Government Contracting in the Time of COVID: Navigating Uncharted Waters

  • Frank McNally

    • A consolidation of useful resources for the govcon community

    It’s hammer time, America. For the next four weeks, and perhaps longer, our economy will face unprecedented conditions and challenges for which there is no playbook. As more states fight this unseen enemy by evoking necessary shelter-in-place measures, the vast majority of small businesses and their workers will be forced to deal with significant disruptions to cash flow, operations, and livelihood.

    If we don’t do whatever we can to help them, their situation will be dire, and the collateral damage wide. So whether you run a small mom and pop shop or a large government contracting business, we’re pooling our resources to provide what we hope can be a “shelter-in-place small business survival kit” that anyone can use to contribute however they can. 

    What does your government contracting business need to know about Coronavirus?

    By now, you probably understand the implications of coronavirus guidance on your business. Here’s a highlight list of the legislative and centralized guidance from the federal government. 

    Acquisition Guidance from the Office of Management and Budget (OMB)

    On March 20, 2020, OMB released a memo (M-20-18) providing guidance and instruction for the government contracting community covering hot topics like telework for contractors, excusable delays, equitable adjustments and changes to procurement thresholds. The full memo is here, with all OMB guidance posted here. Highlights of M-20-18 are below.

    • In the event that telework is not an option, OMB is encouraging COs to be flexible on delivery and completion dates within their contracts.

    • We hosted a roundtable discussion on your rights as a government contractor when dealing with force majeure and excusable delays last Monday; watch the recording here.

    • The standard for reasonableness can be found at FAR 31.201-3

    Specific Flexibilities for the Government Procurement Process

    With the President declaring a national emergency under the Stafford Act, the flexibilities at FAR 18.202 are available. They include increased procurement thresholds as follows:

    1. The micro-purchase threshold is raised from $10,000 to $20,000 for domestic purchases, and to $30,000 for purchases outside the US

    2. The simplified acquisition threshold is raised from $250,000 to $750,000 for domestic purchases and $1.5 million for outside the US

    3. The simplified acquisition threshold for commercial items is up to $13 million

    OMB is also encouraging agencies to leverage existing category management solutions to help agencies find existing solutions for common goods and services. The OMB memo has points of contact and tools and dashboards that agencies can use.

    Dealing with set-asides for local firms under the Stafford Act is another consideration. Normally under emergency declarations, contracting officers are expected to give preference to local firms within that disaster area. However, in this case of a nationwide pandemic, there is no current action that requires local firm preferences. So agencies and contractors can use their judgment when exercising these procurement flexibilities and not limit their activities to local firms.

    Tracking COVID-19 related spending on government contracts

    This is more for contracting professionals, however, some businesses may wish to know where the spend is occuring. So the General Services Administration (GSA) has added a new National Interest Action (NIA) Code in the Federal Procurement Data System (FPDS) to be used exclusively for COVID-19 reporting. The codes are as follows, and are retroactive to 3/13/2020 with an end date of 7/1/2020.

    • Web portals will show the value “COVID-19 2020” in the NIA drop down field

    • Contract Writing Systems are instructed to use the code P20C when creating or updating COVID-19 contract documents

    The guidance also recommends that agencies use either “COVID-19” or “Coronavirus” in solicitations and related documents to make keyword searching easier. We would extend this guidance to your GovShop profiles and capability statements so your company may be easier to find when COs are conducting their market research.

    And just today, MITRE released a full listing of COVID-19 authorities, contract vehicles, and initiatives. 

    If your government contracting business needs funding…

    If you have to obtain money but don’t feel great about taking on debt during a time of uncertainty, you can at least know that it won’t ever be cheaper. When the Federal Reserve slashed its Fed funds rate to between 0 and 0.25 percent, it did so to make borrowing cheaper. Everything from credit cards to bank loans will see interest rates fall, which means opportunistic businesses can get cheap debt to make capital investments, buy raw materials, or invest in other areas of their business.

    The Fed is also relaxing their definition of what constitutes Troubled Debt Restructuring to make it easier for banks and borrowers to restructure loans without negative hits to their credit or institutional rating. Read more from the Office of the Comptroller of the Currency.

    But what if you’re a startup or relatively new company, without the credit history to take advantage of these low rates?

    There are several creative options you can explore. One is from good-PR-thirsty Facebook, which is offering $100 million in cash grants for up to 30,000 eligible small businesses across the 30 countries in which they operate. Their landing page, Boost with Facebook, suggests the grants can be used to help with workforce and rental costs, as well as marketing and other operational costs. There seem to be more details coming, with an option to sign up for updates as they become available.

    Non-bank lending is also an option, especially if you’re in any kind of position to provide critical supplies to first responders, hospitals or any front-line commodities. If you have a network that you could use to purchase such supplies, but don’t want to hurt your cash flow, you can use non-bank lenders for purchase order financing through an assignment of claims.

    This is especially useful if you have purchase order payment terms that mean you can’t cover the costs of the order but also can’t invoice until you deliver. Do your homework if this option sounds like it could work for you, and source a few different nonbank lending firms such as Kabbage or OnDeck Capital, or private lenders like Loyalty Alliance, before you settle on terms.

    What can we do as citizens and stewards to support ourselves and others?

    As with any crisis, there are opportunities in the market. From freelance labor, to critical updates, to maximizing work from home activities (if your business is fortunate enough to have accretive work from home measures), here are some things we can all try to do while we navigate this difficult time. 

    Freelance Labor

    Freelance labor might be widely available as motivated employees working from home find additional capacity to provide support, while also feeling pressure to make additional income to cover unexpected expenses or losses of income.

    Many freelancers and gig economy platforms, especially those offering professional services, are reporting better than average demand. If your company could benefit from a quick injection of design talent, or some coding support to tackle thorny problems, now is a good time to consider dipping a toe into the gig economy.

    If you are a worker who wants some extra hours or need to make up hours that you no longer have from your employer, there’s never been a better time to create an UpWork or Fivrr profile. If you’re looking for something more permanent, a kind soul on the internet put together a giant google spreadsheet with work from home opportunities. (I spot-checked some of these links, and they are legit.)

    Tackle those thorny tech problems, or rebuild your website

    With general consumer distraction and nationwide focus on other important matters distracts typical consumer behavior, taking the time to update a website when traffic may be naturally down can be a capitalizing short term opportunity. Releasing a critical product update when usage is down is another good thing to do. Especially if it’s a critical part of your system; might as well take this chance to deploy at a time when the consequences of failure are low.

    If there are strict guidelines around shelter-in-place, there may not be an opportunity to invest in physical upgrades to a storefront or other infrastructure. But depending on your local guidelines, you could potentially consider a local handyman or woman for project-based work to your office or brick-and-mortar.

    Maximizing Work From Home

    Businesses who have been proactive about work from home procedures may be ahead of the curve here, so talk with others in your network to see what they are doing. If you’re scrambling to get the most out of your remote team, here’s a list of creative ideas we’ve heard:

    • Don’t forget your website’s site structure either. Updating your title tags and metadata can help improve your organic search ranking, sending more relevant traffic your way. Check out this great read on that topic from The Pulse of Government Contracting.

    This is not going to be an easy time, and there will be no easy answers. But with everyone and every business bracing for the impact, proactive steps in the interim can help to make the recovery faster when it’s time does come. Do you have any creative ideas you’d like to share? Tell us in the comments, and we’ll update this article to include the best of the best.

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