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Hello All,

Assume a stop work order is issued in a federal contract due to COVID and last for 90 days. After 90days the client cancelled the SWO. Now the time impact due to the 90days SWO is 120days. In that case, will the contractor eligible to claim the followings as per FAR 52.242-15?

  1. Idle charges for the SWO period of 90 days
  2. Indirect cost required for the extended period 120days

Please provide your thoughts

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2 hours ago, Abdul said:

Hello All,

Assume a stop work order is issued in a federal contract due to COVID and last for 90 days. After 90days the client cancelled the SWO. Now the time impact due to the 90days SWO is 120days. In that case, will the contractor eligible to claim the followings as per FAR 52.242-15?

  1. Idle charges for the SWO period of 90 days
  2. Indirect cost required for the extended period 120days

Please provide your thoughts

See the pertinent wording in the clause:

“b) If a stop-work order issued under this clause is canceled or the period of the order or any extension thereof expires, the Contractor shall resume work. The Contracting Officer shall make an equitable adjustment in the delivery schedule or contract price, or both, and the contract shall be modified, in writing, accordingly, if-

            (1) The stop-work order results in an increase in the time required for, or in the Contractor’s cost properly allocable to, the performance of any part of this contract; and

            (2) The Contractor asserts its right to the adjustment within 30 days after the end of the period of work stoppage; provided, that, if the Contracting Officer decides the facts justify the action, the Contracting Officer may receive and act upon the claim submitted at any time before final payment under this contract.”

Note that you should  assert your right to an equitable adjustment within 30 days after the period of the stop work order. 

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Resource:

Winding Down: COVID-19 and Work Stoppages - SmallGovCon

3 hours ago, Abdul said:
  • Idle charges for the SWO period of 90 days
  • Indirect cost required for the extended period 120days

Anything claimed must be reasonable in nature and clearly not something that could have been mitigated.

FAR 52.242-15(a) - The Contracting Officer may, at any time, by written order to the Contractor, require the Contractor to stop all, or any part, of the work called for by this contract for a period of 90 days after the order is delivered to the Contractor, and for any further period to which the parties may agree. The order shall be specifically identified as a stop-work order issued under this clause. Upon receipt of the order, the Contractor shall immediately comply with its terms and take all reasonable steps to minimize the incurrence of costs allocable to the work covered by the order during the period of work stoppage. . ."

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4 hours ago, Abdul said:

Hello All,

Assume a stop work order is issued in a federal contract due to COVID and last for 90 days. After 90days the client cancelled the SWO. Now the time impact due to the 90days SWO is 120days. In that case, will the contractor eligible to claim the followings as per FAR 52.242-15?

  1. Idle charges for the SWO period of 90 days
  2. Indirect cost required for the extended period 120days

Please provide your thoughts

What do you mean by "will the contractor [be] eligible to claim"? "Eligible"? Are you asking whether the contractor would be entitled to a price adjustment for something?

What do you mean by "idle charges"? "Idle charges"? I don't know what that means. Do you mean the cost of idle facilities or the cost of idle capacity, or something else?

The phrase "idle charges" does not appear anywhere in the FAR System, in any board of contract appeals or Court of Federal Claims decision, in any Federal Circuit decision, in Government Contract Costs & Pricing, in the Government Contract Costs Pricing & Accounting Report, or in The Nash & Cibinic Report.

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3 hours ago, joel hoffman said:

See the pertinent wording in the clause:

“b) If a stop-work order issued under this clause is canceled or the period of the order or any extension thereof expires, the Contractor shall resume work. The Contracting Officer shall make an equitable adjustment in the delivery schedule or contract price, or both, and the contract shall be modified, in writing, accordingly, if-

            (1) The stop-work order results in an increase in the time required for, or in the Contractor’s cost properly allocable to, the performance of any part of this contract; and

            (2) The Contractor asserts its right to the adjustment within 30 days after the end of the period of work stoppage; provided, that, if the Contracting Officer decides the facts justify the action, the Contracting Officer may receive and act upon the claim submitted at any time before final payment under this contract.”

Note that you should  assert your right to an equitable adjustment within 30 days after the period of the stop work order. 

Thanks Joel,

I have gone through the FAR provision. My query is since 90days stop work period is claimed already under idle charge, can I submit REA for the total 120days extended period indirect cost ? or the REA will be considered for only for excess 30days (120 - 90days)?

Thanks

 

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Hi Vern

2 hours ago, Constricting Officer said:

Resource:

Winding Down: COVID-19 and Work Stoppages - SmallGovCon

Anything claimed must be reasonable in nature and clearly not something that could have been mitigated.

