By Robert Nichols, Andrew Victor, and Haaleh Katouzian
June 25, 2021
About a year ago, the Civilian Board of Contract Appeals (CBCA) decided Pernix Serka Joint Venture v. Department of State, CBCA No. 5683, and denied a contractor’s claim for increased costs incurred for its response to an outbreak of the Ebola virus. The contractor appealed that decision to the U.S. Court of Appeals for the Federal Circuit. The case has, for all practical purposes, come to an end. Recently, the Federal Circuit summarily affirmed the CBCA, denying the contractor any relief.
To recap, in 2014, the contractor had a fixed-price contract with the State Department to construct a rainwater capture and storage system in Sierra Leone. During performance, an Ebola virus outbreak spread to the area where the contractor was working. Concerned about the safety of its personnel, the contractor asked the government for guidance on how to proceed. The government, however, declined to provide any guidance as to whether the contractor should leave the job site. Subsequently, the World Health Organization declared the Ebola outbreak an international health emergency, and the contractor unilaterally decided to shut the project down and evacuate the work site. The contractor met with the State Department to discuss the Ebola crisis, but the government would not provide guidance as to whether the contractor should restart the project. Several months later, the outbreak had ended, and the contractor returned to the work site. For the safety of its personnel, the contractor expanded its medical facilities on the site and hired a licensed paramedic. The contractor filed a claim for its increased costs arising from differing site conditions and disruption of work. The CBCA, however, granted summary judgment to the State Department, holding that the contractor bore the risk under its fixed-price contract even for those additional costs stemming from the outbreak.
On appeal, the Federal Circuit summarily affirmed the CBCA. By doing so, the court took no issue with the CBCA’s opinion disposing of the contractor’s claim.
The Pernix case stands as stark reminder to contractors holding fixed-price contracts with the government. Contractors should be aware that, if they are seeking increased costs, for example, during COVID-19, the government may point to Pernix and refuse to pay if such additional costs were not ordered or not authorized pursuant to the contract. Nichols Liu LLP can help contractors assess whether such increased costs can be recovered and, if necessary, litigate claims when the government has unreasonably withheld payment.
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