Contracting in the Time of Coronavirus

As we’ve previously written, COVID-19 funding for government contractors is fraught with enforcement and audit risks (while False Claims Act penalties continue to increase). To document this funding, the Government Accountability Office (“GAO”) recently issued a report to Congress titled COVID-19: Opportunities to Improve Federal Response and Recovery Efforts. In the Report, the GAO gathered available obligation and expenditure data from various federal agencies and found a staggering total of $1.3 trillion in obligations, while expenditures totaled $643 billion through May 31, 2020. This difference accounts for $521 billion in PPP loans, which are not considered expenditures until they are forgiven (or timely repaid).

GAO released a companion report on July 29, 2020, specifically detailing government-wide contract obligations – COVID-19 CONTRACTING: Observations on Federal Contracting in Response to the Pandemic. That Report details that government-wide contract obligations totaled $17.8 billion as of June 11, 2020. Four agencies accounted for about 85% of all obligations, with the Department of Health and Human Services (HHS) solely accounting for about half of all expenditures ($8,944.2 million). Unsurprisingly given the amount of contract obligations expended by HHS, about 62% were for goods to treat COVID-19 patients and protect health care workers (e.g., gowns, ventilators, etc.).

However, of biggest note, agencies competed less than half of total contract obligations:

Out of the approximately $9.4 billion non-competitively awarded contracts, more than two-thirds were reported as using the unusual and compelling urgency exception to full and open competition. However, as money and contract obligations will undoubtedly continue to flow, the GAO has advocated for increasing competition, noting: “Awarding contracts under the unusual and compelling urgency exception to full and open competition can be necessary in certain circumstances, but our prior work has noted that promoting competition—even in limited form—increases the potential for quality goods and services at a lower price in urgent situations.”

Thus, while it appears that various agencies will continue to expend large amounts of contracting dollars with respect to the coronavirus response, expect the GAO and other oversight agencies to begin taking a closer look at where this money is going, how it is spent, and whether there is adequate competition to ensure that the government is not overspending on its contract awards.