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ConstructionPro Week, Volume: 4 - Issue: 44 - 11/13/2015

Are Agency “Sovereign Acts” Always Public in Nature?

By Bruce Jervis

 

On a public works contract, a “sovereign act” is the ultimate government defense to a contractor claim for additional compensation. A sovereign act occurs when the public project owner, the government agency, establishes a policy that is public and general in nature. The government is acting in the interest of public health or safety. The act is not directed at a particular contractor and not intended to nullify rights under a particular contract. And, a sovereign act does not provide economic advantage to the government under a contract.

 

If a public project owner can establish that a contractor’s claim was based on a sovereign act, the contractor’s claim will be denied. This is true regardless of the economic hardship on the contractor or the lack of fault on the part of the contractor. It is a powerful defense.

 

On a recent federal contract, a change in military base access to personnel was ruled a sovereign act. The use of pre-release convicts on work crews was prohibited, although it had been allowed for years. It was ruled that this was not directed at a particular contractor, but was a change in public policy based on security concerns. But was this really true? Is it not probable that the change in policy resulted from complaints regarding this particular contractor’s use of pre-release convict labor?

 

The distinction between an act that is public and general in nature and an act directed toward a particular contractor is hard to establish. It raises difficult questions of proof. Should this not be grounds for viewing the “sovereign act” defense with some skepticism? Your comments are welcomed.

 

 

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