On May 23, 2023, Bloomberg Law quoted Dismas Locaria regarding the impact of the looming debt ceiling crisis on contractors’ pay.
According to the article, the debt ceiling crisis is presenting immediate concerns for federal contractors, even before the government reaches the X-date of running out of funds to pay its obligations, as contractors are already reporting government delays in payment for authorized amounts for work.
“Make sure you’re recording costs. Stay close to your government counterparts, contracting officers. Try to get payments as soon as possible on what you’ve done so far,” says Locaria. “If the government is short-paying, or not paying the full amount, maybe have conversations with the contracting officer on if there’s anything you can do to cut costs.”
Lenders serving contractors—largely regional banks and factoring companies—have relied on the near-sure thing of a government contract payment if the work was completed. This gives smaller contractors that can’t rely on public markets or massive institutional investors easier access to capital.
“In the past, it’s gold,” Locaria said. A default would turn that upside down.
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