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 a range of complex investigation, litigation, and compliance matters, including False Claims Act and fraud investigations and litigation, compliance with accounting, cost, and pricing requirements, and contract claims and disputes.

Peter has litigated more than 25 qui…

Peter Hutt represents government contractors in a range of complex investigation, litigation, and compliance matters, including False Claims Act and fraud investigations and litigation, compliance with accounting, cost, and pricing requirements, and contract claims and disputes.

Peter has litigated more than 25 qui tam matters brought under the False Claims Act, including matters alleging cost mischarging, CAS violations, quality assurance deficiencies, substandard products, defective pricing, Iraqi procurement fraud, health care fraud, and inadequate subcontractor oversight. He has testified before Congress concerning proposed amendments to the False Claims Act.

Peter has also conducted numerous internal investigations and frequently advises clients on whether to make disclosures of potential wrongdoing.

Peter also represents clients in a wide range of accounting, cost, and pricing matters, as well as other contract and grant matters. He is experienced in addressing issues concerning pensions and post-retirement benefits, contract formation, TINA and defective pricing, claims and terminations, contract financing, price reduction clauses, subcontracting and supply chain compliance, specialty metals compliance, and small business and DBE compliance. He has litigated significant cost, accounting, and contract breach matters in the Court of Federal Claims and the Armed Services Board of Contract Appeals.

Peter is recognized for his work both in government contracts and in False Claims Act 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 is co-chair of the firm’s Aerospace and Defense Industry Group and is a partner in the firm’s Government Contracts and Cybersecurity Practice Groups. She previously served as in-house counsel for two major defense contractors and advises a broad range of government contractors…

Susan is co-chair of the firm’s Aerospace and Defense Industry Group and is a partner in the firm’s Government Contracts and Cybersecurity Practice Groups. She previously served as in-house counsel for two major defense contractors and advises a broad range of government contractors on compliance with FAR and DFARS requirements, with a special expertise in supply chain, cybersecurity and FedRAMP requirements. She has an active investigations practice and advises contractors when faced with cyber incidents involving government information. Susan relies on her expertise and experience with the Defense Department and the Intelligence Community to help her clients navigate the complex regulatory intersection of cybersecurity, national security, and government contracts. She is Chambers rated in both Government Contracts and Government Contracts Cybersecurity. In 2023, Chambers USA 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.”

Her clients range from new entrants into the federal procurement market to well established defense contractors and she provides compliance advices across a broad spectrum of procurement issues. Susan consistently remains at the forefront of legislative and regulatory changes in the procurement area, and in 2018, the National Law Review selected her as a “Go-to Thought Leader” on the topic of Cybersecurity for Government Contractors.

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 7012, and NIST SP 800-171 requirements,
  • Evolving sourcing issues such as Section 889, counterfeit part requirements, Section 5949 and limitations on sourcing from China
  • Federal Acquisition Security Council (FASC) regulations and product exclusions,
  • Controlled unclassified information (CUI) obligations, and
  • M&A government cybersecurity due diligence.

Susan has an active internal investigations practice that assists clients when allegations of non-compliance arise with procurement requirements, such as in the following areas:

  • Procurement fraud and FAR mandatory disclosure requirements,
  • Cyber incidents and data spills involving sensitive government information,
  • Allegations of violations of national security requirements, and
  • Compliance with MIL-SPEC requirements, the Qualified Products List, and other sourcing obligations.

In addition to her counseling and investigatory practice, Susan has considerable litigation experience and has represented clients in bid protests, prime-subcontractor disputes, Administrative Procedure Act cases, and product liability litigation before federal courts, state courts, and administrative agencies.

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.

Prior to joining Covington, Susan served as in-house senior counsel at Northrop Grumman Corporation and Motorola Incorporated.

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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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