site conditions.

• Regulatory changes.

• Owner changes.

– Scope added/deleted during construction.

– Late design changes.

– Changes in Owner-provide equipment.

• Information missing from the contract documents, ambiguities, errors

and omissions

• Schedule delays and revisions.

• Adverse Weather – Normal and Severe

CHANGE ORDERS

• Changes may have both cost and schedule impacts.

• Dealing with changes promptly will have the least amount of impact on the budget and schedule.

• Delaying resolution can increase costs, jobsite friction, extend the completion of the project and result in a dispute.

CHANGE ORDER

• Most Contracts do not spell out a formal “Contractor Change Request” process.

• If the Contractor wants to submit a change request it needs to follow the “claims” process defined in the contract to request a change.

CHANGE ORDERS• Compensatory – a delay caused by actions or inactions by one of

the contracted parties that results in financial injury to the other party at contract.• The burden of proving a compensable delay is borne by the

contractor

• Government caused delays = equitable adjustment/claim• The contractor must prove the extent of the government-

caused delay, and its increased costs, to prove its injury, and there was no concurrent delay.

• Contractor caused delays = liquidated damages • The Government must prove the extent of contractor caused

delay, and there was no concurrent delay.

EXAMPLE: ADVERSE WEATHER

• Non Compensable• Notification to Government• UPDATED Schedule – CPM (Monthly)• Extends Contract Completion• Calendar Work Days per Week – 5 or 7• Scheduled CP Activities – 50% production• Daily Reports (Temp, Winds, Humidity)• Fragnet of Impact entered into schedule• Analysis of As-Planned to As-Built

Questions?

Paulanne Page David Hayden pagep@ncmbc.us dhayden@smithlaw.com

(910) 330-8560 (919) 821-6755