As the COVID-19 virus extends its global reach, defense contractors may be called upon to begin implementing their contracts’ mission-essential services plans. These plans, required by DFARS 252.237-7023, facilitate mission-essential functions in extended crisis situations, including pandemics, which are explicitly noted in the DFARS. As the coronavirus outbreak continues, defense contractors should check whether their contracts include this clause and assess their readiness to implement the requirement if DoD requests activation of the company’s plan.

DFARS 252.237-7023, promulgated partially in response to the 2009 H1N1 influenza pandemic, governs contractor performance of essential contractor services that support mission-essential functions. Under the clause, mission-essential functions include “those organizational activities that must be performed under all circumstances to achieve DoD component missions or responsibilities,” without the performance of which DoD’s ability to provide vital services or exercise authority, direction, and control would be significantly impaired. These functions generally do not include all services provided under a contract, but rather, only those the contract specifically identifies as essential.[1] Common examples include services that support vital systems, such as ships leased, owned, or operated to support military missions, associated base and installation support activities, and similar services provided under the Security Assistance Program to foreign military sales customers.

Mission-essential services plans generally must identify any provisions for acquiring essential personnel and resources to support continued operations for 30 days, or until normal operations are resumed. [2] These plans are intended to address challenges posed in maintaining essential contractor services during crises, including delays between activating the plan and personnel availability on-site, established alert and notification procedures for mobilizing essential personnel, and other issues.[3]

When necessary, Contracting Officers will notify defense contractors to activate their plans,[4] and may also request that contractors update existing plans as necessary in light of the current outbreak and submit any changes for approval. If a contractor anticipates not being able to perform any of the essential contractor services identified in its plan, the contractor is required to “notify the Contracting Officer or other designated representative as expeditiously as possible and use its best efforts to cooperate with the Government in the Government’s efforts to maintain the continuity of operations.”[5] Contractors also may be called upon to provide training or other support to Government or other contractor personnel to ensure that they can perform essential services if the contractor cannot. This could result in a deductive change or partial termination of the contract.

Contractors performing essential services in accordance with these plans must segregate costs associated with such performance and must negotiate an equitable adjustment if costs increase or decrease based on performance in accordance with the plan.[6] Unless a longer period is approved, contractors have 90 days from the date they are directed to continue performance to notify the Contracting Officer of any increase or decrease in cost and request an equitable adjustment that addresses price, schedule and/or delivery.

Defense contractors would do well to look to their contracts and the plans they have in place to refresh themselves on what services are identified as essential under their contracts, and review their operations to ensure that they can provide any essential services as required. If directed to activate their mission-essential services plan, a contractor should also ensure that any subcontractor performing essential services is likewise directed to activate their mission-essential services plan. They should also make plans to segregate any costs associated with performance once a plan is activated, to support a request for equitable adjustment.

[1] DFARS 252.237-7023(b); see also DFARS 237.7602(a).

[2] See DFARS 252.237-7024 (establishing minimum plan requirements for DoD solicitations supporting mission-essential functions).

[3] Id.

[4] See DFARS 237.7602(b); 75 Fed. Reg. 66680, 66681 (Oct. 29, 2010).

[5] DFARS 252.237-7023(d)(2).

[6] DFARS 252.237-7023(f).

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Photo of Peter B. Hutt II Peter B. Hutt II

Peter Hutt represents government contractors in False Claims Act and fraud matters, and accounting, cost, and pricing disputes and counseling matters.

Peter is a leading False Claims Act lawyer in the government contracts arena. He has represented contractors for 35 years in matters…

Peter Hutt represents government contractors in False Claims Act and fraud matters, and accounting, cost, and pricing disputes and counseling matters.

Peter is a leading False Claims Act lawyer in the government contracts arena. He has represented contractors for 35 years in matters alleging cybersecurity noncompliance; cost mischarging; CAS violations; quality assurance deficiencies; substandard products and services; defective pricing; health care fraud; price reduction issues; inadequate subcontractor oversight; and reverse false claims. He has testified before Congress concerning the False Claims Act, and is a thought leader in the field. Peter also conducts internal investigations and advises clients on whether and how to make disclosures of potential wrongdoing.

