Playing the Long Game: How to survive the negative impacts of COVID-19 on Government Contracting?

The COVID-19 pandemic has had some government contractors at a standstill and uncertain of what their next move should be. The current unprecedented market has imposed new challenges for which the federal government has struggled to provide defined solutions and guidelines. Prior national crises and federal government shutdowns have provided government contractors with tools and knowledge to survive turmoil, but COVID-19 has still left contractors with little direction.

How can you, as a government contractor, survive the financial and legal ramifications of COVID-19? Take action and stay the course. Remember that the government is still open, and you can and should keep doing business. You can start by evaluating your contracts for specific terms that are now at issue., Do any of your contracts have a provision that allows for an excusable performance delay? Generally, an excusable delay clause calls for a pause in contracted work due to “acts of god,” for which past flu epidemics similar to COVID-19 have been considered. If your contracts can be excusably delayed, identify what situations and for which contracts you must give notice of delay. If a situation is beyond your control and impacts your ability to perform a contract, this clause may properly relieve you of your prior contractual obligations.

In addition to staying in contact with suppliers and prime contractors if you are a sub-contractor, the key to resolving your contract questions is to stay in contact with your contracting officer. Consider in what situations can ask for a stop-work order. A stop-work order halts all work and costs against a contract and is generally a clause within a government contract that can be invoked by a contracting officer. Notify your contracting officer of your delays, expenses, and offer potential solutions to discuss. Discuss how you can mitigate costs and delays. If there are delayed payments and canceled contracts, consider the costs you incur. What fixed cost do you absorb, and can you dispose of any portion of that amount? Pay attention to your cash conversion cycle to ensure that your payments to suppliers line up with how quickly you are getting paid by your government contacts.

In order for government contractors to survive the impacts of a global pandemic, they must stay on a steady course towards the goals they have set for themselves. Staying invested through a period of volatility instead of reacting to the market shocks provides the best mindset for business success and survival. Before looking to how you might establish new contract relationships in the future, focus on your existing contracts. Your existing contracts may provide you with new contract opportunities. Communicate with your government officials about issues that you deal with as a government contractor in your specific business and look out for a contingency plan for contracts established by the federal government.

The SJS Law Firm can help you as you work through these issues. For a complementary consultation, please contact us at (202) 505-5309 or info@thesjslawfirm.com.

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