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52.242-14 Suspension of Work


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I just inherited a $1M generator installation contract. Period of performance April 2019-April 2020. In Sept 2020 a suspension of work was issued due to government delay for various reasons...change of generator locations, change orders, and lack of customer communication and decision making. 10 months later -  I am in the process of lifting the Suspension. While I have read the clause and understand the GC cost excluding profit. Will the subcontractors be due any consideration for the delay? Demobilize/ Mobilize, increase in material cost, etc. Any guidance is appreciated. 

IAW 52.242-14

  (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.

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55 minutes ago, learningcurve said:

Period of performance April 2019-April 2020. In Sept 2020 a suspension of work was issued...

Can you you explain the contract rationale for apparently issuing a contract suspension order 5 months after the period of performance in the contract ended? Was it a ratification for a verbal suspension?

Edited by Neil Roberts
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3 hours ago, learningcurve said:

Will the subcontractors be due any consideration for the delay? Demobilize/ Mobilize, increase in material cost, etc. Any guidance is appreciated. 

Please clarify the the actual scenario per Neil’s questions.

The answer to your question would be yes, if there are verifiable increased costs strictly associated with the suspension .

Note that if there is any change of requirements involved, the changes clause would likely also be involved. In that event, one must separate changes in cost to the subs and/or prime due to  the delay from differences in cost due to any changes.

The latter would include allowance for profit.

If the changes result in net lower costs (after separating out the delay cost impacts) a profit credit would be applicable on those cost differences.

  

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11 hours ago, learningcurve said:

Will the subcontractors be due any consideration for the delay? Demobilize/ Mobilize, increase in material cost, etc. Any guidance is appreciated. 

They will likely be entitled to compensation if their work was affected by the suspension. But that would be a matter between the prime and its subs.

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While there were changes using the changes clause those cost were settled before the suspension. The main question is subcontractor compensation due to the suspension.

I may have misunderstood the feedback from what Joel stated "The answer to your question would be yes, if there are verifiable increased costs strictly associated with the suspension vs the feedback from Vern " they will likely be entitled to compensation if their work was affected by the suspension. But that would be a matter between the prime and its subs."

The contract is with the GC which will be compensated per 52.242-14 guidance, if the sub was on standby during the suspension, this was not due to the request of the Gvt. I find that compensation for Demobilize/ Mobilize may be considered. 

 

Sub A - is requesting compensation for all of their employees salary for the suspension duration. This will be rejected as stated above. The contract is with the GC, if they were on standby it was due to not fault of the Gvt. 

Sub B - is requesting cost for the extended time once work resumes. I find that the funds allocated for the period of performance before the work suspension has not been exhausted. This will be rejected. 

Sub C - is requesting for 15% price increase on material. No decision as of yet. 

Sub D - is requesting 120 hrs for demobilizing which is unfound according to the site daily logs.  All sub were off of the site within 16 hrs.  Denied.

 

 

 

 

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31 minutes ago, learningcurve said:

The contract is with the GC which will be compensated per 52.242-14 guidance, if the sub was on standby during the suspension, this was not due to the request of the Gvt. 

Your statement confuses me. If a Suspension of Work notice was issued to the prime contractor, wouldn't you expect the prime to flow that notice down to its subcontractors? What's the alternative -- to let the subKs keep working (and charging) while the prime sits on its hands? I don't think that's how it is intended to work.

I believe what Vern was getting at is that the prime is responsible for assessing any requests for equitable adjustment from its subcontractors. Those subcontract price increases become part of the prime's cost impact to the government. At least, that's what I think should happen. Vern is welcome to correct me if I've misinterpreted his thoughts.

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Without knowing all the details, we can’t give specific advice regarding entitlement for the prime or the sub’s. 

The government often gets itself into trouble if a directed suspension is for an indefinite, extended period.

With no period defined, the affected firms might initially at least, remain on standby for part or all of the suspension period so that they  can’t redirect their resources to other jobs. This appears to be a nine month (!) suspension of work. A firm should realistically try to redirect their forces after some time has elapsed but we don’t know the circumstances.

You need not and we prefer that you do not provide all that detail here.

By the way, there are scads of case law on delays and suspensions of work that you and your legal counsel  can research.

I also had several books with yearly updates concerning delays. This is something you should review with your legal office and others familiar with delays and other entitlement issues. 

