Chugach Federal Solutions, Inc

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ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeals of - )

)

Chugach Federal Solutions, Inc. ) ASBCA Nos. 62712, 62713, 62877

)

Under Contract No. FA5000-13-C-0005 )

APPEARANCES FOR THE APPELLANT: Douglas L. Patin, Esq.

Lee-Ann C. Brown, Esq.

Lisa A. Markman, Esq.

Bradley Arant Boult Cummings LLP

Washington, DC

APPEARANCES FOR THE GOVERNMENT: Caryl A. Potter, III, Esq.

Deputy General Trial Counsel

Josephine R. Farinelli, Esq.

Trial Attorney

OPINION BY ADMINISTRATIVE JUDGE MELNICK

Chugach Federal Solutions (Chugach) was an operations and maintenance

contractor at three isolated military facilities. When the COVID-19 pandemic struck,

the government required contract employees to quarantine for 14 days before

proceeding with performance. Chugach seeks the costs of complying with that

requirement. The parties elected to proceed under Board Rule 11, and we decide only

entitlement at this time. The government primarily defends based upon the sovereign

acts doctrine. We rule the government has failed to carry its burden to establish the

sovereign acts defense. Under the contract’s terms, Chugach is entitled to an equitable

adjustment for the costs arising from the quarantine.

FINDINGS OF FACT

1. On November 30, 2012, the United States Air Force (government) awarded

the contract identified above to Chugach (R4, tab 1). 1 Chugach was to provide

operations and maintenance services at three remote facilities. They were: Eareckson

Air Station, located on the Aleutian Island of Shemya; Wake Island, located in the

1

Through the course of the litigation the government filed multiple versions of the

Rule 4 file. By email to the Board dated August 26, 2024, copied to Chugach’s

counsel, the government represented that a supplemental version filed on that

day constituted the agreed upon file for the record. All Rule 4 citations in this

decision are to that version of the file.

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north Pacific Ocean a few hundred miles west of the International Date Line; and

King Salmon Air Station, approximately 239 miles southwest of Anchorage, Alaska.

(Id. at 4-6, tab 2 at 7). All three facilities are under the command of the Pacific

Air Forces Regional Support Center (PRSC). The scope of the services provided was

quite extensive. Most of the contract line items were firm-fixed price, with some cost

reimbursable line items for acquired parts. (R4, tab 1 at 4-744; tab 2 at 7-73; gov’t br.

at 3) Chugach subcontracted with Chenega Security Support Solutions (Chenega) to

provide certain security services (app. br. at 2; gov’t br. at 4).

2. The contract incorporated by reference FAR 52.243-4, CHANGES

(JUN 2007); 52.249-8, DEFAULT (FIXED-PRICE SUPPLY & SERVICE) (APR 1984);

and 52.249-10, DEFAULT (FIXED-PRICE CONSTRUCTION) (APR 1984) for

identified line items (R4, tab 1 at 895-96). The contract also incorporated via full text

AFFARS 5352.223-9001, HEALTH AND SAFETY ON GOVERNMENT

INSTALLATIONS (JUN 1997) (R4, tab 1 at 933-34). That clause requires the

following:

(a) In performing work under this contract on a Government installation, the

contractor shall:

(1) Comply with the specific health and safety requirements established by

this contract;

(2) Comply with the health and safety rules of the Government installation

that concern related activities not directly addressed in this contract;

(3) Take all reasonable steps and precautions to prevent accidents and

preserve the health and safety of contractor and Government personnel

performing or in any way coming in contact with the performance of this

contract; and

(4) Take such additional immediate precautions as the contracting officer

may reasonably require for health and safety purposes.

(b) The contracting officer may, by written order, direct Air Force Occupational

Safety and Health Standards (AFOSH) and/or health/safety standards as

may be required in the performance of this contract and any adjustments

resulting from such direction will be in accordance with the Changes clause

of this contract.

(c) Any violation of these health and safety rules and requirements, unless

promptly corrected as directed by the contracting officer, shall be grounds

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for termination of this contract in accordance with the Default clause of this

contract.

(Id.)

3. We take judicial notice that on March 11, 2020, the World Health

Organization declared COVID-19 a global pandemic.

4. On March 18, 2020, the contracting officer emailed Chugach with a

direction to implement guidance from Colonel Paul Cornwell, commander of PRSC.

