forters and a 20% price increase for bathrobes, contending that market prices increased significantly as a result of the pandemic. The Armed Services Board of Contract Appeals observed that the FAR excusable delay provision does not entitle the contractor to a price adjustment, notwithstanding its “recital of acts of God, epidemics, and quarantines as grounds to excuse a contractor’s default.”³⁶¹ Finding no contractual basis to adjust H&C’s compensation to reflect market price inflation, the Board denied H&C’s appeal: “The risk of a fixed-price contract is that the market will change. Heart & Core took the chance that the costs of its materials, labor, and shipping would not fluctuate far above what it planned, while the government protected itself from the consequences if they did.”³⁶²

Likewise, in Appeals of JE Sinn Consulting, LLC,³⁶³ the Armed Services Board of Contract Appeals rejected a contractor’s request for a price adjustment due to supply chain disruptions and inflation in the wake of the COVID-19 pandemic. JE Sinn contracted with the Air Force in September 2020 to construct a culvert bridge on a fixed-price, design-build basis. JE Sinn requested equitable adjustments seeking, among other things, “additional compensation for increases in the price of reinforcing steel needed for the project allegedly due to inflation caused by COVID-19 and fabrication plant shutdowns.”³⁶⁴ The Board denied the claim on the basis of the established principle that the contractor bears the risk of material price increases in a fixed-price contract. However, JE Sinn alleged that its procurement of steel was delayed due to the fault of the government, forcing JE Sinn “to order steel when the price had increased due to the pandemic.”³⁶⁵ If true, JE Sinn might have been entitled to additional compensation, perhaps in the nature of a compensable delay claim. However, JE Sinn had previously accepted and executed a time extension for the government-caused delays, and the modification provided a release of any monetary claims associated with the delays. Therefore, the Board held that JE Sinn was not entitled to additional compensation for the steel price increases.³⁶⁶

As a general rule, on a state DOT fixed-price construction contract, the contractor bears the risk of inflationary price increases. However, as discussed in Section III.A.2.a, some state DOT contracts provide for price adjustments due to market changes for specific materials such as steel or petroleum-based products. Also, as discussed in Section III.A.2.b, the contractor could be entitled to additional compensation for the higher cost of performing the work later in time, as a result of delays caused by the state DOT, provided that the contractor does not waive or release the claim (as JE Sinn did).

V. CONCLUSIONS

By their very nature, pandemics and other force majeure circumstances have unpredictable impacts on the performance of contract obligations. Under the common law, where force majeure circumstances made performance impracticable or impossible, the obligations of both contracting parties were excused. With respect to construction contracts, this meant that the contractor was no longer required to complete the project, and the project owner was not required to make further payments. This left the project owner in the unenviable position of having to reprocure completion of the work after cessation of the force majeure circumstances, probably resulting in a project that was significantly more expensive and delivered significantly later than originally contracted.

However, under most contracts with state DOTs or other transportation agencies, the project owner is in a superior position to the contractor in the event of a pandemic or other force majeure circumstance. The contractor likely can obtain an extension of time, to the extent that the contractor’s work is actually delayed by the pandemic and not by its own defaults, under the force majeure or excusable delay provision in the contract. However, the fixed-price contractor is generally not entitled to additional compensation to cover its increased costs of performance arising as a result of the pandemic (rather than as a result of action by the state DOT). As a general rule, the contractor bears the risk of duration-related costs associated with pandemic delays and inefficiencies, extra costs associated with performing work during a pandemic, and higher material prices associated with the economic impact of a pandemic. The only monetary remedy available to most contractors in pandemic circumstances would come indirectly, as a result of the force majeure time extension, in the form of avoiding liability for delay damages (typically liquidated damages) for failing to meet the contractual milestones. As a result of the recent COVID-19 pandemic, time extensions were frequently granted to state DOT contractors, but significant contract price adjustments were rarely granted despite significant pandemic-related cost increases borne by the contractors.

This default framework puts the state DOT in the position of obtaining beneficial occupancy of the completed project at basically the price for which it bargained, albeit somewhat later in time due to the pandemic-related delay. This may be perfectly acceptable to the state DOT, as demand for the use of its facilities will probably be reduced during a pandemic. If delayed completion is not acceptable to the state DOT, then the state DOT has the sole discretion and option to terminate the project for its own convenience, pay the contractor for work completed and little else, and reprocure the project (or not). Thus, only the state DOT (and not the contractor) has the ability to invoke a remedy akin to the common law impracticability and impossibility doctrines, where the parties are excused from further obligations and go their separate ways. Although termina-

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³⁶¹ Id.

³⁶² Id. (citing Seaboard Lumber Co. v. United States, 308 F.3d 1283, 1295 (Fed. Cir. 2002)).

³⁶³ Appeals of JE Sinn Consulting, LLC, Armed Services Board of Contract Appeals Nos. 63353, 63383 (May 5, 2023), available at http://www.asbca.mil/Decisions/2023/63353,%2063383%20JE%20Sinn%20Consulting,%20LLC%205.5.23%20Decision.pdf.

³⁶⁴ Id.

³⁶⁵ Id.

³⁶⁶ Id.

tion for convenience was not widely employed by state DOTs in response to the COVID-19 pandemic, there could be force majeure circumstances in which termination for convenience provides the best outcome for the state DOT, such as when the force majeure event threatens long-term demand and/or funding for the project.

The state DOT’s most notable tool in the force majeure toolbox is the ability to suspend the project for its own convenience. There are a number of reasons a state DOT may elect to suspend work in the event of a pandemic, including to reduce transmission and infection among the workforce, or simply due to the uncertainty associated with force majeure events (such as whether there will be funding or demand for the project once the pandemic has subsided). However, under almost all state DOT contracts, suspensions or similar orders issued in response to a pandemic have the potential to transform the force majeure delays from merely excusable to compensable for the contractor. Not only would the state DOT assure itself of receiving the project later than the beneficial occupancy date for which it bargained, but the state DOT could also become liable to the contractor for its duration-related costs associated with the suspension, extra costs associated with pandemic-related safety protocols required by the state DOT, and pandemic-related material price inflation due to performing the work later in time. Consequently, suspension was not widely employed by state DOTs in response to the COVID-19 pandemic. Instead, most state DOTs were content to allow contractors to invoke the force majeure or excusable delay provision, and then issue noncompensable time extensions to the extent that the contractors satisfied their burden of proving the extent to which their delay was due to the pandemic.