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18 minutes ago, here_2_help said:

Your statement confuses me. If a Suspension of Work notice was issued to the prime contractor, wouldn't you expect the prime to flow that notice down to its subcontractors? What's the alternative -- to let the subKs keep working (and charging) while the prime sits on its hands? I don't think that's how it is intended to work.

I believe what Vern was getting at is that the prime is responsible for assessing any requests for equitable adjustment from its subcontractors. Those subcontract price increases become part of the prime's cost impact to the government. At least, that's what I think should happen. Vern is welcome to correct me if I've misinterpreted his thoughts.

H2H, I don’t totally disagree with you. However, I will say that just because a prime on a FFP construction contract agrees to pay a sub for claimed costs doesn’t automatically cause the government to be liable for them, if they are unreasonable, inflated or otherwise wouldn’t be allowable. When I was handling construction changes, delays, REA’s and claims, we reviewed and negotiated the subcontract entitlement, too. Our primes wouldn’t separately finalize subcontract claims or proposals for delays before presenting them to the government. 

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@learningcurveThink. If you suspended your general contractor, and your general contractor had to suspend or terminate a sub, then the terms of the contract between the general contractor and the sub will determine what if any settlement the general must make with that sub. If the general incurs a liability to a sub that was caused by the action it took in response to its suspension, it will want to pass that liability on to the government. Okay? Got that?

The general will either settle with the sub before going to the government or it must estimate what settlement it will have to make in order to request compensation from the government. Whether the amount the general seeks from the government is allowable, in accordance with FAR 31.201-2, and therefore compensable, will be a matter for contracting officer consideration and determination. Got that?

Conceptually, this is very very simple contract law. The details, however, are likely to be complicated.

My suggestion is that you do not come here for help with the details. Instead, talk to someone in your organization who knows how to handle this sort of thing.

 

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1 hour ago, joel hoffman said:

H2H, I don’t totally disagree with you. However, I will say that just because a prime on a FFP construction contract agrees to pay a sub for claimed costs doesn’t automatically cause the government to be liable for them, if they are unreasonable, inflated or otherwise wouldn’t be allowable. ... Our primes wouldn’t separately finalize subcontract claims or proposals for delays before presenting them to the government. 

That makes some sense because the primes would want to be confident that their subK settlements would be reimbursed by the customer.

Having said that, I hadn't believed that privity of contract worked that way. I had assumed that the prime's decision to settle a subK REA or claim was separate from the government's decision to settle the prime's REA or claim. (Obviously, that's not the case in terminations, where the government's rights with respect to subcontractor termination settlements are expressly established. But that's not what this thread is about.)

It's interesting to me that your situation didn't work that way. Do you think the prime getting a governmental green-light to settle with its subKs was unique to your particular contractual situation, or was that the consistent approach you experienced throughout your career?

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@here_2_help

22 hours ago, joel hoffman said:

Our primes wouldn’t separately finalize subcontract claims or proposals for delays before presenting them to the government. 

 

21 hours ago, here_2_help said:

Do you think the prime getting a governmental green-light to settle with its subKs was unique to your particular contractual situation, or was that the consistent approach you experienced throughout your career?

What would happen is that a prime would request an adjustment from the government before it settled with its subs because it wouldn't want to agree to pay a sub until it knew how much it was going to get from the government. It wasn't a matter of the government "green-lighting" a settlement.

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1 hour ago, here_2_help said:

It's interesting to me that your situation didn't work that way. Do you think the prime getting a governmental green-light to settle with its subKs was unique to your particular contractual situation, or was that the consistent approach you experienced throughout your career?

Vern explained above. As far as I know, we never green lighted the prime to settle with its subs for forward pricing of changes or for claims and REA’s. For change orders, it depended upon the timing and nature of the action and the subcontracts/subcontracted work.

But for a situation such as described here, we would not have “green lighted” the prime to settle impact claims/REA’s with its subs. 

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46 minutes ago, Vern Edwards said:

@here_2_help

 

What would happen is that a prime would request an adjustment from the government before it settled with its subs, because it wouldn't want to agree to pay a sub until it knew how much it was going to get from the government. It wasn't a matter of the government "green-lighting" a settlement.

Thanks. That makes sense.

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