Category Archives: suspension

DELAYS AND SUSPENSION OF THE WORK UNDER FIXED PRICE GOVERNMENT CONTRACT

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Here is an interesting fact pattern and case decided by the Civilian Board of Contract Appeals dealing with (1) force majeure type events and epidemics (Covid-19); (2) suspension of the work; and (3) delays. These are three topics important to all contractors including federal contractors.

In Lusk Mechanical Contractors, Inc. v General Services Administration, 2024 WL 1953697, CBCA 7759 (CBCA 2024), a contractor entered into a fixed price contract with the government to repair, replace, and modernize site and building systems at a federal building. The contractor commenced work right before Covid-19.  When Covid-19 hit, the government issued the contractor a two-week suspension of work notice on March 27, 2020. The suspension of work allowed off-site administrative work to continue but suspended on-site physical work.  The government extended the suspension of work three more times. The contractor could resume work on the exterior on June 1, 2020, but was not permitted to resume work on the interior until July 20, 2020.  On the same date that the contractor was able to commence interior work, it submitted a modification for delay caused by the suspension – 64 days for the time period the entire site shutdown, and 51 days for the interior work shutdown.

The contracting officer responded stating that under FAR Clause (FAR 52.249.10) dealing with fixed priced contracts, epidemics (such as Covid-19) that impact the critical path will entitle the contractor to a no-cost extension of time and the government grants the contractor a 66-day extension of time. The contractor was also seeking compensation, so it then certified its claim seeking an equitable adjustment in its compensation based on FARS’ suspension of work clause – FAR 52.242-14.

First, because the contractor entered into a fixed price contract, it assumed the monetary risk of delays caused by Covid-19:

It is “well-established that ‘a contractor with a fixed price contract assumes the risk of unexpected costs not attributable to the Government.”’ Absent a special adjustment clause, this Board has held that an unforeseen pandemic does not shift the risk to the Government for any unexpected costs incurred under a firm, fixed-price contract. Here, there is no such adjustment clause in the contract. “FAR clause 52.249-10 explicitly addresses how acts of God, epidemics, and quarantine restrictions are to be treated. A contractor is entitled to additional time but not additional costs.” 

Lusk Mechanical Contractors, supra (internal citations omitted).

Second, regarding the suspension of work argument under FAR 52.242-14:

[A] contractor may recover an equitable adjustment from the Government if the contractor shows that ‘(1) contract performance was delayed; (2) the Government directly caused the delay; (3) the delay was for an unreasonable period of time; and (4) the delay injured the contractor in the form of additional expense or loss.”  [The contractor] has not established that [the government’s] successive suspensions were the sole cause of the delay or that the work was delayed for an unreasonable period of time.

[The government] suspended [the contractor’s] construction on the exterior and interior portions of the project from March 27 to June 1, 2020, for a total of sixty-six days. [The contractor] contends that [the government’s] suspension of work directives were the sole cause of the delay. We disagree. The executive orders issued by the Governor, at least in part, caused [the government] to suspend [the contractor’s] work.

A contractor may only recover under the Suspension of Work clause “when the Government’s actions are the sole proximate cause for the contractor’s additional loss, and the contractor would not have been delayed for any other reason during that period.”  The stay-at-home order issued by the Governor…in March 2020 equally interfered with [the contractor’s] performance of the work because there was no stay-at-home exemption for construction work that was not a “core life service” or maintained “the safety, sanitation, and essential operation to properties and other essential businesses.”

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Even had [the government] been the sole cause of delay, the length of the suspension period was reasonable (based on Covid-19), precluding recovery by [the contractor].

Lusk Mechanical Contractors, supra (internal citations omitted).

