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The Federal Circuit recently affirmed the Civilian Board of Contract Appeals’ (CBCA) decision denying a pandemic-related claim in Pernix Serka Joint Venture v. Secretary of State, CBCA No. 5683, 20-1 BCA ¶ 37,589.  Pernix involved a firm-fixed-price construction contract in Sierra Leone that was impacted by an Ebola outbreak several months into the project.  The Department of State (DOS) declined to provide direction or to issue a suspension of work order, and instead advised Pernix to make its own business decisions regarding performance and employee safety.  Pernix chose to demobilize its workforce and, later, to remobilize with the addition of its own on-site medical facility and services.  Pernix then submitted a claim for the increased medical, safety, and demobilization and remobilization costs.  DOS granted an adjustment to the schedule for the Ebola-related delays under the contract’s excusable delay clause, but denied Pernix’s monetary claim.

At the CBCA, Pernix argued that the Ebola outbreak resulted in a cardinal change, a constructive change, and/or a constructive suspension of work.  The Board rejected each argument.  First, the Board held that a cardinal change cannot occur when the work required by the contract is unchanged (and the Board found that the additional medical and safety precautions did not change the fundamental construction work required under the contract).  Second, the Board held there was no constructive change in the absence of direction from the Government, and noted that the Government permitted Pernix additional time to perform.  Third, the Board dismissed Pernix’s constructive suspension of work argument because it had not been presented to the contracting officer in Pernix’s certified claim.

Pernix appealed to the Federal Circuit.  However, on June 9, 2021, the Circuit affirmed the Board’s decision in a one-line summary Rule 36 decision.  Although the Federal Circuit did not address the specific issues and legal theories in Pernix’s claim, the summary decision is a reminder to contractors that actions taken in the absence of government direction may potentially be treated as business decisions, even if they were intended to safeguard employee health during a pandemic.  Moreover, contractors should be aware that even where they may be entitled to time extensions, they may not necessarily be entitled to additional costs.  Thus, as always, contractors who anticipate submitting claims should carefully consider and consult with counsel regarding potential legal theories for recovery and, where possible, ground those theories in specific direction from the cognizant Government contracting officer.

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Photo of Steve McBrady Steve McBrady

Steve McBrady is a partner and co-chair of Crowell & Moring’s Government Contracts Group. He also serves as a member of the firm’s Finance and Strategic Growth Committees, where he has played a leading role in expanding client service offerings throughout the U.S.…

Steve McBrady is a partner and co-chair of Crowell & Moring’s Government Contracts Group. He also serves as a member of the firm’s Finance and Strategic Growth Committees, where he has played a leading role in expanding client service offerings throughout the U.S., Europe, Asia, and the Middle East.

In recent years, Steve has received the National Law Journal’s “Winning Litigator” award as a lawyer who has “tackled some of the most widely watched cases of the year,” as well as the “D.C. Trailblazer” award, recognizing lawyers who have “made significant marks on the practice.” In 2018, he was named “Government Contracts MVP” by Law360.

Photo of Charles Baek Charles Baek

Charles Baek is a counsel in Crowell & Moring’s Washington, D.C. office, where he practices in the Government Contracts Group.

Charles represents government contractors in both litigation and counseling matters. His practice focuses on contract claims/disputes under the Contract Disputes Act (CDA), litigation…

Charles Baek is a counsel in Crowell & Moring’s Washington, D.C. office, where he practices in the Government Contracts Group.

Charles represents government contractors in both litigation and counseling matters. His practice focuses on contract claims/disputes under the Contract Disputes Act (CDA), litigation before the Armed Services Board of Contract Appeals (ASBCA), federal regulatory and ethics compliance and due diligence, bid protests before the Government Accountability Office (GAO), and False Claims Act (FCA) investigations. His practice also includes state contracting due diligence and litigation before the Court of Federal Claims.

Photo of Michelle Coleman Michelle Coleman

Michelle D. Coleman is a counsel in the Government Contracts Group in Crowell & Moring’s Washington, D.C. office. Michelle advises clients from diverse industries in connection with contract disputes and other government contract matters, including Contract Disputes Act (CDA) claims and requests for…

Michelle D. Coleman is a counsel in the Government Contracts Group in Crowell & Moring’s Washington, D.C. office. Michelle advises clients from diverse industries in connection with contract disputes and other government contract matters, including Contract Disputes Act (CDA) claims and requests for equitable adjustments, fiscal law questions, prime-sub disputes, and bid protests.

Photo of Rob Sneckenberg Rob Sneckenberg

Rob Sneckenberg is a government contracts litigator in Crowell & Moring’s Washington, D.C. office. He routinely first chairs bid protests before the U.S. Government Accountability Office (GAO) and U.S. Court of Federal Claims (COFC), and has successfully argued multiple appeals before the U.S.

Rob Sneckenberg is a government contracts litigator in Crowell & Moring’s Washington, D.C. office. He routinely first chairs bid protests before the U.S. Government Accountability Office (GAO) and U.S. Court of Federal Claims (COFC), and has successfully argued multiple appeals before the U.S. Court of Appeals for the Federal Circuit. He also represents contractors in contract claim and cost accounting disputes before the Armed Services Board of Contract Appeals (ASBCA), and counsels clients on a wide array of government contracts investigations. Rob is very active in Crowell & Moring’s pro bono program, where he focuses on civil and criminal appeals.

Photo of John Nakoneczny John Nakoneczny

John Nakoneczny is an associate in the Government Contracts Group in Crowell & Moring’s Washington, D.C. office.

John represents and counsels contractors from diverse industries on contract disputes and other government contract matters. Prior to joining Crowell & Moring, he clerked at the…

John Nakoneczny is an associate in the Government Contracts Group in Crowell & Moring’s Washington, D.C. office.

John represents and counsels contractors from diverse industries on contract disputes and other government contract matters. Prior to joining Crowell & Moring, he clerked at the Civilian Board of Contract Appeals, where he supported its judges in resolving and mediating appeals under the Contract Disputes Act. John earned his J.D. from The George Washington University Law School, where he was the president of the Government Contracts Student Association and on the Federal Circuit Bar Journal. While in law school, John served as a legal intern at the U.S. General Services Administration and the Fraud Section of the U.S. Department of Justice, Criminal Division. Upon graduation, John was awarded the President’s Volunteer Service Award.

Photo of Catherine Shames Catherine Shames

Catherine O. Shames is an associate in the Washington, D.C. office of Crowell & Moring, where she is a member of the firm’s Government Contracts Group.

Catherine’s government contracts practice focuses on contract claims/disputes under the Contract Disputes Act (CDA), prime-sub disputes, transactional…

Catherine O. Shames is an associate in the Washington, D.C. office of Crowell & Moring, where she is a member of the firm’s Government Contracts Group.

Catherine’s government contracts practice focuses on contract claims/disputes under the Contract Disputes Act (CDA), prime-sub disputes, transactional due diligence, internal investigations, and disclosures under the Mandatory Disclosure Rule. She also assists contractors with cost allowability issues and responding to DCAA audits.