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Matt_mcginn

Suspension of Work

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FAR 52.242-14 states:

(a) The Contracting Officer may order the Contractor, in writing, to suspend, delay, or interrupt all or any part of the work of this contract for the period of time that the Contracting Officer determines appropriate for the convenience of the Government.

(B) If the performance of all or any part of the work is, for an unreasonable period of time, suspended, delayed, or interrupted (1) by an act of the Contracting Officer in the administration of this contract, or (2) by the Contracting Officer?s failure to act within the time specified in this contract (or within a reasonable time if not specified), an adjustment shall be made for any increase in the cost of performance of this contract (excluding profit) necessarily caused by the unreasonable suspension, delay, or interruption, and the contract modified in writing accordingly. However, no adjustment shall be made under this clause for any suspension, delay, or interruption to the extent that performance would have been so suspended, delayed, or interrupted by any other cause, including the fault or negligence of the Contractor, or for which an equitable adjustment is provided for or excluded under any other term or condition of this contract.

Question #1 - If it has been determined that the delay is both excusable (Defaults clause) and compensable (Suspension of Work clause), what is the best way to isolate the costs that should be considered for providing relief of actual costs for FOOH, Design and/or HOOH as a result of the delay? Typically contractors try to load up a cost pool to come up with a daily rate and then multiply times the number of days of delay. However, if there is no idle equipment and only very limited labor costs as a result of suspension, is there anything due the contractor?

Question #2 - What would be the reasons to NOT issue a suspension of work, if you know there is going to be a delay in giving NTP or allowing some part of critical path works to commence? Isn't the contractor already on notice about suspension at the convenience of the Gov't, by virtue of the clause being in the contract?

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"Question #1 - If it has been determined that the delay is both excusable (Defaults clause) and compensable (Suspension of Work clause), what is the best way to isolate the costs that should be considered for providing relief of actual costs for FOOH, Design and/or HOOH as a result of the delay? Typically contractors try to load up a cost pool to come up with a daily rate and then multiply times the number of days of delay. However, if there is no idle equipment and only very limited labor costs as a result of suspension, is there anything due the contractor?"

For a delay period where little or no work is performed, the contractor could recover the fixed portion (those costs which are time dependant) of field office overhead as a daily rate. The trick is to isolate the fixed costs from other, variable costs (costs which vary based upon amount of work).

Unless the contractor can establish the conditions precedent for "unabsorbed home office overhead, the additional home overhead costs would be payable as a percentage of other direct and indirect costs.

Here is some discussion from P.J. Dick, Inc. v. Department of Veterans Affairs, 324 F.3d 1364 (Fed. Cir. 2003). Note, this may have been superseded by later decisions but was good guidance at the time. The Federal Circuit listed the questions a court should ask when evaluating a contractor?s claim for Eichleay (daily, unabsorbed overhead) damages:

"1. Was there a government-caused delay that was not concurrent with another delay caused by some other source?

2. Did the contractor demonstrate that it incurred additional overhead costs?

3. Did the government CO issue a suspension or other order expressly putting the contractor on standby?

4. If not, can the contractor prove there was a substantial delay of indefinite duration during which it could not bill substantial amounts of work on the contract and at the end of which it was required to be able to return to work on the contract at full speed and immediately?

5. Can the government show that it was not impractical for the contractor to take on replacement work (i.e., a new contract) and thereby mitigate its damages?

6. If the government meets its burden of production as set out in Question No. 5, can the contractor satisfy its burden of persuasion that it was impractical for it to obtain sufficient replacement work?

The court held: ?Only where the above exacting requirements can be satisfied will a contractor be entitled to Eichleay damages.?

The Federal Circuit took a particularly close look at the fourth question in an effort to clarify what it called the ?multi-faceted? inquiry of standby. In the absence of an express order from the CO putting the contractor on standby, the court said, the contractor must prove standby by the following indirect means:

1. The contractor must show that the government delay was not only substantial but was of indefinite duration. (For example, when the government suspends all work on the contract but tells the contractor that the work will begin again on a certain date, the contractor cannot be on standby.)

