Pentagon modifies 1,500 contracts in coronavirus, small business support effort

The Pentagon is moving quickly on a “mass modification” of existing defense contracts to expedite support for COVID-19 response efforts and support economic growth for businesses.

The modifications, which include as many as 1,500 contracts, are designed to support the construction and delivery of medical supplies such as masks and gowns and other essential items such as communication and transportation, according to a Pentagon statement.

Six Air Force C-17 flights have delivered up to 3 million COVID-19 test kit swabs, the statement says.

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Regarding economic strategy, the Pentagon’s contract modifications include increasing limits on progress payments to 90 percent for large businesses and 95 percent for small businesses.

“This will provide immediate cash flow to industry, especially small businesses in the supply chain, once incorporated into the contract,” the statement says.

Interestingly, the effort includes specific support for small businesses potentially impacted by COVID-19-related economic developments. The intent is to both support COVID-19 relief efforts and also help ensure that “cash flow is moving to small businesses in their respective supply chains,” the statement says.

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A small business cash-influx strategy appears to align with an interesting 2017 Walden University essay called “Strategies for Enhancing Small-Business Owners' Success Rates.” As part of a detailed discussion of the particular challenges or barriers to success faced by small businesses, the article makes the point that small businesses, in particular, can be impacted by “crises” and a resulting decrease in cash flow.

“Some authors have posited that business failures stem from a lack of experience of the business owner in addressing (a) competition, (b) economic factors, (c) crises, (d) shifts in priorities, and (e) varying expectations,” the essay states.  (International Journal of Applied Management and Technology, Walden University).

The economic implications of the COVID-19 situation clearly seem to qualify as a “crisis,” challenging cash flow opportunities and an ability to adjust to fast-changing economic variables. Larger businesses, while still, of course, impacted, often have the capital to sustain and adjust to unexpected economic crises.

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“Small-business owners must maintain sufficient capital to cover start-up costs as well as for maintaining and expanding operations,” the essay states.

Finally, it goes without saying that small businesses are indeed quite fragile at times, given that 50 percent of new start-ups fail within the first 5 years of operation, according to the essay. Small businesses account for up to 48 percent of private-sector employees.

Given all of these variables, the current crisis-inspired predicament seems to highlight or present a delicate balancing act. How can the COVID-19 spread and its corresponding danger to lives be mitigated while minimizing the economic impact? How long will it last? How much will be needed to recover? At the moment, these questions linger in a complex haze of uncertainty and yet-to-be-determined circumstances.

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Overall, the initiatives involve ongoing collaboration between the Industrial Policy’s Small Business Office and a specially configured Joint Acquisition Task Force within FEMA’s National Coordination Center, according to the Pentagon statement.