A contractor recently won an appeal when it was required to spend extra money to complete a contract, but the complications were due to no fault of its own.
IAP Worldwide Services was awarded a contract to provide power plants at a forward base in Afghanistan by the U.S. Army Corps of Engineers. The company planned to move the equipment through Pakistan by way of the United Arab Emirates.
Initially, IAP received an order for three generators, and it was given 365 days to deliver the generators to the Forward Operating Bases in Afghanistan. The generators were rated at 10-megawatts, 15-megawatts and 12.5 megawatts. Unfortunately, Pakistan closed its borders for seven months shortly after the contract was signed. The action was in response to military operations by NATO and the United States, and caused IAP to delay shipments.
After the closure, IAP notified the contracting officers. The company suggested shipping the generators with airfreight, but that was estimated to cost an extra $11.8 million or use another route, which was estimated to cost an extra $1 million. The contracting officers said the contract was a fixed price, and he was not willing to grant any extensions. He threatened to place the company in default of the contract if the equipment was not delivered within the agreed upon time schedule.
Government regulations state that a delay is warranted “if the failure to perform the contract arises from causes beyond the control and without the fault or negligence of the Contractor.” The government later realized that the delay was excusable, but it was not willing to compensate the company for the delay.
IAP filed claims with the government worth a total of $11 million, because it used a more costly shipping measure to meet the deadline. The claim was denied, and the company appealed. The Armed Services Board of Contract Appeals found that the company had acted in good faith and was “entitled to an equitable adjustment reimbursing it for expenses actually and reasonably incurred in complying with the acceleration orders.”
KDuncan & Company is dedicated to providing knowledge and support for small government contractors about concerns regarding government contracting. For questions on areas such as as cost proposals, accounting systems, DCAA compliance, and incurred cost audits, reach out to KDuncan & Company.