The government contracting industry is known for its ability to successfully weather the ups and downs of the economy but the coronavirus pandemic is putting that long-cherished reputation to the test.
Federal government contractors have been viewed for the most part as less susceptible to broader economic conditions given the nature of federal spending as a constant and especially that of defense.
But the ongoing coronavirus pandemic could put that notion into question even more than perhaps any of the government shutdowns in recent years. Agencies have full budgets in this current situation but the ability to perform the work could be disrupted by moves to limit the virus’ spread.
That conundrum is top of mind for many in the public sector ecosystem. Many agency directives on telework are in place, but House leaders including Rep. Gerry Connolly (D-Virginia) sent a letter Tuesday that urged the White House to mandate remote work for all federal employees and contractors across the country.
Government services companies should be able to rapidly adjust and often have better internal telework capabilities than agencies themselves do, analysts at Cowen & Co. wrote in a research note Wednesday. Remote work also largely does not interfere with unclassified projects.
Aerospace and defense hardware makers by comparison could be more challenged as they are largely manufacturers, where access to facilities is a must.
That is likely top of mind for the Aerospace Industries Association, which put out a four-point proposal Wednesday that in part calls for a temporary injection of public and private investment to “help mitigate reduced cash flow and financial burdens” -- particularly small businesses and others in the supply chain.
AIA also proposed “clear and consistent guidance” to speed up payments and contract awards in order to stabilize the procurement system, here again to help with companies in maintaining their cash flow.
Cash flow and ability to record revenue was an immediate item of concern for government contractors during last year’s 45-day partial shutdown, even though many defense and intelligence agencies were fully funded.
For this pandemic, Cowen analysts cautioned that the situation still is early and that “there could be hiccups initially” regarding invoice payments if civilian workers responsible for those cannot get to the government facility with the systems to facilitate that function.
But even if there are early setbacks, many of those systems that support the processing of invoices are also remote and not necessarily firewalled, so that issue could be overcome quickly in a best case scenario.
Efforts are underway by Defense Department to work with industry on how they are being affected. In a emailed media statement Tuesday, DOD spokesperson Lt. Col. Mike Andrews said that Pentagon acquisition chief Ellen Lord has started daily phone conferences with major GovCon trade associations such as AIA, the Professional Services Council and National Defense Industrial Association.
Given the overlap in membership, the National Association of Manufacturers and U.S. Chamber of Commerce also participated on the industry side. DOD’s participants included Jennifer Santos, deputy assistant secretary for industrial policy, and representatives from other Fourth Estate agencies such as the Defense Contracting Management Agency.
DOD’s statement did not disclose details on exactly what was discussed.