Peter also represents contractors and grantees in accounting, cost, and pricing matters, and other contract and grant matters. He has addressed issues concerning pensions and post-retirement benefits; TINA and defective pricing; alleged CAS violations; cost accounting practice changes; alleged charging of unallowable and expressly unallowable costs; terminations; contract financing; price reduction clause issues; subcontracting and supply chain compliance; specialty metals compliance; and small business and DBE compliance. He has litigated cost, accounting, and contract breach matters in the Court of Federal Claims and the ASBCA.

Peter is recognized for his work both in False Claims Act and government contract disputes by Chambers USA, which notes that “He is absolutely outstanding. He is thoughtful and client-focused.” Chambers also notes that “Peter’s judgment and problem solving ability is unique. He is a very good False Claims Act lawyer.”

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Photo of Susan B. Cassidy Susan B. Cassidy

Susan Cassidy co-chairs Covington’s Aerospace and Defense Industry Group, and has been advising government contractors for more than 35 years on the requirements imposed on companies contracting with the U.S. Government.

Susan’s practice focuses on the intersection of cybersecurity, national security, and supply…

Susan Cassidy co-chairs Covington’s Aerospace and Defense Industry Group, and has been advising government contractors for more than 35 years on the requirements imposed on companies contracting with the U.S. Government.

Susan’s practice focuses on the intersection of cybersecurity, national security, and supply chain risk management for companies that sell products and services to the U.S. Government. Susan advises contractors at all phases of the procurement cycle, and regularly:

advises clients on compliance obligations imposed by the FAR, DFARS, and other agency regulatory requirements;
leads internal and government False Claims Act (FCA) investigations addressing allegations of violations of government cybersecurity, national security, supply chain, quality, and MIL-SPEC requirements; and
advises clients who have suffered a cyber breach where U.S. government information may have been impacted.

In her work with global, national, and start-up contractors, Susan advises companies on all aspects of government supply chain issues including:

Government cybersecurity requirements, including the Cybersecurity Maturity Model Certification (CMMC), DFARS 252.204-7012, FedRAMP, controlled unclassified information (CUI), and NIST SP 800-171 requirements;
Evolving sourcing issues such as Section 889, counterfeit part requirements, Section 5949 semiconductor product and service restrictions, and limitations on sourcing a variety of products from China; and
Federal Acquisition Security Council (FASC) regulations and product exclusions.

 

Susan previously served as senior in-house counsel for two major defense contractors (Northrop Grumman Corporation and Motorola Incorporated) and is Chambers rated in both Government Contracts and Government Contracts Cybersecurity. Chambers USA has quoted sources stating that “Susan’s in-house experience coupled with her deep understanding of the regulatory requirements is the perfect balance to navigate legal and commercial matters.”

Susan is a former Public Contract Law Procurement Division Co-Chair, former Co-Chair and current Vice-Chair of the ABA PCL Cybersecurity, Privacy and Emerging Technology Committee.

Susan’s pro-bono work extends to assisting veterans in a variety of matters, as well as providing advice to elderly clients on their wills and other end-of-life planning documents.

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Photo of Brooke Stanley Brooke Stanley

Brooke Stanley helps companies of all sizes navigate the complex issues that arise from doing business with federal, state, and local governments. She routinely advises on a broad range of issues, including compliance with procurement and financial assistance regulations, contract negotiation and formation…

Brooke Stanley helps companies of all sizes navigate the complex issues that arise from doing business with federal, state, and local governments. She routinely advises on a broad range of issues, including compliance with procurement and financial assistance regulations, contract negotiation and formation, organizational conflicts of interest, flow-down requirements, equitable adjustments, claims and disputes, and small business issues. Brooke leverages her prior experience soliciting, negotiating, and administering government contracts for the United States Navy in crafting creative yet practical solutions for clients.

Brooke regularly assists clients in negotiating both procurement contracts and non-traditional agreements, such as other transaction agreements and cooperative research and development agreements. She has particular expertise assisting clients in protecting their intellectual property and confidential or proprietary information when negotiating with the government, including with respect to intellectual property rights and Freedom of Information Act issues.

In addition, Brooke frequently advises both government contractors and private equity firms in transactional matters, from preparing for sale or purchase to due diligence, negotiating transaction documents, and navigating pre- and post-closing activities. Her expertise in nuanced government contracting compliance issues helps clients understand, mitigate and manage material risks in such transactions.

Prior to entering private practice, Brooke clerked for the Honorable Susan G. Braden of the United States Court of Federal Claims.

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