Inflation Spike Disrupts Federal Vendors’ Supply Chain Planning

In response to the nation’s biggest inflation increase in decades, agencies have loosened pricing rules and negotiated contract modifications in order to stave off critical supply disruptions that could threaten national security, public health, and economic performance.

Accounting for inflation and removing pandemic response procurement, federal contract spending in 2021 was down to $535 billion, a lower total than all but four of the last 10 years.

Prices for government purchases jumped more than 3.5% in 2021, according to the Bureau of Economic Analysis, squeezing many vendors’ costs.

Funding Uncertainties

The government’s underestimation of inflation poses financial risks to vendors. ...