The email also notified Chugach that further guidance would be issued. The email

quoted AFFARS 5352.223-9001 in its entirety. It asked that as further policy and

guidance was issued Chugach remain in touch with the contracting officer to work

through it together. It closed by stating:

If any required actions result in an increase or decrease in

the cost of, or time required for, performance of any part of

work under this contract, [Chugach] must assert its right to

equitable adjustment within 30 days from receipt of the

order. However, if a longer time can be justified, I may

receive and act upon the proposal as long as it is before

final payment of the contract.

(R4, tab 29 at 1) The instructions forwarded from Colonel Cornwell, addressed to

“Mission partners,” discussed COVID-19. He warned that restrictive measures were in

a state of flux. He explained that the PRSC was following Department of Defense,

Air Force, and Centers for Disease Control and Prevention guidance. He noted that,

due to the remoteness of PRSC’s facilities, it was important for leaders to engage with

high-risk employees and consider rotating them to areas with greater levels of medical

support. He stressed that leaders should assume it was not a matter of if, but when

COVID-19 would infect the sites. He stated that at this time he was not placing further

restrictions on airfields. But he ordered personnel to take steps to limit interaction and

take precautions. He noted that COVID-19 would be with them for quite some time,

the effect would increase, and the guidance would change. (R4, tab 29 at 3-5)

5. By email dated March 23, 2020, the contracting officer once again issued

directions to Chugach under AFFARS 5352.223-9001. He ordered it to coordinate

with unions and personnel, including subcontractors, to reduce the number of new

personnel introduced into installation populations. He also required Chugach to

adhere to federal and state travel restrictions, especially regarding self-isolation and/or

quarantine timelines. He also referred to screening policies that would be

implemented for flights to PRSC installations. (R4, tab 31)

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6. On April 2, 2020, Colonel Cornwell issued a memorandum (a copy of which

was forwarded to the contracting officer) to all personnel entering PRSC installations,

including Chugach, directing, effective April 3, that, “prior to entering a PRSC

installation, all PRSC personnel (military and civilians), . . . and contractors, transiting

to a PRSC installation shall abide by self-quarantine requirements set forth by

installation commanders en route, and comply with applicable state and local health

mandates” (R4, tabs 41-41a). On April 6, 2020, the program manager emailed

Chugach (copying the contracting officer) that the intent of Colonel Cornwell’s

self-quarantine policy was to require Chugach employees desiring to travel to

Wake Island, King Salmon Air Station, or Eareckson Air Station to quarantine for a

minimum of 14 days (R4, tab 42). On April 10, 2020, Colonel Cornwell issued a

revision to his prior memorandum (a copy of which was forwarded to the contracting

officer) clarifying to all personnel entering PRSC installations, including Chugach,

that personnel traveling to PRSC installations in Alaska shall abide by a 14-day

self-quarantine in Alaska prior to traveling to the installation. Personnel traveling to

Wake Island should self-quarantine in their residence prior to traveling through

Hawaii. (R4, tabs 49-49a)

7. The government contends the goal of the quarantine was to prevent

“COVID-19 from spreading to a remote and isolated location with a critical mission,

extremely limited means to quarantine infected personnel once on the island, no ICU

beds or emergency medical capabilities in the event that infected personnel showed

life-threatening symptoms, and no guarantee of sufficient medical evacuation for

symptomatic personnel due to distance and unpredictable severe weather conditions”

(gov’t br. at 3). It concedes, and we find, that the quarantine directives served to

protect the health and safety of all personnel on site (gov’t br. at 12). This includes

contractors participating in the critical mission. By invoking and quoting AFFARS

5352.223-9001 in his initial COVID-19 directions, warning that more would follow,

and reciting Chugach’s procedures for seeking equitable adjustments, we find the

contracting officer recognized that all these directives would fall within the scope of

the clause.

8. By letter from Chugach’s president, dated April 14, 2020, to Colonel

Cornwell (copied to the contracting officer), Chugach notified the government that it

estimated the cost to comply with the quarantine would be approximately $300,000

(R4, tabs 51-51a at 1). Colonel Cornwell responded by email dated April 21, 2020

(copied to the contracting officer), stating he “respect[ed] [Chugach’s] right to file for

equitable adjustment in the event there are additional costs incurred for complying

with [his] policy, those of the states, or installation commanders” (R4, tab 54).

9. Chugach or its subcontractor, Chenega, quarantined workers bound for one

or more contract locations (app. br. at 4-6; govt br. at 7). Chugach submitted certified

claims for costs associated with the quarantine of its workers, or those of Chenega,

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which the contracting officer denied (R4, tabs 24-27; 76-77). Chugach timely

appealed the government denial of its claims.

DECISION

Chugach’s brief is unclear as to whether the quarantined employees at issue

worked only at Eareckson Air Station or at all three of the installations. We need not

resolve that matter because this entitlement ruling respecting the quarantine applies the

same regardless of where they worked.

Chugach does not appear to quarrel with Colonel Cornwell’s judgment

imposing the quarantine upon entry to the PRSC installations. The devasting effect of

COVD-19 upon the lives of numerous individuals and the nation’s ability to function

are well known, especially prior to the introduction of vaccines. There is no dispute

that the relevant installations are very remote and lightly manned, with limited medical

support. Their mission is critical. Certainly, it was prudent for the government to

impose quarantines to reduce the chance of widespread introduction of the virus into

their populations. But this matter is not about the wisdom of the government’s

quarantine. It simply presents the classic question of who bears its costs under the

contract. Our view is that the government does.

To address contingencies such as unexpected health and safety threats, the

government incorporated AFFARS 5352.223-9000 into this contract. The clause, in

addition to requiring compliance with the contract’s specific health and safety

requirements, also mandates that Chugach comply with installation health and safety

rules that concern related activities not directly addressed in the contract, take all

reasonable steps and precautions to preserve the health and safety of personnel

performing or in any way coming in contact with the performance of the contract, and

“[t]ake such additional immediate precautions as the contracting officer may

reasonably require for health and safety purposes.” It adds that the contracting officer

may direct “health/safety standards as may be required in the performance of this

contract.” Likely to reduce contractor concerns about unexpected costs arising from

such instructions, it expressly provides that “any adjustments resulting from such

directions will be in accordance with the Changes clause.” (Finding 2) That clause, in

turn, provides for an equitable adjustment for contracting officer-imposed changes to

the work, including to the method or manner of performance. FAR 52.243-4.

AFFARS 5352.223-9000 is no mere technical boilerplate, given that it stresses that a

violation of its rules and requirements are grounds for termination for default unless

promptly corrected (finding 2).

Here, we are presented with a series of instructions to Chugach, beginning with

the contracting officer quoting AFFARS 5352.223-9001 and requiring adherence to

Colonel Cornwell’s directions regarding the effects of COVID-19 on the health of

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personnel in PRSC’s remote facilities, including that consideration be given to rotating

high risk personnel and limit interaction. The contracting officer warned that further

policies would be issued and noted the procedures for seeking equitable adjustments if

any required actions resulted in an increase or decrease in the cost of, or time required

for, performance of the contract. (Finding 4) That was followed by another direction

from the contracting officer, again citing the clause, requiring Chugach to coordinate

with unions and personnel, including subcontractors, to reduce the number of new

personnel introduced into installation populations. He also directed Chugach to adhere

to federal and state travel restrictions, especially regarding self-isolation and/or

quarantine timelines. (Finding 5) As predicted by the contracting officer, three more

directives to Chugach followed that included the contracting officer within the

communications. The first, from Colonel Cornwell, required that, “prior to entering a

PRSC installation, all PRSC personnel (military and civilians), . . . and contractors,

transiting to a PRSC installation shall abide by self-quarantine requirements set forth

by installation commanders en route, and comply with applicable state and local health

mandates.” (Finding 6) The second, from the program manager, explained that

Colonel Cornwell’s intent was to require all Chugach employees desiring to travel to

Wake Island, King Salmon Air Station, or Eareckson Air Station to have quarantined

for a minimum of 14 days. The third, again from Colonel Cornwell, clarified that

personnel traveling to PRSC installations in Alaska shall abide by a 14-day

self-quarantine in Alaska prior to traveling to the installation, while personnel

traveling to Wake Island should self-quarantine in their residence prior to traveling

through Hawaii. (Id.)

We are satisfied that these quarantine directives issued to slow the spread of

COVID-19 at these remote facilities were within the scope of AFFARS 5352.223-

9001(b). Indeed, the contracting officer recognized they were. (Finding 7) Also,

both he and Colonel Cornwell acknowledged Chugach’s right to request an adjustment

seeking the costs to comply with the required actions (findings 4, 7-8). Nevertheless,

the government contends now that because the quarantine encompassed everyone who

would travel to the sites, AFFARS 5352.223-9001’s provisions are inapplicable. The

quarantine was directed to protect the health and safety of all personnel on the sites,

including contractors (finding 7). It was a health/safety standard that, among other

things, restricted the access of Chugach’s personnel to the sites to perform the contract

(findings 6-7). Hence, it was “required in the performance of this contract,” just like

the prior directives, expressly referring to AFFARS 5352.223-9001, dictating that

personnel possibly be removed and reduced in number, and requiring adherence to

federal and state travel restrictions (findings 4-5). Though the health/safety standard

must be required in the performance of the contract to fall under the clause, nothing in

the clause says that the standard must only apply to contractors at the installation and

not to other personnel. Indeed, that would likely be highly counterproductive.

Accordingly, the government was liable for “adjustments resulting from such direction

. . . in accordance with the Changes clause.”

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The government primarily relies upon the sovereign acts defense to avoid

liability for the quarantine costs. We’ve described that doctrine as follows:

The sovereign acts doctrine provides that the government is

not liable for obstructions to the performance of its contracts

“resulting from its public and general acts as a sovereign.”

Yankee Atomic Elec. Co. v. United States, 112 F.3d 1569,

1574 (quoting Horowitz v. United States, 267 U.S. 458,

461 (1925)); see also Klamath Irrigation Dist. v. United

States, 635 F.3d 505, 520 (Fed. Cir. 2011). The doctrine

recognizes that when the government contracts, it is

functioning in a different capacity than the sovereign. As a

contractor, the government is usually subject to the same

rules as any other party. As the sovereign, “it stands apart.”

Stockton East Water Dist. v. United States, 583 F.3d 1344,

1366 (Fed. Cir. 2009). Accordingly, “if an act of the

Government as sovereign would justify non-performance by

any other defendant being sued for contract breach, then the

Government as contractor is equally free from liability for

non-performance.” Id.

Essentially, the sovereign acts doctrine permits the

government as a contractor to assert an impossibility

defense to claims of non-performance, to the same extent

as a private party could, when the government’s sovereign

acts obstruct performance. Put another way, it “relieves

the Government as contractor from the traditional blanket

rule that a contracting party may not obtain discharge if its

own act rendered performance impossible.” Stockton East,

583 F.3d at 1366 (quoting United States v. Winstar Corp.,

518 U.S. 839, 904 (1996)).

Am. Gen. Trading & Contracting, WLL, ASBCA No. 56758, 12-1 BCA ¶ 34,905

at 171,636. The sovereign acts doctrine is an affirmative defense. Conner Bros.

Constr. Co. v. Geren, 550 F.3d 1368, 1371 (Fed. Cir. 2008).

The government argues extensively that the quarantine qualifies as a sovereign

act because it applied to all personnel at PRSC installations and was not self-serving.

Certainly, a broad restriction upon access to a military base that happens to impair

contract performance, though not directed for that purpose, might constitute a

sovereign act. See Conner Bros, 550 F.3d at 1375-79; APTIM Fed. Servs., LLC,

ASBCA No. 62982, 22-1 BCA ¶ 38,127 at 185,219. Here, the government’s goals

were the protection of the health of people and their associated mission, not to relieve

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it of any contractual duties. However, we need not rule with certainty whether the

quarantine is a sovereign act. Assuming it is, the government’s attempt to avoid

liability collapses by refusing to establish all the elements necessary to prevail upon a

sovereign acts defense.

Even when the government engages in a sovereign act, “the common-law

doctrine of impossibility imposes additional requirements before a party may avoid

liability . . . .” Conner Bros, 550 F.3d at 1379. “[B]ecause the sovereign acts doctrine

is an affirmative defense, the government [has] the burden of establishing each

element of the defense, including the “impossibility” component.” Id. “Specifically,

performance by the government is excused under the sovereign acts defense only when

the sovereign act renders the government’s performance impossible.” Casitas Mun.

Water Dist. v. United States, 543 F.3d 1276, 1287 (Fed. Cir. 2008); see also Klamath

Irrigation Dist. v. United States, 635 F.3d 505, 521 (Fed. Cir. 2011) (noting even when

the sovereign acts defense applies it does not follow that discharge will always be

available because the common law doctrine of impossibility imposes additional

requirements before a party may avoid liability) (citing Carabetta Enters., Inc. v.

United States, 482 F.3d 1360, 1365 (Fed. Cir. 2007)); Stockton E. Water Dist.,

583 F.3d at 1366 (explaining the second part of the test is whether the act would

release the government from liability under ordinary contract law principles, known in

contract law as the impossibility defense) (citing Winstar, 518 U.S. at 896); Am. Gen.

Trading & Contracting, 12-1 BCA ¶ 34,905 at 171,637.

To prevail under the impossibility test, “the nonoccurrence of the act in

question must have been a basic assumption of the contract, and the government must

not have assumed the risk that such an act would occur.” Conner Bros, 550 F.3d

at 1379; see also Piszel v. United States, 833 F.3d 1366, 1380 (Fed. Cir. 2016) (finding

an impossibility defense fails if the contracting party assumed the risk of government

regulation); Seaboard Lumber Co. v. United States, 308 F.3d 1283, 1294 (Fed.

Cir. 2002) (“This defense requires [the government] to show that (i) a supervening

event made performance impracticable; (ii) the non-occurrence of the event was a

basic assumption upon which the contract was based; (iii) the occurrence of the event

was not [the government’s] fault; and (iv) [the government] did not assume the risk of

occurrence.”); APTIM Fed. Servs., 22-1 BCA ¶ 38,127 at 185,219; RESTATEMENT

(SECOND) OF CONTRACTS § 261 (1981) cmt. b (“In order for a supervening event to

discharge a duty under this Section, the non-occurrence of that event must have been a

‘basic assumption’ on which both parties made the contract . . . .”).

The government maintains that it need not satisfy the impossibility test here for

reasons that, quite frankly, are difficult to follow. As best we can tell, it seems to

contend that it must only prove impossibility to establish a sovereign act if it claims

the act made its performance impossible. This appears to imply that it is not claiming

its performance was impossible, but it should still prevail on the defense. Though the

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government’s argument lacks clarity, the case law does not. It absolutely requires

application of the impossibility test as a component of the sovereign acts defense.

Accepting the government’s invitation to ignore it would be reversible error. Klamath,

635 F.3d at 522 (ruling “the Court of Federal Claims erred in holding that

impossibility of performance is not a factor to be taken into account in considering the

sovereign acts doctrine.”). Consistent with that, we have applied the impossibility test

as part of our sovereign acts analysis to this very type of fact pattern, where the

government has restricted base access to a contractor as part of its wider efforts to

reduce the spread of COVID-19. APTIM Fed. Servs., 22-1 BCA ¶ 38,127 at 185,219.

The government’s denial that it bears any burden to establish impossibility, and

its failure to advance any argument supporting that component, is reason enough to

reject its sovereign acts defense. In any event, the record does not support finding the

government’s restrictions upon Chugach’s access was justified as an impossibility.

There is no basis to hold that the non-occurrence of the quarantine was a basic

assumption upon which the contract was based, and that the government did not

assume the risk of it under the contract’s terms. This again is clearly demonstrated by

AFFARS 5352.223-9001(b). As we previously noted that clause contemplated that

Chugach was subject to directed government health/safety standards as may be

required in the performance of the contract. A quarantine imposed for the protection

of health and safety of all personnel performing the installations’ critical mission,

including contractors, that restricted contractor access to perform the contract is within

the scope of this provision, regardless of whether it additionally restricted non-contract

personnel, and is therefore an occurrence that was a basic assumption upon which the

contract was based. The clause placed the financial risk of such an action squarely

upon the government by providing that “adjustments resulting from such direction will

be in accordance with the Changes clause.” AFFARS 5352.223-9001(b). Given that

the standards for impossibility are not satisfied, even if the quarantine is a sovereign

act, the sovereign acts defense does not shield the government from liability under

AFFARS 5352.223-9001. See also D & L Constr. Co. v. United States, 402 F.2d 990,

999 (Ct. Cl. 1968) (“[T]he Government can agree in a contract that if it does exercise a

sovereign power, it will pay the other contracting party the amount by which its costs

are increased by the Government’s sovereign act . . . .”). Chugach is entitled to the

equitable adjustment authorized by AFFARS 5352.223-9001(b).

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CONCLUSION

We sustain the appeals on entitlement, finding that Chugach may recover an

equitable adjustment based upon its costs (including those passed through by its

subcontractor) resulting from the quarantine. The appeals are remanded to the parties

to address quantum.

Dated: October 2, 2024

MARK A. MELNICK

Administrative Judge

Armed Services Board

of Contract Appeals

I concur I concur

w

OWEN C. WILSON MICHAEL N. O’CONNELL

Administrative Judge Administrative Judge

Acting Chairman Vice Chairman

Armed Services Board Armed Services Board

of Contract Appeals of Contract Appeals

I certify that the foregoing is a true copy of the Opinion and Decision of the

Armed Services Board of Contract Appeals in ASBCA Nos. 62712, 62713, 62877,

Appeals of Chugach Federal Solutions, Inc., rendered in conformance with the Board’s

Charter.

Dated:

PAULLA K. GATES-LEWIS

Recorder, Armed Services

Board of Contract Appeals

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