Preparing for the Worst

The hot topic of late—for good reason—is the coronavirus (or COVID-19), and its incredible impact on people and the world’s economy. It’s inescapable, and turning on the evening news can be downright scary.

We’re all concerned with how to protect our loved ones from the impact of this outbreak. But for business owners—particularly small business owners—those concerns are compounded by the fear of potential economic hardships that are almost certain to come.

In this post, we’ll discuss suggestions as to how a federal government contractor might prepare for disruptions caused by the coronavirus (or other calamities).

At the outset, it’s worth noting that there’s not a one-size-fits-all approach to disaster mitigation and recovery plans. Each contractor and each industry are different, and the considerations of one might not be applicable to another. But, by keeping a few points in mind, hopefully any disruption will be minimized, regardless of the industry.

1. Develop a plan for working remotely. This plan shouldn’t necessarily be limited to times of pandemics, but focus on all contingencies: what would your company do, for example, if a pipe burst and your corporate headquarters temporarily closed to deal with the effects? How would you access your files and documents? How would your employees answer the phone?

Keeping employees safe is a paramount consideration for any business owner. But so too is keeping data safe and remotely accessible. Doing so will help minimize any business disruptions. The point, though, is to plan before disaster strikes—scrambling to implement a teleworking plan when it’s needed in a chaotic moment won’t do you any good.

2. Contractors should also understand their obligations under their contract to determine whether there is any relief for business disruptions. For example, a cost-reimbursable government contract might include FAR 52.249-14 (Excusable Delays), which provides an exception to default if performance is disrupted for acts outside of the contractor’s control (like in the case of epidemics and quarantine restrictions). Take a look at FAR 52.249-8(c) (fixed price contracts) and FAR 52.212-4 (commercial item contracts) as well. A contract might also include a force majeure clause, which allows some relief in the performance of a contract for unusual circumstances (“acts of God,” so to speak). If these provisions are in your contract, it’s worth considering how they might impact your performance.

Sometimes, however, services sought under a contract are so essential that performance must continue. If your contract includes DFARS 252.237-7023, for example, you might be obligated to develop a “Mission Essential Contractor Services Plan” to ensure performance continues even in the event of a calamity.

Understanding what your contract requires even in the event of a disaster will help guide your efforts going forward.

3. It’s also vitally important that contractors stay in regular contact with their government clients. Be direct with the contracting officer: ask what the agencies’ intentions are regarding access to its facilities, and work cooperatively to ensure contingency plans are in place before they are needed. Explain to the agency what your company’s intentions and understandings are to determine whether additional actions are necessary.

Beyond speaking with the contracting officer, you should also speak with your key subcontractors and vendors to determine what their risks are, and how they plan to mitigate them. Speak with your insurance agent to see if your policies include business disruption protection and, if so, what the exclusions are. Finally, understand what government resources are available to help protect your business.

4. Finally, keep detailed, contemporaneous records of any performance disruptions or delays. All communications with the contracting officer, subcontractors, and suppliers should be memorialized in writing. Keep detailed meeting minutes and then circulate them for approval. And if you receive instructions or changes from anyone other than the assigned contracting officer, confirm them (in writing) with the contracting officer before proceeding.

If performance is disrupted and delays or increase costs follow, it might be necessary to submit a claim to the contracting officer. Whether that claim is successful will depend, in large part, on how well it’s contemporaneously documented. Be careful, too, when signing something offered by the government, in case there is a release of claims.

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With any luck, the impact of COVID-19 will be minimal. But preparing now—whether it’s for this disruption or one yet to come—will not be a wasted effort.

Wash your hands and remember to take care of each other. And if you have any questions about potential delays or disruptions, please give us a call at 785-200-8919.