News & Events

As the week winds down, we are faced with a situation in which Congress and the President have not yet reached a deal on the debt ceiling issue.  If a deal is not reached by early next week, some of the government's bills may not be paid "on time" because the government may have insufficient funds to make payments. 

Many contractors have expressed concerns about this issue.  We would like to take a moment to pass along a few thoughts about how you can deal with this potential cash flow issue and come out strong on the other side:

1.  Continue to Submit Proper Invoices in a Timely Manner.  Government contracts are existing obligations of the U.S. government.  The government is still obligated to pay contractors under the terms of their contracts, whether or not the government experiences a cash flow problem.  Invoice payments generally are covered by a "Prompt Payment" clause, which details the government's responsibilities to pay interest on most late payments to contractors so long as the contractor is in strict compliance with the FAR invoicing rules.  If the government makes a late payment, the interest should be automatically included in your payment.  If it’s not, then promptly contact your Contracting Officer. 

2.  Keep Up Your Documentation.  In the unlikely event that your customer agency decides to put your contract performance “on hold,” make sure that you get that direction in writing from the proper authority:  your Contracting Officer.  Also, keep detailed records of the costs of the delay – they may be reimbursable. 

3.  Remember You Still Have Contractual Obligations to Subs & Employees.  With the exception of subcontracts that include “pay when paid” provisions, the government’s failure to pay you does not automatically relieve your obligation to pay your subcontractors, your suppliers or your employees.  If you are having serious cash flow issues due to the government’s delayed payments, you may want to contact your Contracting Officer to see if payments can be expedited. 

4.  Continue to Perform High Quality Work for your Customer.  Contractors working on funded existing contracts should continue to perform their contractual responsibilities.  Note, however, that in the case of incrementally funded contracts, option exercises, and/or unawarded contractual actions, continuing to perform unfunded work is generally at the contractor’s own risk. 

On behalf of the Government Contracts Practice Group at Odin, Feldman & Pittleman, we hope that this issue is resolved before it affects any of you.  Please do not hesitate to call any of us if you have any questions.

David Lawrence  703-218-2181

Brian Darst         703-218-2140

Matthew Keller    703-218-2117