To stop the spread of the new coronavirus, federal agencies could shutter facilities. States and localities are already issuing shelter-in-place orders. And with obscure rules surrounding telework for federal contractors as well as the potential for supply chain disruptions and employee infections, there could be a new level of unpredictability for the contractor community.
“There’s both a little bit of stability and a fair amount of uncertainty,” said Alan Chvotkin, executive vice president and counsel at the Professional Services Council, an interest group representing more than 400 government contractors.
“Things that were normal yesterday are not normal today. Behaviors that were planned for over the last couple days have been changed as government missions are changing,” he added.
In the near term, schedules laid out in contracts will likely experience delays and costs may increase due to disruptions caused by COVID-19, said Jonathan Aronie, head of law firm Sheppard Mullin’s government contracts practice group. These disruptions could be caused by employees not coming into work, or their suppliers’ employees not working.
President Donald Trump said March 18 that he’s willing to use the Defense Production Act to force companies to manufacture goods the government needs to fight the virus, like ventilators or masks. These orders become “rated,” essentially allowing the government to skip to the front of the line.
That poses other challenges.
“While some companies are going to have problems that are slowing them down, other companies are going to have the problems associated with an influx of new orders,” Aronie said.
Aronie warned of a complex web of orders that companies could have to fulfill, pulling businesses in different directions. For example, he said, companies could get an order from a hospital, an order from a state government with a preexisting contract, and then a rated order from the federal government as well as agencies without rated authorities — potentially overwhelming and confusing manufacturers.
“Somehow you’re going to have to make sense of this all,” Aronie said.
Effects of telework
Across the government, federal employees eligible for telework have generally been allowed to do so. But contractors haven’t always followed the same rules. Not allowing contractors to telework could have significant ramifications, experts warned. Many contractors are required by their contracts to work in government facilities. But to stop the spread of COVID-19, access to these facilities could be limited or completely shut off.
This conundrum leaves contractors with questions for the government.
“Are there going to be access issues? Are contractors going to be asked in some cases to work from home where previously they were going into a government facility? What does that mean from a performance perspective? What does that mean from a cost perspective? How do you work that out with the government?” said Roger Waldron, president of the Coalition for Government Procurement. “These are some of the thing people are thinking about.”
On March 20, the Office of Management and Budget’s deputy director for management, Margaret Weichert, released a memo urging agencies to “maximize telework for contractor employees.” But, as reported by Federal News Network, Weichert’s memo did not mandate telework for federal contractors, leaving industry frustrated.
Several interest groups that represent government contractors called on congressional leaders and the White House to allow contractors to work from home. PSC wrote a letter to OMB on March 18 warning that not issuing guidance regarding extending telework flexibility to contractors could lead to layoffs.
“The duration of this is a huge uncertainty, if it does get worse before it gets better, if folks are really unable to perform the kind of work that need to be done at some government locations, that’ll have some impact on people,” Chvotkin told Federal Times.
Over the last few days, several states such as California and New York have begun following shutdown orders that could leave contractors in tenuous positions. A Justice Department memo from March 20 also directed U.S. attorneys general to tell state and local officials that federal employees must be allowed to travel and commute, “even when travel restrictions are in place.” This action didn’t mention contractors either.
State governments are going to have to “recognize that exceptions are going to be essential and some federal missions are just going to be so important to continue on that they’ll have to accommodate them,” Chvotkin said.
How does this compare to the government shutdown?
This is the second consecutive year that contractors have faced challenges due to a crisis; last year’s was the record 35-day government shutdown.
Some aspects of the 2019 shutdown and the coronavirus crisis are the same. For example, Aronie said, both increase delays and incur higher costs on contractors. The big difference is that some companies will receive more work, instead of less.
Another significant difference is that employees, both from the federal government and contractors, are still working — many federal employees from home.
This increase in telework has increased agencies’ demands for IT infrastructure as they work to accommodate the rise in telework. Last week, the White House requested several billion dollars for agencies to improve their IT infrastructure.
Under the COVID-19 pandemic, the uncertainty is greater than during a government shutdown, experts said, because the ending was solely in the hands of the government.
“Even in the shutdown … everybody recognized that it was going to end sooner or later. It was under both the congressional and presidential control to bring an end to it — not so here,” Chvotkin said. “There’s nobody who can just decree that the coronavirus has been cured.”