The government has to restrict contract performance to those “Essential Business and Operations” contracts because of the COVID-19 virus. But what is the definition of Essential Business and Operations? The following meets the government’s requirements:
- Groceries & Medicine;
- Food, beverage, and licensed marijuana production & agriculture;
- Organizations that provide charitable and social services;
- Religious entities
- First Amendment protected speech;
- Gas stations and businesses needed for transportation;
- Financial and Insurance Institutions
- Hardware & Supply Stores;
- Critical trades;
- Main, post, shipping logistics, delivery and pick-up services;
- Educational institutions;
- Laundry Services;
- Restaurants (Take out only)
- Supplies to work from home;
- Supplies for essential businesses and operations;
- Home-base care and services;
- Residential facilities and shelters;
- Professional Services;
- Manufacture, distribution, and supply chain for critical products & Industries;
- Critical labor union functions;
- Hotels and motels; and
- Funeral Services.
Next, we will look at Shelter-in-place.
Shelter-in-place – COVID-19
Shelter-in-place orders are handled differently depending on the state and city. Some states require all non-essential businesses and operations to stop. Others have stated that non-essential businesses may continue to conduct Minimum Basic Operations. Yet, cities may evoke their own restrictions. Please check with your state and city for any restrictions due to COVID-19 virus.
Minimum Basic Operations – COVID-19
What does Minimum Basic Operations mean? Any activity to maintain the value of the company’s inventory or preserve the condition of a company’s’ physical plant and equipment. Also, the following functions: security, payroll, and employee benefits or related functions. Lastly, any activity to facilitate employees working from home. Next, we will tell you what to look for in your current contracts.
As we have discussed in earlier blogs, you must review your contract clauses. Especially if you find that your business does provide essential services, but you cannot perform them due to interruptions in the supply chain, or decreased laborers. What should you be looking for? That is coming up next.
Force Majeure Clause
Review your contracts for a “Force Majeure Clause.” A Force Majeure Clause allows for an excusable delay. What is an excusable delay? According to the Federal Acquisition Regulation (FAR) 52.249-14, an excusable delay includes, among other things, acts of God, fires, floods, epidemics, quarantine restrictions, strikes, freight embargoes, and unusually severe weather. So you see, this clause fits the epidemic and quarantine restrictions happening in the world today. But what do you do if you don’t have a Force Majeure Clause? That is up next.
No Force Majeure Clause
If your contract does not contain a Force Majeure Clause, you may also seek relief through other common law doctrines of impossibility and impracticability. These doctrines may not fit all contracts, so check with your attorney. But remember that these clauses are not an excuse not to talk to your contracting officer. Let the contracting officer know what is happening on the contract. Communication is key during this pandemic. Next, we will talk about your insurance.
File an Insurance Claim – COVID-19
.Lastly, you could review your insurance policy as it may contain a provision for relief in this situation. Also, talk to your contracting officer. They understand the present situation and will work with you. Remember that failure to perform the contract could result in a default. A default has significant ramifications!!! Next, we will look at the Defense Production Act.
Defense Production Act (DPAS)
President Trump invoked a wartime law that makes supplies to the Federal Government the top priority. Specifically for medical equipment and supplies.
The government has the authority to go to the top of the line and force contractors to prioritize the sales of goods to the government before selling to consumers or other private purchasers. How do you know if your contract has the DPAS ratings? We will go into detail on what to look for next.
DX and DO Ratings
You must review any active or new government orders for DPAS ratings. These DPAS orders will include a field indicating the level of DPAS rating. The rating is either “DX” or “DO.” DX orders are higher than DO orders. DO orders must be prioritized over non-DPAS orders. Above all make sure to let your customers know what is happening. They realize that products and services will be impacted during this crisis.
Now, make sure that you review your orders for these DPAS rating and pay attention as you must respond within a set timeframe to the agency. Up next SBA small business loans.
Small Business Loans – COVID-19
We have discussed SBA Small Business loans in detail in previous episodes. SBA Disaster loans and Payroll Protection Program (PPP) loans are available to small businesses. Please be patient as SBA is experiencing a high volume, and the application process can take up to 21 days. The United States has never had a situation where the whole country has been declared a disaster. As a result, this is taxing the system capabilities for SBA.
I believe in the future, SBA may have to invest in system upgrades to handle any possible future disasters. Better safe than sorry. Up next is eight recommendations for government contractors.
Eight Recommendations – COVID-19
Preparation is key. That is why we have put together eight recommendations to help your business during the pandemic. These are not in any order. Now on to the recommendations.
- Spend your time now researching your contracts to determine the types of relief contained for pandemics and natural disasters.
- Review your contracts to determine if they contain DPAS.
- Plan now to comply with state/federal law.
- Keep track of incurred costs over and above the contract for compliance.
- Communicate with your contracting officer and let them know your current capabilities and any accommodations that might be required.
- Submit requests for equitable adjustment as soon as possible to your contracting officer.
- Update your sick leave policies and reinforce key messages to your employees. Example: stay home when they are ill or have any COVID-19 symptoms.
- Be prepared to change business plans if needed to maintain critical operations.
Many people believe that business plans or operating plans are outdated. I for one believe that they service a useful purpose. Now on to our summary.
You have invested a lot of time, money and resources in your business. Now is the time to make sure that. you have your business protected. Please take the time now to review your contracts for the Force Majeure clause or other common law doctrines of impossibility and impracticability. If you need help reach out to a consultant, attorney or other professional. Now is the time to act. Lastly, follow the eight steps is a great start to protect your business.
Also, please take a moment and be kind to someone today. You never know how this act may be just the thing that this person needs today. As always, please be safe out there.
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