US contractors told to brace for government debt crisis

The US Capitol building in Washington, DC. (Janes/Marc Selinger)

The US Professional Services Council (PSC) is urging its member companies to prepare for the possibility that the US government could delay payments to contractors if it fails to resolve its debt limit crisis.

Contractors should stockpile cash and consult with their credit providers to ensure they can continue operations if the government suspends payments, David Berteau, PSC president and CEO, told reporters on 25 May.

The government is expected to run out of money in early June unless its borrowing authority is increased. While President Joe Biden and his Democratic allies in Congress support raising the USD31.4 trillion debt ceiling without conditions, congressional Republicans insist that a ceiling increase be coupled with cuts in non-defence spending. The Biden administration and congressional leaders have been trying to negotiate a compromise but have yet to reach a deal.

“We want this to be done as soon as possible,” Karine Jean-Pierre, White House press secretary, told reporters on 25 May. “That's why the negotiators have been working around the clock – 24 hours, practically – to get this done.”

Berteau said PSC is hearing from member companies that some banks are tightening access to credit because of uncertainty caused by the debt crisis. Small contractors are especially vulnerable in a credit crunch because they tend to have modest cash reserves, he said.

PSC, which is based in the Washington, DC, area, is an association that represents more than 400 companies providing services to the federal government in areas such as consulting, engineering, facilities management, information technology, logistics, and operations and maintenance.