 |
||||||||||||||||||
|
AWR Articles
Dealing with Delays, Disruptions and Changes to Government Contracts
Federal government contracts can be a great source of revenue. When done properly, they can be rewarding and satisfying. Companies proposing on contracts plan for success, not problems. Often companies do not establish adequate controls to deal with delays, disruptions and changes to federal contract. But as long as human beings are involved in the procurement process, sometimes, things will just seem to go wrong. Problem after problem seems to arise, the company reacts and provides additional resources to correct problem situations but it may not get better. The budget is overrun and the projected cost to complete are much higher than anyone had anticipated.
What is a company to do? First, assess what are the root causes of the problem and what control the company has over it. Sometimes, the problem is within your control and caused by your own company’s actions. This may mean a change in staff or a subcontractor. But sometimes the problems are caused by something the federal government has done or has not done, and no matter what is done by the company, the problem will be costly in both time and money to resolve. The key is understanding which situation the company is in.
Problems in performance must be carefully analyzed. If the company has a good configuration management system that tracks changes to the scope of the work being done, it may be able to identify the reasons for performance problems or cost increases. Sometimes, however, project staff is too quick to saddle the company with the cost of the problems that were caused by the customer. As for the federal government, it often assumes the problem is the contractor. For example, specifications provided by the government are faulty. The government may say the company should have known and project staff will accept that statement as fact. But it requires analysis. Examples of questions that need to be answered are:
- Was the faulty specification apparent?
- Did the company develop the specification?
- What input to the specification did the company have?
- Was the company aware that the specification was faulty when it bid the job?
- Did the government make available information that indicated the specification was faulty, even if the company did not use the information?
Delays in completing a job can be the government’s responsibility as well. The following are some of the indicators of government caused delays:
- If work requires review or approvals, but the government is untimely in providing them,
- If the government hinders access to places or information critical to completing a project.
- If government personnel are not cooperating or obstructing timely performance.
The question for the contractor to answer is the why is there a delay. The facts will lead you to the answer.
Maintaining good customer relations is as important in working with the federal government as it is in any other industry. So how responsive you are to the government is very important. When a problem is the company’s fault, let the government know and implement a corrective action plan that will put the contract back on schedule. The key here is to recognize what the company is responsible for and also what the government may be responsible for. The company’s position must be documented and explained completely to the federal government. If it is the govern-ment’s fault, the company must have a clear chronology of events with the facts, dates of events, and resulting effect on the company.
The way it is explained to the procurement officials, normally the administrative contracting officer (ACO) is also important. It should always remain factual and not accusatory. The federal government may not be aware of the facts and you must always assume that you are giving them additional knowledge. Do not assume that they will agree and do not take it personally if they do not. I have been in situations where the government has a budget or other internal problem that causes them to disagree, not the facts.
Whatever the situation, always maintain your rights. Discuss what options are available to you with the government. If they disagree with your conclusions, ask for a response in writing. Try to ascertain and ask what additional information may be useful in determining the opinion of the government. In most cases, the federal government will be professional in its approach to a company’s position about a change.
Changes come in two forms, directed and constructive. Directed changes are clear at least from the perspective that the ACO has told the company to do a specific action. Sometimes, that action may appear to the government to be within the scope of the contract when it is not. The company must point this out informally, at first, but next in writing and if the government does not agree it should file a claim under the Contracts Disputes Act clause of the contract.
Constructive changes are much harder for a company to deal with. Often it is not apparent until the company is well into the performance of the contract. Budget overruns and contract delays in deliveries are symptoms of a problem but not clear indicators of what the problem is. A careful examination of the facts is warranted. Often discussions with project staff will provide clues to what the problem is. They can indicate what is causing delays, for example site conditions. They would know what they were expecting and what they found when they got to the site. Faulty specifications from the government may be requiring staff to rework what the government had provided or to discard it completely. Again get the facts straight and present them to the government in a rational and professional manner. You must be persuasive in your presentation. Only presenting partial information will only prolong the process and delay the company from getting compensated for its additional work. Also, a company may lose its opportunity to claim interest if information is missing and the government has reason to delay making a final decision.
As before, if the ACO decides that the facts do not support a change, the company must file a certified claim to the federal government to preserve its rights. If the deadline set for filing a properly certified claim is missed, then the company loses its rights to additional compensation.
Our experience indicates that 90% of constructive and directed changes are settled without a certified claim. The ACO in most cases will discuss the situation and present the government’s position in a rational and thoughtful way. But for the 10% that require a certified claim under the Contracts Disputes Act, most are settled outside the litigation system. For those going to court, the case made about the change is based on how well the facts agree with the position the company takes. Sometimes, a company loses a case, not because they are wrong about the change, but because they argue the wrong facts.
When your company faces the possibility of a change in its contracts where it disagrees with the government, always get the advice of an attorney knowledgeable about government contracting. When deciding how to quantify the cost of such a claim, an accountant with an expertise in government contracting can provide advice and assistance in maximizing the value of the change.