COVID-19: Impacts to Government Contractors
In the wake of the COVID-19 (Coronavirus) pandemic, Federal contractors are experiencing unprecedented challenges. Some contractors may receive Stop Work Orders (SWO) or Contract Termination notifications resulting in the loss of revenues. Additionally, contractors are facing a variety of operational challenges to the continuing performance of existing contracts, including:
- Government mandated shelter-in-place orders
- Supply-chain interruptions
- Increased sick-leave / absenteeism
- Operational inefficiencies to promote social distancing,
- Increased sanitation costs,
- Increased IT & telecommunication costs to support telework
- Limited / no access to Government sites
- Etc.
These operational challenges are resulting in unanticipated increases to operating costs and/or schedule delays.
Various Federal Agencies have issued memorandums directing Contracting Officers to exercise flexibility and accommodate contractors impacted by the current COVID-19 situation, including flexibility for contract performance requirements, schedule relief, and Requests for Equitable Adjustment (REA).
- Office of Management and Budget (OMB) Memo (March 20, 2020)
- Department of Defense (DoD) Guidance
- Department of Homeland Security (DHS) Guidance
- National Aeronautics and Space Administration (NASA) Guidance
- National Institutes of Health (NIH) Guidance
Contractors should be particularly vigilant to recognize the financial impacts resulting from the current COVID-19 situation. Where appropriate, contractors should be seeking relief via an REA. Additionally, contractors should adjust their provisional billing rates if they anticipate increases in their operating costs to avoid cash-flow issues (see FAR 42.704(c) – “billing rates may be prospectively or retroactively revised by mutual agreement…to prevent substantial overpayment or underpayment”).
To the maximum extent practical, contractors should be separately tracking the incremental and unique costs associated with their company’s COVID-19 response. Tracking these costs in real-time will help ensure proper cost recovery and minimize the administrative efforts needed to prepare REA proposals at a later point.
Victura has extensive experience assisting clients with the preparation and negotiation of REA proposals and provisional billing rate proposals. To learn more about our proven strategies and how our team can assist, contact us.