Government Contracting Alert - March 2020

Posted on: 4/2/20 by Kevin P. O'Leary, CPA

Maximizing Government Contracts to Offset Commercial Downtown

Novel coronavirus (COVID-19) concerns are having a significant impact on the commercial aviation market. The impact is also being felt by Government contractors with portfolios containing a mix of commercial and Government business, and in particular, by aerospace OEM and parts manufacturers, as airlines ground aircraft and defer new aircraft deliveries. In this environment, companies with contracting portfolios that contain a mix of Government and commercial contracts are better positioned to withstand potential disruption. Those companies can offset some of the commercial exposure by leveraging the steady cost absorption and cash flow from their Government contracts. While the current state around COVID-19 may result in delays in some programs, or a requirement for a company to spend additional money to avoid delays, this is not the same as the Government shutdowns that have become far too frequent in recent years. During a shutdown, there are no new program starts, and programs aren’t funded. During the current COVID-19 situation, contracts are still being funded, and there may in fact be expanded contracting opportunities to ensure critical infrastructure and supplies continue to be produced. Contractors who currently perform on Government contracts can continue to benefit from the cost absorption and cash flow generated by those programs to offset negative impacts in the commercial market. Those contractors should coordinate closely with their contracting officers to help ensure there are no program interruptions or delays, which could lead to delayed deliveries and payments. As the duration of the COVID-19 situation is unknown, now is a good time for those companies who are considering entering the Government market to position themselves to do so. 

SBA to Provide Disaster Assistance Loans to Some Coronavirus-affected Small Businesses

Newly installed Small Business Administration (SBA) Administrator, Jovita Carranza, is heading up the Presidential directive to implement Economic Injury Disaster Loans in coordination with state and local governments. The loan cap is $2 million. With interest rates at an all-time low, and an urgent need for small business capital due to the novel coronavirus’ (COVID-19) negative impact on the economy, it is important that small businesses be exceedingly proactive in engaging the SBA before economic factors change further. Restaurants, recreational sports leagues, and rideshare companies – all have been greatly impacted by COVID-19, and in some cases, shut down by government mandate. Business owners are encouraged to reach out directly to the SBA at 800-659-2955 or email at Small businesses are also encouraged to seek assistance from large businesses that are offering relief for Small Business Community members. Facebook announced on Wednesday, March 18th a $100 million cash grants and ad credits program, and Amazon has created a Neighborhood Small Business Relief Fund of $5 million for local Seattle small businesses. It is important to be active and diligent in your pursuit of disaster funding. 

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