Editor’s Note: When this was written, the decision to shut down the government had not yet been made; however, the government did, in fact, shut down. Many of my friends, who are still government workers, were furloughed Monday morning and un-furloughed Monday afternoon. The points made in this blog are still very relevant. And don’t expect this to be the last government shut down.
As a young Army officer, I once heard a wise general comment, “What’s the opposite of Progress? Answer: Congress.” It got a big chuckle from the group of soldiers and officers gathered around the general, as it was intended to. But I’ve always remembered the lesson, that Congress, and partisan politics, is often an impediment to getting anything done.
As I’m writing this, Congress is once again on the verge of “shutting down” as a result of their failure to pass a budget, or even a spending bill, that would allow the government to continue operating. If they fail to reach an agreement by midnight tonight, technically, they are not allowed to spend anymore “discretionary” money, until they do pass the budget or at least a “continuing resolution” that kicks the can down the road another few weeks or months.
For contractors, the impacts of a government shutdown are immediate, and appear to be severe. All work should cease, because this work is now being done at the contractor’s own risk. Federal law states that no money can be obligated under contract unless it has been authorized and appropriated by Congress. So once Congress’s spending authority lapses because they have not renewed the legislation, then technically, no contractors can get paid for the work they would normally be doing. So, in simple terms, a government shutdown amounts to a ‘stop work’ notice, meaning all contracted goods and services are suspended, and possible terminated.
Of course, this immediately causes other issues, as Stop Work notices usually result in other costs, either of alternate arrangements, interim labor and/or material costs, and so forth. These will all amount to claims that the contractor can file with the government for compensation for the disruptive costs caused by the Stop Work. But like all things governmental, there will be a drawn-out process to file those claims and receive just compensation. That’s just part of the cost of doing business with Uncle Sam.
One positive factor that results from government shutdowns is that the major defense contractors kick their lobbying efforts into high gear, and the crisis gets resolved within a few days. There are millions of employees that work for major defense contracting firms, and Uncle Sam closing its doors, even for a few days, presents a major economic impact to those companies, and the communities in which they live and work. And truth be told, those corporate executives and their lawyers and lobbyists spend a lot more time with Congress than the civil service employees and bureaucrats do, so they have tremendous influence with the elected representatives. If the government ‘shuts down’ this weekend, I’m confident that within a few days, a week at most, of these huge companies complaining loudly about layoffs, cutbacks and job eliminations, Congress will get its act together and pass a budget, or at least another Continuing Resolution.
So, contractors should be tracking the issue closely. They need to dialogue with the contracting officer – there may be specific instructions or exemptions that permit them to keep work (national security, for instance). And the contracting officers should be providing updated guidance about the potential Stop Work, and what to do until, if and when, the Stop Work is lifted. Contractors need to carefully plan their next few days to avoid incurring costs or expenses for which they may not get paid. They need to have a plan for resuming work once they receive the ‘go-ahead,’ and they need to plan on submitting a claim for any costs or expenses caused by the interruption (like missed deliveries of materials, delayed service provisions, etc.)
At the end of it all, Congress will sort it out, and Uncle Sam will make it right for the contractors, since the requirements are still there and the buying activities still need their goods and services to be provided. It’s just a messy, disheartening experience, and wastes time, energy and resources for what amounts to empty political grandstanding. For more information, Skyway’s Contracting Officer Podcast has an episode that discusses Government shutdowns: Episode 134 – Another Government Shutdown?