This may seem obvious, but recent policy efforts both on the Hill and in the Pentagon indicate otherwise. One example is the recent effort to revamp how the government funds capital-intensive projects for companies through contract financing. Right now, companies receive financing on average for 80 percent of the total cost of these projects. This financing frees up internal capital, allowing the company to make upfront investments in research and development, workforce hiring and training, tooling, etc.
Instead, the revamped rule would have lowered the cap on financing to 50 percent, with outyear incentives to bring that percentage higher while requiring industry to self-finance the rest. This would have been onerous for larger contractors and existential for smaller ones, which would have suffered from the trickle-down impact of prime contracts having less available capital. Tellingly, this proposed rule came out without any engagement with industry on its impact and industry’s ability to remain viable and thrive. Thankfully, both congressional and industry opposition led the Pentagon to reconsider.
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