So You’re Telling Me There’s a Chance: Contractor Recovers COVID-Related Quarantine Costs

In Chugach Federal Solutions, Inc., ASBCA Nos. 62712, et al., the Armed Services Board of Contract Appeals held that a contractor could recover its costs for having to quarantine personnel in accordance with government-imposed COVID safety requirements, because the underlying contract contemplated that the contractor would be compensated for complying with any changes to health and safety requirements.

Under the parties’ contract, the contractor was to provide operations and maintenance services at three military installations located on remote islands across the Pacific Ocean.  The contract incorporated AFFARS 5352.223-9001, Health and Safety on Government Installations, which required the contractor to comply with any changes to the installations’ health and safety rules or standards.  The clause also provided that any such changes would be done in accordance with the contract’s Changes clause.

In March 2020, the contracting officer (CO) issued direction to the contractor regarding COVID-safety requirements, citing the AFFARS clause and stating that the contractor was required to notify the CO within 30 days of any changes that would necessitate a price adjustment.  The next month, the commander of the Pacific Air Forces Regional Support Center (PRSC) issued a memorandum detailing, in part, quarantine requirements that applied to contractors accessing military installations in the Pacific.  The contractor timely notified the CO that it estimated a cost impact of $300,000 resulting from the quarantine requirements.  The CO later denied the contractor’s certified claim.

On appeal, the Air Force raised the sovereign acts doctrine as an affirmative defense, asserting that because the quarantine applied broadly to all PRSC personnel and was not self-serving, it qualified as a sovereign act, which is meant to prevent the government from being liable for actions resulting from its public and general acts as a sovereign. The Board rejected this defense but declined to decide whether the quarantine qualified as a sovereign act.  The Board explained that, even if the doctrine applied, the defense “absolutely requires the application of the impossibility test as a component” in order to prevail.  The Board found that the occurrence of a quarantine was not an impossibility because the AFFARS clause demonstrated that the action was a foreseeable, basic assumption of the contract, with the financial risk of this occurrence allocated to the government.  As such, the contractor was entitled to recover under AFFARS 5352.223-9001.

This decision is a reminder for contractors that recovery for COVID-related costs can be dependent upon the terms of the contract, and contractors should carefully review their contracts to identify whether there is a basis for relief.  It is also a reminder that pandemic-related claims are not conclusively barred by the sovereign acts doctrine, as we discussed here and here.