2019 GAUGE REPORT - Industry Roadmap of Benchmarks and Trends for Government Contractors

The ICP can be a labyrinth of at least 12 minimum schedules with 24 or more detailed, inter-related schedules likely. Given this, the potential exists to overlook many of the intricacies of the information required in an adequate ICP. In consideration of the impending June 30, 2017 deadline, we have outlined ideas for avoiding some the most common inadequacies as you prepare and review your ICP prior to submission.

A Consilience of Military, Political and Economic Perspectives

The spread of the COVID-19 virus and the unprecedented steps taken by federal, state and local authorities to contain it by shutting down or significantly altering normal business operations pose great challenges to government contractors in meeting the needs of their universal customer, the U.S. Government. Work spaces are closed. Supply chains are disrupted. Key employees may no longer be available to oversee critical operations - both on and off U.S. Government installations.

The COVID-19 pandemic has presented unique challenges for companies performing federal government contracts. The operating landscape is constantly shifting and the communication and directives from federal agencies and state and local governments are often vague and contradictory. In response to a flood of information, advisories, memoranda, and alerts, Smith Pachter McWhorter PLC has issued a handbook for government contractors covering topics in a question-and-answer format to provide simple answers addressing some of the pressing issues and questions we are seeing from the industry.

This week, the State of Hawai`i instituted some of the most sweeping emergency orders in the country in the response to the COVID-19 pandemic. For tourists, tourism, federal employees, federal contractors, and the millions of island residents, this means a very different kind of stay while in paradise.

As most government contractors are aware, progress payments are a form of contract financing in which the Government pays the contractor based on cost throughout performance of the contract, up to a cap dictated by the terms of the contract. On March 20, 2020 - "in response to the Coronavirus Disease" - the Department of Defense issued a Class Deviation to contract clauses DFARS 252.232-7004 and FAR 52.232-16, the effect of which is to increase the progress payment rates to 90% for large business concerns and 95% for small business concerns - an increase of 10% and 5%, respectively - from the customary progress payment rates established by DFARS 232.501-1. The Class Deviation provides that the change is to remain in effect until rescinded.

The COVID-19 epidemic is creating uncertainties for contractors performing government contracts due to, among other things, changes in facility access, new health rules, and an evolving situation. In apparent response to industry concerns, the Office of Management and Budget ("OMB") issued Memorandum M-20-18, "Managing Federal Contract Performance Issues Associated with the Novel Coronavirus (Covid-19)" dated March 20, 2020. OMB states that the purpose of the memorandum is to identify steps to help ensure contractor health and safety while maintaining continued contract performance in support of agency missions consistent with precautions issued by the Centers for Disease Control and Prevention.

By Executive Order dated March 18, 2020, the President invoked wartime powers authority provided in the Defense Production Act ("DPA") to direct private industry in the interests of the national defense. See, 50 U.S.C. Ch. 55; The Defense Production Act of 1950: History, Authorities, and Considerations for Congress (CRS REPORT NO. R43767). The definition of "national defense" is expansive and extends to domestic preparedness, response and recovery from natural hazards, terrorist attacks, and other national emergencies. 50 U.S.C.  4552(14). The President's authority includes the ability to prioritize government contracts over competing customers for goods and services and allocate or control materials, services, and facilities necessary to promote the national defense. The Executive Order specifically identifies ventilators and personal protective equipment as priorities and delegates authority to the Secretary of Health and Human Services to identify further necessary health resources relating to the COVID-19 emergency. Although the Executive Order was initially limited to medical items, we are already seeing expansions to other sectors of the economy outside of the medical field.

The impact of COVID-19; the ensuing delays and changes in the work; protecting the contractor's cash flow; and avoiding a default termination are now top-of-mind for every construction contractor. This article reviews delay principles, changes in the work, default and convenience terminations, illness of key personnel, stop work orders, and other considerations related to claims and defenses arising from COVID-19. Contractors must be alert to the practical aspects of entitlement and recovery under the clauses that come into play.