This week, the State of Hawai`i instituted some of the most sweeping emergency orders in the country in the response to the COVID-19 pandemic. For tourists, tourism, federal employees, federal contractors, and the millions of island residents, this means a very different kind of stay while in paradise.

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As most government contractors are aware, progress payments are a form of contract financing in which the Government pays the contractor based on cost throughout performance of the contract, up to a cap dictated by the terms of the contract.  On March 20, 2020 – “in response to the Coronavirus Disease” – the Department of Defense issued a Class Deviation to contract clauses DFARS 252.232-7004 and FAR 52.232-16, the effect of which is to increase the progress payment rates to 90% for large business concerns and 95% for small business concerns – an increase of 10% and 5%, respectively – from the customary progress payment rates established by DFARS 232.501-1.  The Class Deviation provides that the change is to remain in effect until rescinded.

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On Friday, March 20, 2020, the Office of Management and Budget (OMB) issued Memorandum No. M-20-18, titled “Managing Federal Contract Performance Issues Associated With The Novel Coronavirus (COVID-19).”  The Memorandum, directed to the heads of all Executive Departments and constituent federal agencies, provides key guidance on maintaining continued contract performance while respecting the need to protect the safety of the contracting community during this unprecedented time.  The critical aspects of the Memorandum, accompanied by a contractor “To Do” list, are as follows:

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The spread of the COVID-19 virus and the unprecedented steps taken by federal, state and local authorities to contain it by shutting down or significantly altering normal business operations pose great challenges to government contractors in meeting the needs of their universal customer, the U.S. Government.  Work spaces are closed.  Supply chains are disrupted.  Key employees may no longer be available to oversee critical operations – both on and off U.S. Government installations.  Here are some proactive measures that contractors can take now to avoid loss and to maximize the potential of obtaining new business opportunities created by the expected exponential increase in government spending:

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