The impracticability of performance doctrine is applicable in situations where the contractor’s performance of a contract, although not impossible, is rendered impracticable due to a problem encountered that was unforeseen at the time of formation of the contract. This impracticability of performance may be caused by a variety of unforeseen situations faced by the contractor during performance, including substantial increases in costs, significant problems encountered, or technological changes. Since the government retains sovereign immunity against contractor claims of restitution, recovery under the doctrine of impracticability of performance is generally only likely when the conditions causing the impracticability are already in existence at the time of the formation of the contract.
In determining whether the doctrine of impracticability is applicable, the Court of Federal Claims or the Boards of Contract Appeals require contractors to demonstrate that their claims satisfy at least three conditions. First, the contractor must demonstrate that an unexpected condition or contingency occurred during the performance of the contract, in other words, the existence of a contingency. Secondly, the contractor must show that it did not assume the risk of that contingency either expressly or through trade usage or custom. Finally, the contractor must prove causation. That is, the unexpected condition or contingency caused the impracticability of performance.
o Existence of Unexpected Condition or Contingency
The adjudicating forum may consider several factors to determine whether an unexpected condition or contingency exists. For instance, the Court may consider whether any other similarly situated contractor could have performed the contract. That is, whether the requirements or conditions are subjectively impractical for the contractor bringing the claim or impractical for any contractor in its position. Another factor to consider is the extent of the contractor’s efforts to meet the performance requirements. The contractor must generally demonstrate that it was diligent and exhaustive in its attempts to perform the contract. In cases where the contractor alleges commercial impracticality or unfeasibility, they must prove that the performance costs would be so high that performing the contract would not make commercial sense. Notably, non-substantial increases in contract price will not result in successful commercial impracticability claims.
o Assumption of Risk
After establishing the existence of an unexpected condition or contingency, the contractor must show that it did not assume the risk of such a condition. Depending on the specific facts, contractors may find this a difficult hurdle because the contractor assumes various performance risks when entering a federal contract. For instance, in claims arising due to unforeseen performance issues, the contractor generally assumes the risk of competence. That is, it is assumed that the contractor is at least just as competent as other contractors in the industry. Similarly, in claims of commercial impracticability, contractors may have taken the risk of scarcity of necessary materials or fluctuations in price.
Meanwhile, in technical impracticability claims such as those arising due to defective specifications, the contractor generally assumes the risk of non-performance if it had proposed to perform the contract according to its own specifications. This is especially true if a contractor possesses expertise in the field relevant to the contract and it is determined that the government relied on that expertise. Contractors can overcome this challenge by demonstrating that they performed according to Government-provided specifications.
o Causation
Finally, to successfully establish a claim based on impracticability, contractors must show that the unforeseen condition or contingency caused the issues that made performance impracticable. This is generally demonstrated by showing a logical nexus between the existence of the unexpected condition or contingency and the contractor’s inability to perform successfully. Contractors may establish causation by proving that had it not been for the unforeseen condition or contingency; they would have performed on the contract as stipulated during contract formation or subsequent pertinent modifications.
Depending on the specific facts surrounding the impracticability claim, contractors may rely on several types of evidence to demonstrate the existence and nature of the impracticability and its impact on the contractor’s inability to perform. Such evidence may include expert testimony and documentary evidence such as cost estimates, invoices, communications, and performance reports. Similar evidence should also prove helpful in demonstrating that the contractor did not contribute to the impracticability and acted reasonably and in good faith. A discussion of such factors, in addition to proving the requisite conditions of impracticability described above, may improve the chances of successful recovery in an impracticability claim.
This Federal Contract Claims Insight is provided as a general summary of the applicable law in the practice area and does not constitute legal advice. Contractors wishing to learn more are encouraged to consult the TILLIT LAW PLLC Client Portal or Contact Us to determine how the law would apply in a specific situation.
