The federal government has taken and will continue to take a host of actions to deal with the COVID-19 crisis. Our Government Contracts Practice Group at Bass, Berry & Sims is carefully monitoring these developments and will keep you updated through our blog and through our Firm’s COVID-19 Response website page.
While the health of our citizens is, as it must be, the primary focus of the response, Congress and the Executive Branch are scrambling to ensure that companies have sufficient liquidity to continue operations, and continue employing people, notwithstanding the global economic shutdown that could run for months. Given that the federal procurement budget is in the hundreds of billions of dollars and government contracting involves hundreds of thousands of workers nationwide, our government procurement workers play an important role in facing this crisis.
Among other measures, last Friday the Department of Defense (DoD) issued a deviation that will permit it to increase Progress Payments from 80% to 90% for large businesses and 85% to 95% for small businesses. Where the provision is included, this contract financing mechanism authorizes the federal government to pay contractors 90% of the total costs they have incurred under a contract, whether or not actually paid, plus financing payments to subcontractors, while work is being performed but before supplies have been delivered.
Given the extraordinary need for liquidity our business will be facing in the coming weeks, DoD is to be commended at taking this and other steps so quickly to adjust the procurement rules to support what increasing appears to be a war time posture.
This is but one of the many measures the procurement workforce is taking to keep the United States working and liquid as these extraordinary actions to limit the spread of COVID-19. If you have any questions about this Progress Payment provision or other government contract issues related to COVID-19, such as whether delays related to this epidemic are excusable or whether your contracting officer can authorize payment continuity plans, please contact Richard Arnholt or Todd Overman.