The country as a whole is feeling the squeeze that inflation is imposing on families and businesses alike. The cost of living and of doing business is rising at a faster rate than ever, and even though this effect is so widespread, there are still naysayers struggling to admit to the reality of it. Coming out of the COVID haze and the Rescue Plan of 2021, some are jaded by the rampant fraudulent acquisition of federal support dollars by businesses who didn’t qualify or didn’t deserve it and the seeming abandonment of so many who needed it most. But what is at stake right now is that the cost of doing business is up and is not reflective in the rates negotiated before the consequence of inflation set in.
In a recent Bloomberg article, Democratic Senator, Elizabeth Warren of MA, argues that “ DoD contractors–like all contractors–agreed to provide goods and services to DoD for the contractual rate, […] These are private sector entities that competed for and voluntarily chose to engage in these agreements –and they should not be bailed out with corporate welfare simply because their profits are lower than anticipated.” She went on to urge officials “to be circumspect about the industry’s claims about the impact of inflation, given their second-quarter profits, which show operating incomes that increased over the last quarter average 11.7%, suggesting there was little to no adverse impact due to inflation.” It seems Sen. Warren neglects to address the impact to small businesses with regard to DoD contract rates, as her statements only address the oversight of larger businesses who are vastly supported by and are required to team with small contractors for a large percentage of active contract work for the DoD and other agencies.
We consulted our experts to get further insight into this discussion. Courtney Fairchild, CEO of Global Services, based in Washington D.C., supports small and growing government contractors with opportunities such as GSA scheduling, among many other services. From her point of view, she says, “To say that corporations entered into contracts and shouldn’t be bailed out seemingly ignores the financial situation all contractors are facing with such high inflation. No one could have predicted this at the time of signing the long-term contracts. Most importantly, contractors that can’t afford to work under the rates or prices as negotiated will find themselves in default. This cannot be in the best interest of either the agency or the contractor.”
Small businesses’ interaction on federal contracts is decreasing every year. Even though some reports convey the dollars are being spent to allocate opportunities to the smalls, the number of contractors participating is dwindling due to many factors, but none more impactful now than inflation. Congress should take notice of the trickle-down effect of inflation to the supply chain that supports the DoD and all agencies from the ground up. Not to mention that small businesses provide more jobs for our economy than larger contractors do. The effect will be that the small contractors will be forced out and less jobs will be available when these businesses move into private sector work and abandon their efforts in the federal marketplace supporting our National defense and security, among other mission objectives.
A special thank you to @DustinSiggins for sharing this article, and thank you to @CourtneyFairchild for providing your expert insight on this subject!