Breathing easier as you mop up from the shutdown? Those who forget the past are destined to repeat it, so let’s see what we can take into 2014.
While the pain is still fresh, take a moment with your team, partners, and even other business owners in your industry to compare notes on what went right and what you wish you'd known. Now's the time to update your shutdown survival checklist. You'll be glad to have those lessons learned next time.
Because next time probably isn't far away. The federal FY 2014 budget still hasn't been passed. The Continuing Resolution only provides funding for government operations through mid-February; before then, Congress and the White House may also be at loggerheads over the debt ceiling. Then there's the hangover from last year: Another sequestration and five- to eight-percent across-the-board budget cuts are probably coming.
If you're a prime, and your contracts were temporarily halted by your federal client, you need to know what costs or losses you can recover from federal buyers, how, and when.
Would your company incur unbudgeted costs if the government either issued you a formal Stop-Work order or otherwise prevented you from performing on your contract (for example, by not returning your calls, or closing its offices)?
Check your contracts!
Brush up on how Requests for Equitable Adjustment (REA) work. First, read FAR Part 42.1305(b), the contract clause at FAR 52.242-15, and related clauses in your own contract. Consider meeting with your contracting officer long before there's another slowdown or shutdown to review how things would work if you had to do this for real. What are the policies and practices on REA in the agency, and how can you make the contracting officer’s job easier if need be?
While the contracting officer can initiate an adjustment, that doesn't happen automatically. Don't assume that's going to happen, or that the contracting officer could know all of your unanticipated costs without your assistance. As contractor, you have the right to initiate an REA, too, if you do so within 30 days after the resumption of work.
Ray Bjorklund, President of BirchGrove Consulting and former senior government executive, agrees:"Talk with your contracting officer about the agency's practices and rules. [It’s] better to discuss the particulars with the government ahead of formally submitting the request. The government dislikes surprises from its contractors, and may not be legally able to afford the money or the time to make the adjustment.”
What if you’re dealing with a prime contractor, not directly with the government?
Subcontractors can be at more risk for unrecoverable costs if the federal prime contract is a Time & Materials contract rather than Fixed-Price with payment tied to deliverables.
As a subcontractor, would you continue to incur costs directly related to the project even if the federal contract were temporarily shut down? If so, then check your legal agreement with the prime. If it has no provisions for you to identify and recover allowable costs in such circumstances, chances are good that you won't recoup those expenses.
Bill Jaffe, Executive Vice President and General Manager at Technical and Project Engineering, LLC shared from his experience as both prime and sub.
It pays to know how the prime is getting paid."At TAPE we had a Firm Fixed contract that paid us regardless of the shutdown, so we decided to pay the sub even though we were off work!
Did deliverable dates change as a result of the shutdown? If so, a claim may be due. Did end dates compress for deliverable due dates? If so, a claim may be due. Get legal help," urged Bill. "This stuff is complicated!"
Contributing resources to this blog post: