Contractors Under Scrutiny for Failing to Notify Government of Changes, Impacts, and Delays

In the realm of federal construction contracts, transparency and communication are paramount. However, recent scrutiny has highlighted a concerning trend: contractors failing to promptly notify the government of changes, impacts, and delays as they occur (Wakefield, 1995). This oversight not only jeopardizes project timelines but also undermines the integrity of the construction process, raising questions about accountability and adherence to contractual obligations.

At the heart of the matter lies the fundamental principle of communication. If the notification is from the contractor, the government’s actions include evaluating the proposed change and contract interpretation, initiating contact with the Project Manager, Project Engineer, and starting to prepare a file that contains the following items (Sanders, 2000):

• Progress photos
• Government estimate
• Scope / Justification
• Funds commitment
• Pre- and Post-Negotiation Memorandums and Business Clearances
• Other pertinent information

The government Contracting Officer is to remain objective and be not only a judge but also an advocate so that a fair and impartial decision is made. Federal contracts mandate that contractors promptly notify the government of any changes, impacts, or delays that could affect the project's schedule or cost. How do contractors notify the government of any changes? One way is for the Project Engineer to write a Request for Information (RFI) which kick-starts the discussion of a field change condition. Another way, once the RFI is answered, is for the Project Manager to write a Serial Letter that discusses the change condition and how it will be compensable to the contract. This requirement serves as a cornerstone of effective project management, enabling all parties to anticipate challenges, assess risks, and implement necessary adjustments in a timely manner.

The consequences of this failure to communicate extend beyond individual projects, impacting the broader landscape of federal construction. In a report from DefenseNews, “Several of the U.S. Navy’s top shipbuilding programs are running one year to three years behind schedule…” (Eckstein, 2024). Delays in addressing issues can cascade into larger disruptions, leading to budgetary strain and diminished public confidence in the government's ability to effectively manage construction projects. Moreover, the lack of transparency can erode trust between contractors and the government, hindering collaborative efforts and impeding progress towards shared objectives.

To address these concerns, stakeholders emphasize the importance of strict adherence to contractual requirements and robust communication protocols. The Resident Management System, or RMS, from USACE, and the Electronic Construction Management System, or eCMS, from NAVFAC, allow contractors to upload important contractual information such as submittals, RFIs, meeting minutes, and schedules as an example of different methods that contractors can take to effectively communicate with the government. Contractors must prioritize transparency and proactively engage with the government to ensure timely notification of changes, impacts, and delays. Likewise, government agencies must uphold accountability standards and actively monitor contractor compliance to mitigate risks and uphold the integrity of the construction process.

In response to these challenges, calls for enhanced oversight and enforcement mechanisms have grown louder. Liquidated damages, see FAR Clauses 52.211-11 & 12, are one of the enforcements the government can take to ensure projects are completed on time. These rates are “calculated based upon the independent Government estimate (IGE) excluding Supervision, Inspection and Overhead (SIOH) and contingency for the construction project; liquidated damages are not adjusted based upon the contract award amount and the total calculated amount is not prorated.” (NAVFAC, 2018). Another implementation the government utilizes to ensure contractor compliance is the Contractor Performance Assessment Reporting (CPARs). FAR Clause 42.1501 discusses how the contractor's past performance evaluations can inhibit, or exemplify, their standings with the government on how well they executed a previous project. The government is evaluating the contractor on the following items:

(1) Conforming to requirements and to standards of good workmanship;
(2) Forecasting and controlling costs;

(3) Adherence to schedules, including the administrative aspects of performance;
(4) Reasonable and cooperative behavior and commitment to customer satisfaction;
(5) Complying with the requirements of the small business subcontracting plan (see 19.705-7(b));
(6) Reporting into databases (see subpart 4.14, and reporting requirements in the solicitation provisions and clauses referenced in 9.104-7);
(7) Integrity and business ethics; and
(8) Business-like concern for the interest of the customer.

As a contractor, knowing what the government is looking for in a past performance evaluation can strengthen the monitoring and reporting frameworks, implement stricter policy, and foster a culture of accountability to safeguard the interests of all stakeholders involved in federal construction projects.

As the spotlight intensifies on this issue, the onus falls on both contractors and government agencies to uphold their respective responsibilities and uphold the highest standards of transparency and communication. Only through concerted efforts to address these shortcomings can the federal construction industry truly thrive, delivering projects on time, within budget, and to the highest standards of quality and integrity.