If the federal government fails to pass a spending bill to keep it running past March 4, the subsequent shut down will have deep repercussions in the contractor community. Here’s how to prepare for a government shutdown.
The last time the government had a shutdown was for 27 days in 1995 and 1996, when federal employees felt the impact most directly. Now, however, a government shut-down would affect hundreds of thousands of contractors who wouldn’t receive payment for most services, or be able to renew expiring awards, or obtain access to federal facilities where they might have been operating.
Yet there are things government contractors can do to prepare for a government shut-down said the Professional Services Council (PSC), a trade association who recently briefed industry officials on how to prepare and what to do during a government closure. The first step is for firms with active contracts to engage in conversations with their contracting officer to determine how their program would be affected, said John Cooney, who served as the Office of Management and Budget’s general counsel during the 1995 shutdowns. Contractors also need to make sure they have a system to keep their employees posted on day-to-day closure status.
Cooney said a federal agency may continue to obligate funds if:
- The money is not limited to a single year (weapons systems contracts typically contain multiyear funding)
- Statutes expressly permit obligations
- Spending is a necessary to perform specific essential duties, such as issuing Social Security checks
- Money is needed to terminate operations in an orderly way
Both federal employees and contract staff generally will not work during a shutdown. The government isn’t allowed to use “voluntary” work by contractors to take the place of furloughed federal workers said Alan Chvotkin, executive vice president at the Professional Services Council.
However, federal employees that perform functions deemed “essential” including defense, health care, national security or emergency-related fields would be allowed to continue working during a shutdown. Yet for contractors, these decisions are more tricky. Contractor work status could be based on whether the shutdown is “hard” or “soft”. A soft shutdown occurs when an administration believes a budget compromise is near and often entails workers appearing in the office but performing minimal duties. On the other hand, a hard shutdown means federal workers are furloughed and prevented from entering buildings where work is performed.
The PSC suggests that companies affected by the shutdown be extremely detailed in their documentation, including detailing the costs needed to halt a program and restart operations. Once the government is operational, contracting firms should seek reimbursement for these costs.