FAR 52.242-15(a) - The Contracting Officer may, at any time, by written order to the Contractor, require the Contractor to stop all, or any part, of the work called for by this contract for a period of 90 days after the order is delivered to the Contractor, and for any further period to which the parties may agree. The order shall be specifically identified as a stop-work order issued under this clause. Upon receipt of the order, the Contractor shall immediately comply with its terms and take all reasonable steps to minimize the incurrence of costs allocable to the work covered by the order during the period of work stoppage. . ."

Hi Thanks for the response. We took all the effort the reduce the cost and the Government wanted to keep the resources readily available to resume the work. So, the idle charges for keeping the people on standby was paid. My question is since 90 days stop work period standby charges are paid, are we eligible to get indirect cost like overhead expenses for the total extended 120 days period or only 30 excess days will be paid (120-90)?

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16 minutes ago, Abdul said:

My question is since 90 days stop work period standby charges are paid, are we eligible to get indirect cost like overhead expenses for the total extended 120 days period or only 30 excess days will be paid (120-90)?

The below is a case decision that was based on the 52.242-14 (suspension), but I believe it would still apply to 52.242-15 (stop work):

BEARDSLEY_03-26-18_5410__BCPEABODY_CONSTRUCTION_SERVICES_INC.pdf (cbca.gov)

Concerning Unabsorbed Home Office Overhead Costs (if that is what you are inquiring about): 

"BCPeabody requests unabsorbed home office overhead costs in the amount of $49,516.20 for the 179-day suspension. Suspension or delay of contract performance results in an interruption in payment for direct costs, which in turn causes an interruption in payment for overhead; however, overhead costs continue to accrue regardless of direct contract activity. This interruption in the stream of payments causes a portion of home office overhead costs to be unabsorbed. Nicon, Inc. v. United States, 331 F.3d 878, 882 (Fed. Cir. 2003); Wickham Contracting Co. v. Fischer, 12 F.3d 1574, 1577 (Fed. Cir. 1994). Eichleay refers to the formula used to calculate the amount of unabsorbed home office overhead when the Government indefinitely suspends or delays work. See P.J. Dick, Inc. v. Principi, 324 F.3d 1364, 1370 (Fed. Cir. 2003) (citing Melka Marine v. United States, 187 F.3d 1370, 1375 (Fed. Cir. 1999)); Eichleay Corp., ASBCA 5183, 60-2 BCA ¶ 2688. To receive Eichleay damages, appellant must first establish its prima facie case that (1) there was a VA-caused delay that did not run concurrently with any other delay, (2) the delay extended the time of performance of the contract, and (3) appellant was required to remain on standby during the delay. P.J. Dick, 324 F.3d at 1370."

In my view, if you are eligible for them, then it should be for the whole period of the stop work order.

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15 minutes ago, Abdul said:

Hi Vern

Hi Thanks for the response. We took all the effort the reduce the cost and the Government wanted to keep the resources readily available to resume the work. So, the idle charges for keeping the people on standby was paid. My question is since 90 days stop work period standby charges are paid, are we eligible to get indirect cost like overhead expenses for the total extended 120 days period or only 30 excess days will be paid (120-90)?

Let me see if I understand this situation.

The contractor received a Stop Work notice and stopped work. The government agreed to reimburse the contractor for its paid leave costs for the idled employees under Section 3610 of the CARES Act. If so, the reimbursement labor should have been burdened with appropriate indirect costs when the reimbursement requests were submitted.

Now you want to know if the contractor is entitled to Eichleay damages for the period of time not covered by the Section 3610 reimbursements? Possibly. Where did the idled employees charge during the 30 days? Can the costs be claimed under Section 3610 instead of via an Eichleay claim? How much is at stake here (quantum)? Is it worth hiring consultants and lawyers to support your claim if your REA is rejected? Those are questions that you need to answer.

 

 

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My first question would be whether the stop-work order was actually issued under the clause at FAR 52.242-15.  If NO, then the equitable adjustment provision of that clause does not apply.

If the stop-work order was issued under some other authority, then one must look to that other authority to see if there is any remedy.

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28 minutes ago, here_2_help said:

The government agreed to reimburse the contractor for its paid leave costs for the idled employees under Section 3610 of the CARES Act.

I read, "...the idle charges for keeping the people on standby was paid..." -- but the contractor may have paid its employees on its own initiative to retain talent.  Really, I don't know if that blurb means (1) the contractor paid its employees; (2) the Government paid the contractor; or (3) something else.

