Georgia Tech Procurement Assistance Center

How to manage a Federal contract during the Government shutdown

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In the wake of the Government’s October 1, 2013 shutdown, clients of the Georgia Tech Procurement Assistance Center (GTPAC) have been asking our counselors a lot of questions about the implications.  Here is a summary of the advice we are giving:

  • Generally, if you are competing for a Federal contract, everything is on hold.  Watch FedBizOpps (www.fbo.gov) where a majority of Federal solicitations are posted to see updates on the status of anything you are bidding on, or have bid on recently.  Don’t expect up-to-the-minute information since so many Federal employees are on furlough, but that’s the best place to check on the status of most Federal procurements.  If you discover that the procurement official assigned to managing the solicitation in which you are interested is not on furlough, an inquiry by email is permissible.  Be patient in waiting for a reply — remember that literally hundreds of thousands of Federal employees are on furlough status at the moment.
  • Some procurements, related to essential Government functions, are proceeding with minimal disruption, but expect delays.
  • If you have an active Federal contract, it is imperative that you comply with all contractual terms and conditions, and that accurate records of shutdown-related impacts be maintained.  Knowing the terms and conditions of your contract inside-out will pay-off right now.  Be sure to read the rest of this article for tips on managing an active Federal contract.

Specific contractual actions to protect your company’s interest will vary by contract type and contract terms.  All have to do with the specific provisions contained in your contract.   Some things to consider include:

Cost-Type/Fixed Price-Type (incrementally funded) Contracts

  • Ensure compliance with the notification requirements of the “Limitation of Cost” or “Limitation of Funds” provision of the contract (cost-type contracts).
  • Develop plans to minimize the impact to the customer (the end-user within the Government) and your firm (i.e., curtail non-essential program elements to stretch program funding) and request a Stop Work be issued by the Government’s Procurement Contracting Officer (PCO or just CO) for the non-essential elements.
  • If a Stop Work is not issued, notify the PCO/CO of potential delays under “Government Delay” and/or “Excusable Delay” provisions. (fixed price-type contracts).
  • Provide direction to your supplier base consistent with the PCO/CO’s direction.
  • Ensure Government payments reflect any adjustments due you under “Prompt Payment” provisions.
  • Segregate costs as documentation for a potential delay and disruption under the Request for Equitable Adjustment (REA) provision of your contact.

Fixed-Price Type Contracts (fully funded)

  • The Government shutdown does not have an immediate impact on contract performance but, over time, the unavailability of Government inspectors or support could lead to delays and disruptions and should be documented for future Request for Equitable Adjustment (REA) consideration.
  • Ensure Government payments reflect any adjustments due you under “Prompt Payment” provisions.

Other Items to Consider

  • Proposals and unexercised options could expire during an extended shutdown period.  If it is in the best interest of your firm, a non-solicited proposal extension/option exercise date extension could be provided to the Government.
  • The Government may not be able to provide inspectors (e.g., Defense Contract Management Agency) under a shutdown and delay, so disruption impacts should be captured and documented for a future Request for Equitable Adjustment (REA).
  • The Anti-Deficiency Act (ADA) does not allow the government to spend money that is not obligated, therefore and firms should be leery of      non-warranted individuals requesting you to work and get paid later; e.g., contracting officer representatives (CORs) or other Government officials.  Only COs and PCOs can make binding commitments.
  • Be mindful of mission creep, where the Government requests you to perform additional contract tasks due to Government personnel unavailability.
  • The Government shutdown potentially impacts to your rates and long-range plans based on prolonged funding gaps and/or stop work orders, so alert your accounting staff to document all impacts of the shutdown.

As always, feel free to contact a GTPAC procurement counselor if you have questions or need guidance.  All contact information is posted at: http://gtpac.org/team-directory.

 

DoD discontinues accelerated payments to prime contractors; small businesses exempt

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The Department of Defense (DoD) has issued a notice that DoD has discontinued its temporary practice of providing accelerated payments to all contractors.  This new rule is found at 78 FedReg 12745, issued on Feb. 25, 2013.

DoD originally provided notice in the Federal Register at 77 FedReg 63298, on October 16, 2012, that it had taken steps to accelerate payments to all DoD prime contractors, in order to implement the temporary policy established in OMB Memorandum M-12-16, Providing Prompt Payment to Small Business Subcontractors (July 11, 2012).

With the latest notice, DoD discontinues its temporary practice of accelerating payments to all prime contractors. This action does not affect DoD’s policy to assist small business prime contractors by paying them as quickly as possible after receipt of an invoice and all proper documentation, while also maintaining necessary DoD internal controls.

DoD plans to continue phased implementation of the policy at DFARS 232.903 and 232.906. This notice is effective February 25, 2013.

DoD orders expedited payments to small subcontractors

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Contracting officers within the Department of Defense (DoD) have been ordered to modify existing contracts and establish new contracts in such a way that small business subcontractors are paid on an accelerated basis.

Richard Ginman, director of defense procurement and acquisition policy, issued this order on Aug. 15, 2012 in response to a policy announced by the Office of Management and Budget (OMB) in mid-July.

The DoD directive sets forth a “class deviation” so that all new solicitations and contracts contain a clause that requires prime contractors to pay small business subcontractors on an accelerated timetable.  In addition, existing solicitations and contracts are to be modified, if possible, to include the new accelerated payment clause.

To facilitate the prompt payments to subcontractors, DoD is to provide accelerated payments to its prime contractors after receipt of a proper invoice and appropriate documentation.

The OMB policy is a temporary, one-year policy.

A copy of DoD’s Aug. 15, 2012 class deviation can be found here: DoD Class Deviation – Accelerated Payment to SB Subs 08.15.2012

A copy of OMB’s July 11, 2012 policy memorandum can be found here: OMB Policy Memo – Prompt Payment to SB Subs 07.11.2012

 

Agencies told to ensure subcontractors get prompt payments

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Agencies have to pay their prime contractors promptly and, in turn, try to get the primes to make faster payments to their small-business subcontractors, and the Office of Management and Budget wants to see their progress.

OMB is requiring two reports—one in six months and the second report a year from now—to assess agencies’ work to get money into the hands of subcontractors faster, according to a memo released July 11.

The reports have three aspects.

Keep reading this article at: http://fcw.com/articles/2012/07/11/prompt-pay-subcontractor-agency-reports.aspx.

OMB urges agencies to pay small business contracts faster

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Federal agencies must accelerate their payments to small business contractors, according to an Office of Management and Budget memorandum released Wednesday.

The new guideline cuts the recommended payment time in half. Previously, under the 1982 Prompt Payment Act, agencies had to make payments within 30 days from when an invoice was received. Now, agencies should make payments within 15 days, or as soon as practicable.

With the government spending nearly $100 billion a year in small business contracts, OMB predicts this will boost cash-flow for small businesses and help create economic growth.

“This will benefit tens of thousands of small businesses by getting money into their hands faster,” Jeff Zients, deputy director for management and chief performance officer, said in a blog post for OMB.   The late payment interest penalty will not change, however. A provision in the Prompt Payment Act, the penalty is triggered when an agency does not pay within the 30-day mark.

Initial reaction from the National Small Business Association is positive.

“We’re supportive of it conceptually. Expediting the payment time is a good thing,” said Molly Brogan, vice president of public affairs for the group.

Agencies are expected to notify OMB by Nov. 1 when they can begin making accelerated payments.

— by Caitlin Fairchild – Government Executive – September 15, 2011 at http://www.govexec.com/story_page.cfm?articleid=48808&dcn=e_tma.

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