By Greg Bland
While some industries grapple with slowdowns as a response to the pandemic, many government contractors have geared up. Yet what lies ahead for contractors remains uncertain as the health crisis continues to present new challenges.
From vital military and intelligence tasks to supporting FEMA’s coordination of the national response to COVID-19, the work of contractors is vital. The government contracting sector remains a large source of revenue for our local communities, with Tri-County area defense contractors, including Raytheon Technologies in Goleta and VSolvit in Ventura, securing roughly $18 billion in government contracts between 2000 and 2019.
Contracts from federal and state governments remain in force, and work continues as government partners are working to help them succeed. Because much of the work is “essential” to government, few local companies have seen stop-work orders.
Yet contractors’ worries are similar to other industries: how stay-at-home orders impact their ability to do the work they’re contracted to do. Government agencies, recognizing the need for essential work to continue, have taken extraordinary steps to guide local companies on policies and procedures. Governments activated contingency plans to help people work virtually wherever possible.
While this helps existing contractors, many new contracts are delayed 30 or 60 days because of health concerns and competing priorities. This can cause cash-flow challenges for companies that need to keep employees in place and ready to go while waiting for new contracts to take effect.
First-time government contractors may also face challenges. A ventilator manufacturer might be asked for five times its normal production, but may not have the capital and personnel necessary to ramp up while also navigating federal contracting requirements.
While companies want to help, there may be obstacles for those without federal contracting experience. In this rapidly changing environment, contractors should be in direct communication with contracting officers. Many—including the U.S. Army small business office, the Defense Intelligence Agency, and the Special Operations Command—post daily updates. Companies should consider their workers’ health and welfare, including physical and emotional well-being.
They also should assess how long they can sustain a virtual-work environment, taking into account its impact on company performance as well as the associated costs. While payments to companies are predetermined, contracting officers may be able to modify payments due to unforeseen COVID-19 related expenses.
Some contractors are facing supply chain difficulties without any recourse. But looking ahead, those depending on a single supplier should identify backups. Companies need to communicate with their contracting officers, along with their CPAs, attorneys and bankers—specialists in working with government clients.
Now is the time for businesses to discuss contingencies about cash flows, installation changes, access to facilities and additional local and federal resources. Contractors have supported military operations in Afghanistan and Iraq and have navigated earthquakes and hurricanes, sequestration and government shutdowns.
Mission success often depends on adapting to unforeseen obstacles. Government contractors are good at this because they’ve always done it. Using their experience coupled with the counsel of their partners, government contractors will survive and thrive through this crisis too.
• Greg Bland is the senior vice president of commercial banking and Central Coast market president for Bank of America.