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36 minutes ago, ji20874 said:

I read, "...the idle charges for keeping the people on standby was paid..." -- but the contractor may have paid its employees on its own initiative to retain talent.  Really, I don't know if that blurb means (1) the contractor paid its employees; (2) the Government paid the contractor; or (3) something else.

I'm not arguing with you ... but I was interpreting based on the topic under which the question was posted. Interpretation is inherently subjective ...

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46 minutes ago, here_2_help said:

Interpretation is inherently subjective ...

Right.  And the paucity of meaningful information from the original poster requires a lot of interpretation, supposition, and so forth from anyone here who wants to be helpful.

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Not sure that unabsorbed home office overhead would apply to the standby period if the labor costs were paid and already burdened with the all indirects including the home office. It was essentially a ninety day time extension. And it wasn’t an indeterminable period, which is normally one of the prerequisites for unabsorbed home office overhead. If your time related indirect costs weren’t already covered, I would think that they should be allowable as if it were a 90 day time extension. 

You didn’t explain the reason for the necessity of an additional 30 days or if this was additional idle time. You should have been ready to go back to work immediately if you were retaining and paying the workforce. The government cancelled the SWO after ninety days but the clause says it’s only effective for 90 days unless there is a bilateral extension. 

if there was a delay in bringing the workforce back, could it be that they were redirected to other work, even though paid for the project they were assigned to before the delay? In that event, I’d have some serious problems with paying for “idle time” when employees weren’t “idled” and you knew the end date of the order to stop work in advance. As I said, we don’t know why there is now 120 days to make up the effort instead of ninety. I’m assuming that this is not a construction contract- likely a service contract, if a “stop work order” was issued (52.242-15).

If idle time constituted the impact on a service contract stop work and you were paid for the impact, it would essentially be a time extension, including indirect costs and profit.

You said that you were paid for all labor in order to retain the workforce. If some labor was redirected to other work during the delay, so that they couldn’t immediately restart work, I feel that you overcharged and were overpaid.  And the government might not be responsible for some or all of the additional 30 day impact in that event.

Construction contracts and A/E contracts use a “Suspension of Work” clause (52.242-14) which doesn’t provide for an equitable adjustment (profit), only for increased costs. A time extension due to suspension of work for construction is provided for under the “Defaults- Fixed Price Construction Clause”  (52.249-10).

A time extension of 90 days appears to be warranted for construction or for services. We don’t know anything about the additional 30days.

Honestly, because of COVID being the stated excuse for the stop work order, we don’t really know if the contractor could have worked without a stop work order , thus there may be excusable delay but not necessarily compensable delay for all of the impact. Depends upon all of the facts and circumstances. 

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Hello All, thank for your valuable comments. Let me give some more information about the scenario which I think will provide clarity to all your questions;

  1. Our contract is a construction contract and the stop work order was issued under  52.242-15 (AUG 1989).
  2. No cares act provision was used. Government reimbursed the actual cost spent by the Contractor on the following items during the stop work period and no other indirect costs or profit was paid;
    • Idle manpower charges (direct works manpower)
    • Idle machinery charges (machineries left at site)
    • Idle site temporary facilities (facilities left at site)
    • Demobilization and remobilization of manpower charges
    • DBA, performance bond and insurance charges for the stop work period
  3. No unabsorbed home office overhead cost and profit was paid for the above reimbursed cost of the stop work period
  4. No indication on the anticipated cancellation work stop work order was given even after repeated follow-up by the Contractor. Contractor recorded all the idle hours of the items stated in above point#2 through daily report
  5. Immediately after the stop work, the site manpower was demobilized to their respective Districts/ States. Once the stop work was cancelled they were remobilized to the site after obtaining necessary Government permits for the movement
  6. Stop work period was only 90 days. But the project needed 120 day extension to complete due to the remobilization works required, impact on the material delivery and additional period required to increase the productivity. 
  7. We submitted an REA for the extended 120 days period for the following costs;
    • Site overhead for the extended period
    • Site temporary facilities cost for the extended period
    • Home office overhead cos for the extended period
    • DBA, performance bond and insurance charges for the extended period
    • Profit for the above costs
  8. Whereas, now the Government is agreeing to pay for the items claimed under above point#7 (except profit) only for the excess 30 days (120-90). The Government stand on 120 days claim is, 90 days out of 120 days is part of original Period of Performance (POP), so it must be covered in the original contract price. Since the Government reimbursed the stop work period costs as stated in point#2 above, the Contractor still has the cost to spend for the 90days POP for the items listed in point#7.
  9. Hence, please provide your guidance on how to claim all the items stated in point#7 for the total extended 120 days period.

Thanks

 

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1. Is this a firm fixed price construction contract?

