Contractors face tough choice under POMA

The intentions behind the Pay Our Military Act are laudable: Pay our active duty military and the civilians and contractors who provide direct support to the troops.

Defense Sec. Chuck Hagel used the law, which was signed in the waning days of fiscal 2013, to recall some 350,000 civilian employees to work during the government shutdown, and with them came many contractors, as well. Many across the market breathed a sigh of relief.

But the devil, as Ross Perot likes to say, is in the details.

The act, known by the acronym POMA, only covers direct pay and benefits, and that’s a problem for services contractors, said Stan Soloway, president of the Professional Services Council and a Washington Technology columnist. PSC is an industry organization that represents 350 companies.

Currently, the contractors who are working at the Defense Department are still using fiscal 2013 money, and POMA only applies to fiscal 2014 money. “As far as we know, there is no one working today under a POMA justification,” Soloway said.

So, POMA isn’t an issue yet, but that could change if Congress and the White House don’t strike a deal by the end of this week.

“There are an increasing number of contracts for which fiscal 13 dollars are slowly but surely evaporating,” Soloway said.

If a contractor is deemed essential under POMA, the government can only reimburse them for direct pay and benefits. “You cannot bill for overhead, other direct charges, supplies, equipment, travel, per diems. All that stuff goes away,” Soloway said.

And it is illegal for the government to say, “Don’t worry, we’ll make you whole after the budget is settled” because the government cannot obligate funds that haven’t been appropriated.

“This is a real risk environment contractors need to be aware of,” Soloway said.

Contractors will face the choice of either not working, or performing work for which they won’t be fully paid. “How do you go back to your shareholders with that?” Soloway said.

Of course, one justification is supporting your customer’s mission, but even that has its limits.

“This is the first time I’m aware of that, by statute, those supporting the government will not be compensated for their basic costs, let alone margins,” Soloway said.

Just to add another layer of confusion, a contractor can still be deemed essential under the traditional justification that their work is needed to protect life and property, which has always been the case during shutdowns.

In that case, contractors can bill and be paid for all their expenses.

But, if they are justified under POMA, they can’t.

Will this be a big deal? If a deal is struck this week, this is just an intellectual "what if" exercise.

But if the current, promising talks on Capitol Hill get derailed, POMA’s impact on contractors will quickly become a reality for many.

And tough choices will need to be made.