“’The inflation crunch is especially severe for government contractors, however, because they have traditionally faced a buyer dominated market in which contract terms and conditions are offered on a take it or leave it basis. Once into the period of performance, government contractors consequently confront a formidable bureaucracy characterized by limited flexibility in responding to the radically changed circumstances presented by such developments as double digit inflation. Unlike his civilian counterpart, the government contracting officer has little or no power to adjust contract prices when equity or practical considerations require and his authority in general is limited by a bewildering array of regulatory and decisional law.’
This excerpt is from a research paper by the Washington and Lee Law Review, capturing the impact of inflation on government contractors in 1975. Yes, written 47 years ago and the point made by Richard Johnson and John Pachter, who now are with Smith, Pachter and McWhorter, rings more true today than ever…”
“’[The General Services Administration’s] multiple award schedule contractors are being put in an untenable position: continue performance at losses of 15%-to-25% or more on individual products, seek other, more flexible channels to support the customer, or simply exit the government space altogether in favor of the private sector that responds more readily to the forces of the market,’ wrote Roger Waldron, the president of the Coalition for Government Procurement, in a Jan. 28 blog post. ‘This reality is stark, especially for small business whose margins are slim, resources are scarce and channels to the federal buyer are limited.’
And sources say some contractors are actually leaving the federal market altogether, in part, because they are losing so much money…”
“’We are working with the Office of Governmentwide Policy and the Office of Policy and Compliance to see what we can do to provide workarounds for industry so you can increase more often throughout the year and increase more often after you have added something to your contract so your pricing can stay current and your pricing can stay fair and reasonable, and so we can make sure you are in a pocket for success,’ [Stephanie Shutt, the director of the MAS program management office] said at the Centre Law and Consulting Annual 2022 Review on March 3. ‘If you are having issues with your pricing, so we can track it better, we do recommend that you email the GSA ombudsman. Please don’t email the ombudsman until you actually have an issue though. We are working really hard to make sure that we provide a lot more flexibility so the supplier journey is easier across the board. It does take time and money for us to process a rejection as much as it is time, money and frustration on your side. We are working very hard to see what we can do to make sure we are doing it well across the board.’…” Read the full article here.
Source: Contractors need agencies to help them “whip inflation now!” – By Jason Miller, March 9, 2022. Federal News Network.
