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There are a lot of words that can be used to describe supply chain disruptions: expensive, embarrassing, and downright frustrating for suppliers and customers alike. However, we shouldn’t forget that many supply chain disruptions are often unpredictable, and they are not always preventable. That means that, sometimes, they are excusable. At least by federal, state and local government agencies that procure goods and services per Federal Acquisition Regulation (FAR) guidelines.
Though a failure to meet contractual obligations is often attributed to poor business practices, there are many risk factors outside of a company’s control that can disrupt the flow of goods and services to government agencies. Know the difference between excusable and inexcusable delays.
Though hurricanes, earthquakes and other natural disasters are notorious for wreaking havoc far beyond the communities on which they bear down, they are also considered “acts of God” per Government business regulations. That means that related supply chain disruptions – and missed deadlines – are considered “excusable delays” per the FAR. Strikes, quarantines and freight embargoes also fall into this “excusable delays” category among other incidents that occur beyond a contractor’s control. (See FAR 52.249-8 for the Fixed Price Supply and Service excusable delay clause and FAR 52.249-10 for the Fixed Price Construction default clause.)
Plainly put, you are protected from government repercussions if you are unable to fulfill your contractual obligations in these “excusable” situations – so long as there’s no evidence that “the failure to perform” was the result of negligence or fault on your part. And, as long as you notify them immediately of any issues.
Now, that doesn’t mean that you’re shielded from any government action.
While agency customers can’t hold you “liable for any excess costs” or do anything detrimental to your performance record in the case of a natural disaster, they are not obligated to just sit around and wait for you to deliver promised commodities or services either. They have options for handling delays if necessary. For example, they can:
Don’t forget: You must notify the customer as soon as you realize that you will not be able to meet the contract terms, regardless of the reason. If you delay notification, then you could be held accountable for a negligent default or “at fault” breach of contract. This is true even if the root cause is uncontrollable, such as a hurricane-caused supply chain disruption.
For more guidance on how to handle emergency situations, contact your assigned procurement official or refer to the terms of your specific contract.