On October 5, 2006, the Department of Commerce (DOC) issued Procurement Memorandum 2007-01, instructing the heads of all DOC contracting offices to incorporate into current contracts, as well as new solicitations for contracts, identified as "mission critical and essential to the operations of" DOC a new clause, CAR 1352.218-70, entitled "Contract Performance During Pandemic Influenza Outbreak, SARS Outbreak or Other Biomedical Emergency or Catastrophe." This new contract clause, which was not subject to notice and comment or publication in the Federal Register, requires "mission critical" DOC contractors to negotiate with DOC and modify their contracts to establish a "modified performance level" in the event of a pandemic flu outbreak, SARS outbreak or other biomedical emergency. Procurement Memorandum 2007-01 instructs DOC contracting offices to request that the contractor submit a request for equitable adjustment that includes a contingency plan for providing the appropriate level of support in the event of a biomedical event, negotiate the equitable adjustment, and then incorporate CAR 1352.218-70 and the contingency plan into the contract.
Most notably, the DOC clause provides that "[f]ailure of the Contractor to maintain the modified performance level of supply or service until the Pandemic Influenza outbreak, SARS outbreak, or other biomedical emergency or catastrophe has been declared ended, or for such time until DOC determines that the modified performance level should be changed, whichever is later, shall constitute a breach of this Contract and shall entitle DOC to immediately pursue any and all remedies to redress the Contractor's breach of this Contract." The American Bar Association's Section of Public Contract Law has provided comments to the DOC on both the procedural and substantive issues raised by Procurement Memorandum 2007-01 and CAR 1352.218-70. Among other things, the Section noted that contrary to traditional "force majeure" principles, this new DOC clause seeks to ensure continued performance even in the event of an uncontrollable biomedical emergency.
Contractors providing "mission critical" services or supplies to DOC should be prepared to address in negotiations or in response to solicitations the intricacies and unknowns of a contingency performance plan, any need for Government support to continue performance, and compensation. Against this backdrop, contractors should take note of the possibility of default termination in the event the modified performance level cannot be met.