Guidance for the Federal Contractor in Dealing with a Financially-Distressed Subcontractor During and After the COVID-19 Pandemic

Crowell & Moring – The ongoing COVID-19 crisis has caused unprecedented harm to nearly all industries, including those involved in federal government contracts. This article provides information and guidance to prime contractors (and higher-tier subcontractors) who might be dealing with subcontractors devastated by COVID-19. A contractor may find that a subcontractor’s financial problems not only jeopardize subcontract performance but also threaten an otherwise profitable project and the contractor’s own reputation. Consequently, and especially in the COVID-19 era, contractors must monitor the financial affairs of their subs and be prepared to act decisively when a subcontractor’s deteriorating financial condition becomes apparent.