With congressional leaders and the Biden administration still in negotiations over raising the nation’s debt ceiling, unless Congress acts quickly, there is a reasonable likelihood the United States could run out of money to meet its financial obligations beginning as soon as early June 2023. This, in turn, will create uncertainty for many federal contractors regarding government contract, labor and employment, and other laws.
Below are some of the critical issues federal contractors should consider to ensure they are well-positioned to respond to any debt ceiling-related default.
Government Contracts
Contractors, as a general matter, are required to continue performance of existing government contracts, even where the federal government delays payment (or has shut down, if the debt ceiling crisis later leads to that). Specifically, as a general rule, an existing federal contract with a remaining period of performance and obligated funding remains in effect and should be performed during debt ceiling-related payment delays or a later partial federal shutdown:
Contractors should analyze their contracts to estimate a “burn rate” and determine if and when obligated funding will run out. Contractors should also (a) pay close attention to any contractual obligations to notify the federal government of the status of funds...
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