2. The contractor must show that during that delay it was required to be ready to resume full work immediately. (Thus, when the government gives the contractor a reasonable amount of time to remobilize its workforce once the suspension is lifted, the contractor cannot be on standby.)

3. The contractor must show effective suspension on much, if not all, of the work on the contract."

Source: "Construction Weblinks" by Howrey LLP at:

http://www.constructionweblinks.com/Resour...03/eichleay.htm

Regarding "design costs", what are you referring to? Not enough information to formulate any opinion or advice.

"Question #2 - What would be the reasons to NOT issue a suspension of work, if you know there is going to be a delay in giving NTP or allowing some part of critical path works to commence? Isn't the contractor already on notice about suspension at the convenience of the Gov't, by virtue of the clause being in the contract?"

From the clause and the above discussion, you should be able to see that:

1) You don't have to direct a suspension of work for the contractor to request an adjustment as a constructive suspension of work and:

2) It is potentially worse if you allow the contractor to be constructively suspended from performance of work for an indeterminate period than if you issue a formal suspension for a determinate period.

If the period is indeterminate and the contractor is in limbo, it will more than likely be entitled to unabsorbed daily home office overhead, calculated using the Eichleay formula. If you issue a suspension for a determinate period, you might only be liable for any increased cost impacts, such as inflation or the like. If the period is indeterminate, you might be liable for both that and unabsorbed OH costs. You can issue a definite delay notice and if it needs to be extended, extend it. If the delay will certainly be resolved early, you can contact the contractor and ask if it could mobilize or remobilize earlier than the original suspended delay period.

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Dear Joel,

Thank you for your complete opinion.

You asked "Regarding "design costs", what are you referring to? Not enough information to formulate any opinion or advice."

In the case of a D-B construction project, typically an A-E is teamed with a GC and there is therefore Design-specific costs associated with a delay, due to acceleration of design submittals so as to not impact critical path. Many times, accelerations happen outside the sphere of influence of contracting and then when all is said and done, there is more or less a number already worked out between the PM and the GC for costs associated. Tricky part is that another person's name is on the SF-30 signature line. While I understand and appreciate the myth Vern mentioned in another post "A Contracting Officer is the only one who can obligate the Gov't", certainly an 1102 IS the only one that technical staff wants to have sign so that their butt is not on the line.

I also agree with your comments about constructive suspensions vs. a notification of suspension. Different schools of thought appear to be out there and I do not accept the advice that it might not be advantageous to mention the FAR clause and notify the contractor accordingly. ANY reasonable person should be able to see what you pointed out - (1) there is potentially worse liability if a notice of suspension is not issued and (2) all it takes is a constructive suspension for the contractor to have entitlement to request an adjustment.

Joel, I can't remember at the moment - are you current or former Army/Navy construction CO by chance? Or are you with GSA as your signature indicates (GSA PBS has a "Sail On" mantra on everything) ?

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Joel,

I want to make sure I understand what you mean by variable costs (costs which vary based upon amount of work) in the case of a D-B contractor who has not mobilized on site (the reason is due to the delay cause). It seems the only costs that should be contemplated for providing relief is:

Daily FOOH - fixed portions (as per your post): salary of staff, equipment, vehicles, etc.

Design costs: salary of A-E subcontractor & other misc. costs

HOOH % rate on the total

Also included in settlement is time extension - not necessarily all of the days of the delay period.

Given that you have experience negotiating and settling modifications for the above, can you provide advice of "what to look out for" or other helpful information to make sure a fair adjustment is made?

I've determined that the precedent for Eichleay has not been met. Therefore, it seems to me a negotiation of what fixed costs are allocable for the daily field office cost and other misc. costs associated with field staff, design staff. Is there ever a situation where HOOH as a % is not added onto the total of actual costs?

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Not knowing the circumstances or period of delay, I can't be too specific.

The cost impacts are granted under the Suspension of Work clause and the time extension is granted under the Defaults Clause.

Sometimes, delays may cause price escalation. I wouldn't include profit or fee on a constructive suspension of work. Pursuant to the Suspension of Work clause, we allow increased costs but no profit or fee.

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