LEGAL ISSUES


New Administration Ushers in Changes for Contractors on Federal Projects


By Joseph C. McGowan, Jr., Rogers Joseph O’Donnell


T


he election of U.S. President Joe Biden and Vice President Kamala Harris will bring drastic changes


to publicly funded construction. Spending on government infra- structure projects will likely increase, but, at the same time, this funding will come with strings attached due to the tightening of Buy America, labor and environmental rules. Equally significant, the change


in administration will bring, for some contractors, a harsh change in government priorities. While President Biden expands projects based on new technologies such as renewable energy, he is also pulling the proverbial plug on other projects, such as the Keystone XL Pipeline and U.S./Mexican border wall contracts. Many construction contractors will


have their contracts terminated – often with little notice. Such contractors need to have a firm understanding of the applicable rules and procedures for the termination of a federal contract – particularly where the termination is for the government’s convenience, and not the fault of the contractor.


Possible Increase in Infrastructure Funding


Te good news is that the President


and his Cabinet are promising a significant funding increase for infra- structure projects. President Biden’s “Build Back Better” plan proposes a $2 trillion investment in infrastructure. Pete Buttigieg, the new Secretary of Transportation, stated in his confir- mation hearing that Biden’s major infrastructure package represents a “generational opportunity to transform and improve America’s infrastructure.” Although similar promises were


also made by the White House’s former 14 May/June 2021


resident, success in raising infra- structure funding appears more likely under Biden-Harris, given Democratic majorities in Congress and a recog- nized need to stimulate the pandemic ravaged economy.


The Government Shutdown of Federal Projects


Additional funding, however, will


not be divided out according to the same priorities applied by the Trump/ Pence administration – quite the opposite. Contracts to build the U.S./ Mexican border wall were stopped dead in their tracks, President Biden having announced that his administration would not build “another foot of wall.” In fact, such border wall contracts


were placed on suspension status in one of the President’s first acts, with all contractors told to stop all work, subject to safety concerns, by January 27, 2021. Te announcement was made in the “Proclamation on the Termi- nation of Emergency with Respect to the Southern Border of Te United States and Redirection of Funds Diverted to Border Wall Construction” issued by Te White House. As of this writing, the projects remain suspended. President Biden also terminated the


permit for the Keystone XL Pipeline. Te cancellation of the Keystone XL Pipeline permit is but one facet of a wide-ranging directive from President Biden entitled “Executive Order On Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crises.” Tis Executive Order identifies national “commitments,” including the protection of public health and the environment. Te Executive Order mandates


that all federal agencies and executive departments review federal actions taken during the Trump years and remedy government acts conflicting


with the stated “commitments.” Although the cancellation of the Keystone XL Pipeline and Artic Refuge oil leases are specifically mentioned, the broad language applies to a vast array of federal projects. Te inevitable result of this Executive Order and other Biden mandates will likely be the cancel- lation of a multitude of federal agency construction contracts.


Likely Mechanism for Cancel- ling Contract — Termination for Convenience


Te government will use a


“termination for convenience,” in most instances, availing of a process governed by Part 49 of the Federal Acquisition Regulations (FAR). Te Government is given near carte blanche discretion to terminate any federal contract where it believes termination lies in its best interests. Contractors that entered into


politically charged federal projects during the last four years may consider consulting with an attorney and/ or accountant with expertise in government contracting. Te government initiates a termi-


nation for convenience by sending written notice to the contractor defining the scope, the type, and date of the termination. Upon receipt, the contractor must abide by the instructions and provide notice to its subcontractors and suppliers. A contractor terminated for


convenience is required to negotiate a settlement with the government paying the contractor for (1) the work performed prior to the termination, (2) the costs incurred as a result of the termination (e.g., for buttoning up the project site and preparation of California Constructor


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