I’ve never seen clause 52-242-15 used in a construction contract. FFP construction contracts prescribe (shall insert) 52.242-14 “Suspension of Work”. The other clause is optional for contracts for supplies, services, or research and development. I don’t know why the FAR matrix says the -14 clause is “A”, (as applicable) for FFP construction. But the -15 clause is blank in the FAR matrix under construction contracts. 

By the way, the Stop Work Order clause provides for an equitable adjustment , which INCLUDES  profit or fee.

You said that immediately after the order: 

9 hours ago, Abdul said:

Immediately after the stop work, the site manpower was demobilized to their respective Districts/ States.

2.  Did you keep paying the hourly workforce during the directed 90 day period? If so, why and did you receive any Government COVID relief for those payment  EDIT: never mind  you said they did pay for idled labor.

3.  You said that the 120 days is composed of 90 days to finish the “stopped” work plus 30 days remob time, correct? 

The government paid for all your claimed costs, less profit, for the 30 days.

The government said that said that the cost of the work still to be performed and earned already includes the direct and indirect cost including G&A, overheads profit , site expenses, etc. for 90 days of the 120 day time extension. So, apparently the work has just been shifted out 120 days and you will be paid for the 90 days to do the delayed work. 

4.  What actual type of expenses did you incur during the 90 days that the work was stopped, that the government didn’t reimburse you for ?  EDIT:  You said they paid for “idle labor”Does that include the site overhead staff? You said they paid for site facilities, equipment standby,  Insurance and bond on the costs.  That only leaves G&A (and profit), correct??

I see the 90 days as a clearly articulated, determinant length of the stop work order.  It wasn’t in-determinant. 

I just want to be clear about the facts , if you can please clarify answers to the four overall questions?

By the way, if in fact, the -15 clause was actually in your contract, the stop work order clause entitles you to profit on the additional costs due to a Stop Work Order. 

EDIT: without further clarification, It looks to me like you will have been paid or reimbursed for all additional direct and indirect costs for the actual 90 day delay period with the exception of G&A. Plus no profit on costs.

EDIT: And it appears that for the 120 days to remob and perform the work, you will have been paid for the 30 day remob period and all costs plus profit for the 90 days to perform the work.

EDIT: Then, as a minimum, it would appear that G&A on the reimbursed costs may be due. But I’m not sure that unabsorbed overhead is due for the 90 day delay. For one thing ,  the costs reimbursed appear to be about what it oil have cost if you were working during the 90 days. Add normal G&A rate to that.  The only other question would be whether profit is allowable. I think this depends upon which clause applies -14 or -15. 

 

Edited by joel hoffman
I neglected to consider the very first set of reimbursed expenses.
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So, the Government has already paid for a large portion of your REA, but you cannot come to agreement on the remainder?

Read the Disputes clause in your contract and file a claim.

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On 5/16/2021 at 4:44 PM, joel hoffman said:

Hi Joel;

Thanks for your response. Please find the my clarification to your questions;

On 5/16/2021 at 4:44 PM, joel hoffman said:

1. Is this a firm fixed price construction contract? - Yes, and 52.242-15 is used in the contract

I’ve never seen clause 52-242-15 used in a construction contract. FFP construction contracts prescribe (shall insert) 52.242-14 “Suspension of Work”. The other clause is optional for contracts for supplies, services, or research and development. I don’t know why the FAR matrix says the -14 clause is “A”, (as applicable) for FFP construction. But the -15 clause is blank in the FAR matrix under construction contracts. 

By the way, the Stop Work Order clause provides for an equitable adjustment , which INCLUDES  profit or fee.

You said that immediately after the order: 

2.  Did you keep paying the hourly workforce during the directed 90 day period? If so, why and did you receive any Government COVID relief for those payment  EDIT: never mind  you said they did pay for idled labor. - The Government did not provide any indication until when the stop work order will be. So we were paying the salary to the workforce to keep them readily available and the Government paid for those idle hours

3.  You said that the 120 days is composed of 90 days to finish the “stopped” work plus 30 days remob time, correct? - 120 days including 90 days stop work period + remobilization + additional time required to complete. In construction when the work is progressing in full swing and if it is stopped in between, the time required to complete the work after the resumption of work will be more than your original estimated duration since the speed of the work progress will be less.

The government paid for all your claimed costs, less profit, for the 30 days.- Government paid the claimed cost except HO G&A + profit for the stop work period

The government said that said that the cost of the work still to be performed and earned already includes the direct and indirect cost including G&A, overheads profit , site expenses, etc. for 90 days of the 120 day time extension. So, apparently the work has just been shifted out 120 days and you will be paid for the 90 days to do the delayed work. - Yes, as per the Government, out of total 120 days extended period expenses, 90 days cost is covered in the base contract and for the excess 30days they are willing to site indirect cost but not the HO G&A and Profit. 

