Every day, government contractors are faced with the tension of trying to walk the fine line between what the government wants and what a contract actually requires. Contractors shoulder a heavy burden trying to please their government customers, and it can be difficult to know what action to take when faced with a controversy or genuine dispute. When faced with this conundrum, contractors need to look at what the terms of the contract actually require.
The disputes clause of the contract states that "[t]he Contractor shall proceed diligently with performance of this contract, pending final resolution of any request for relief, claim, appeal, or action arising under the contract, and comply with any decision of the Contracting Officer." This requirement applies either under the normal disputes clause, FAR 52.233-1, or, in the context of commercial items, FAR 52.212(d). Commonly called "the duty to proceed," this requirement essentially mandates that performance of the contract continue until the dispute is fully resolved. This contractor duty to proceed can exist even in the face of a material breach by the government. Therefore, should a contractor refuse to perform, such a refusal could be viewed as a breach of contract, resulting in the government's issuance of a show cause or cure letter, termination for default, suspension and debarment, negative past performance commentary, or any one or more negative consequences.
When faced with the classic conundrum of being requested or directed by a government representative (a COTR, COR, or field inspector, for example) to perform work not covered by a contract, but also being required to perform under the disputes clause, contractors should consult with counsel and carefully weigh their options. In most cases, the more prudent course of action is to perform the work requested by the government and then later submit a request for equitable adjustment for the increased costs of performance. In other cases, the aggrieved contractor may be able to rely on legal theories, such as commercial impracticability or waiver, to excuse the contractor from the duty to proceed with disputed work. Nevertheless, even with rock-solid defenses against extra-contractual requirements, a contractor's refusal to perform can result in a termination for default. In very limited cases, a contractor may be able to avail itself of a court or board's discretion and willingness to grant declaratory relief and allow the contractor to stop performance even before it has completed the work that is at the center of the dispute.
In short, contractors that are caught between an out-of-scope demand by the government and being required to perform under the disputes clause must carefully consider their course of action. Relief certainly is available to the contractor, but the course of action the contractor takes will dictate that availability.
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