Third, as it related to the additional delay to the interior work, that additional suspension also was not unreasonable. The contractor had been able to resume exterior work earlier, and its administrative work was never suspended. And, the contractor never proved that the suspension of work to the interior work impacted its critical path:

Because [the contractor] resumed work on the exterior portion of the project much earlier and the administrative work was never suspended, [the contractor] had to prove that the interior work was on the critical path of the project during the additional suspension period. [The contractor], however, has not established, or even asserted, that the interior work was on the critical path of the project. When establishing a Government-caused delay, the contractor bears the burden of proving that the delay affected the critical path of the project. “‘The reason that the determination of the critical path is crucial to the calculation of delay damages is that only construction work on the critical path  had an impact upon the time in which the project was completed.”’  Here, [the contractor] provides no proof that the interior work was on the project’s critical path. Therefore, [the contractor] is not eligible for delay damages for the suspension of the interior work through July 20, 2020.

Lusk Mechanical Contractors, supra (internal citations omitted).

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

CONSTRUCTIVE SUSPENSION (SUSPENSION OUTSIDE OF AN EXPRESS ORDER)

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In the federal procurement arena, there is a concept known as “constructive suspension.” Constructive suspension, while known in the federal arena, should reasonably apply to all projects when work is stopped outside of an express order to stop the work based on the law below.  An unreasonable suspension is an unreasonable suspension and an express order to stop the work does not negate the effects of what really amounts to a suspension.

“Constructive suspension occurs when work is stopped absent an express order by the contracting officer and the government is found to be responsible for the work stoppage.”  P.R. Burke Corp. v. U.S., 277 F.3d 1346, 1359 (Fed. Cir. 2002).  The government delay must be unreasonable to support a constructive acceleration claim. Id.

“To demonstrate such a constructive suspension of work, the contractor must show that the delay (1) was for an ‘unreasonable length of time,’ (2) was proximately caused by the government’s actions, and (3) resulted in some injury to the contractor.” Fireman’s Fund Ins. Co. v. U.S., 2001 WL 36415627, *6 (Fed.Cl. 2001) (citation omitted). “Relative to proving that the delay was directly caused by the government, the contractor must concomitantly show that it was not delayed by any concurrent cause that would have independently generated the delay during the same time period even if it does not predominate over the government’s action as the cause of the delay.” Beauchamp Const. Co. v. U.S., 14 Cl.Ct. 430, 437 (Cl.Ct. 1988).

“A constructive suspension has the same effect and consequences as an actual suspension, and relief should be granted as if an actual suspension order had been issued.”  K-Con Bldg. Systems, Inc. v. U.S., 100 Fed.Cl. 8, 27 (Fed.Cl. 2011) (quotation omitted).

Beauchamp Construction illustrates a constructive suspension situation.  Here, a prime contractor was awarded a fixed price contract to construct several federal buildings in Miami within 365 days.  The contract included representations of soil conditions. The contractor received a notice to proceed.  Shortly after it proceeded, the contractor discovered muck which prevented the contractor’s from installing foundations (footings) in two of the buildings.  This muck was a differing site condition. The contractor notified the government, but the government did not expressly issue a stop work order. The contractor did some other work that it could do since there was no stop work order. Thereafter, the government gave the contractor new specifications and asked for a cost proposal for demucking. The contractor submitted its cost proposal which the government did not approve until about two months after the contractor submitted the cost proposal and three months after furnishing notification of the muck. About two months later, the contractor addressed the differing site condition (muck) and submitted a claim to the government for 137 days of delay along with its delay damages.  The government agreed to 54 days but disputed 83 days.  The court found that a constructive suspension did apply to justify the contractor’s entitlement to the disputed 83 days of delay:

In the case at bar, the parties agree that the original specifications did not include demucking and that the specifications had to be changed to include this additional work. The parties also agree that certain aspects of the construction of buildings 10c and 12 were postponed until the demucking was completed. This postponement of progress under the original contract would necessarily include the time prior to authorization of the demucking work since plaintiff could not proceed until it received the authorization to remove the differing site condition. The court finds, therefore, that on the record before it there is specific evidence of interference with the progress in a part of the contract performance caused by the admitted differing site condition and the resulting and subsequent 83–day delay on defendant’s [the government] part in issuing Modification No. 4. The court, on these facts, can and does reasonably infer the existence of compensable delay damages to [the contractor] as a result of the unjustified interruption of performance.

Beauchamp Construction, supra, at 439.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.