4.  What actual type of expenses did you incur during the 90 days that the work was stopped, that the government didn’t reimburse you for ?  EDIT:  You said they paid for “idle labor”Does that include the site overhead staff? You said they paid for site facilities, equipment standby,  Insurance and bond on the costs.  That only leaves G&A (and profit), correct?? Government paid the claimed cost except HO G&A + profit for the stop work period

I see the 90 days as a clearly articulated, determinant length of the stop work order.  It wasn’t in-determinant. 

I just want to be clear about the facts , if you can please clarify answers to the four overall questions?

By the way, if in fact, the -15 clause was actually in your contract, the stop work order clause entitles you to profit on the additional costs due to a Stop Work Order. 

EDIT: without further clarification, It looks to me like you will have been paid or reimbursed for all additional direct and indirect costs for the actual 90 day delay period with the exception of G&A. Plus no profit on costs. Government paid the claimed cost except HO G&A + profit for the stop work period

EDIT: And it appears that for the 120 days to remob and perform the work, you will have been paid for the 30 day remob period and all costs plus profit for the 90 days to perform the work. for the excess 30days the Government is  willing to site indirect cost but not the HO G&A and Profit.  My question is can I get my indirect cost + HO G&A + Profit for all 120 days extended period?

EDIT: Then, as a minimum, it would appear that G&A on the reimbursed costs may be due. But I’m not sure that unabsorbed overhead is due for the 90 day delay. For one thing ,  the costs reimbursed appear to be about what it oil have cost if you were working during the 90 days. Add normal G&A rate to that.  The only other question would be whether profit is allowable. I think this depends upon which clause applies -14 or -15. 

 

 

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Thanks for the clarification, Abdul. Based upon the information provided, I don’t know why the Home Office G&A on the direct and indirect costs is not allowable.  And, if they did indeed issue a 90 day “stop work order” under the -15 clause, an “equitable adjustment” for increased (or decreased) costs includes consideration of profit.

Very strange why the -15 clause is in a construction contract instead of the -14 Suspension of Work clause (delay costs only- no profit).

 

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On 5/20/2021 at 5:39 PM, joel hoffman said:

Thanks for the clarification, Abdul. Based upon the information provided, I don’t know why the Home Office G&A on the direct and indirect costs is not allowable.  And, if they did indeed issue a 90 day “stop work order” under the -15 clause, an “equitable adjustment” for increased (or decreased) costs includes consideration of profit.

Very strange why the -15 clause is in a construction contract instead of the -14 Suspension of Work clause (delay costs only- no profit).

 

Hi Joel,

Given the provision of stop work order, what are all the ways to claim the indirect cost, G&A and profit for the total 120days (not just 30days)?

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On 5/20/2021 at 1:29 AM, Abdul said:

Government paid the claimed cost except HO G&A + profit for the stop work period

You did not mention an exception for other “indirect costs”. 

On 5/20/2021 at 8:39 AM, joel hoffman said:

Based upon the information provided, I don’t know why the Home Office G&A on the direct and indirect costs is not allowable.  And, if they did indeed issue a 90 day “stop work order” under the -15 clause, an “equitable adjustment” for increased (or decreased) costs includes consideration of profit.

If you have been reimbursed for your direct and indirect costs, except for home office G&A, did you sign any applicable bilateral modification(s)  that contained the following release?

FAR 43.204(c):

“(c) Complete and final equitable adjustments. To avoid subsequent controversies that may result from a supplemental agreement containing an equitable adjustment as the result of a change order, the contracting officer should—

(1) Ensure that all elements of the equitable adjustment have been presented and resolved; and

(2) Include, in the supplemental agreement, a release similar to the following:

CONTRACTOR'S STATEMENT OF RELEASE

In consideration of the modification(s) agreed to herein as complete equitable adjustments for the Contractor's ________ (describe) _________ “proposal(s) for adjustment,” the Contractor hereby releases the Government from any and all liability under this contract for further equitable adjustments attributable to such facts or circumstances giving rise to the “proposal(s) for adjustment” (except for __________ ).

[48 FR 42386, Sept. 19, 1983, as amended at 56 FR 15154, Apr. 15, 1991; 62 FR 51271, Sept. 30, 1997]”

In other words, did you reserve your rights to obtain reimbursement for home office G&A and profit as part of any agreement made so far concerning the stop work order?

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