Promising Practices Promising PracticesPromising Practices
A forum for government's best ideas and most innovative leaders.

Do Contractors Need to Take Out Government Shutdown Insurance?

ARCHIVES
Image via igor kisselev/Shutterstock.com

Now that it looks like a deal to reopen the government  and raise the debt ceiling is upon us, I’ve been thinking about where this leaves the government services industry. If the shutdown ends today, we’ll all get back to work, assess the damage, and begin digging out of the hole this lost time has dug. In a month or so, it might seem like we’re back to normal, but I think that’s a bit of a leap.

At the beginning of the shutdown, I posited that this kind of instability in budgeting and appropriations might be the new normal. We’ve had essentially the same debate between Republicans and Democrats since 2010 about entitlement spending and government revenue/taxes with no resolution. The fundamental positions have not changed despite many skirmishes and an election. All signs now point to a 2014 mid-term that might tweak at the margins but will still likely result in a Republican controlled House and a Democratically controlled Senate.

So what does that mean for the government services industry? If we continue to see short-term deals that postpone the reckoning, I think contractors are going to seek ways to insulate themselves from business disruption due to possible future shutdowns.  At first this might simply amount to larger rainy day funds. That of course will have negative effects, pulling money away from other productive uses (investment, training, etc.).

However, if there are repeated disruptions, I think businesses will begin to seek some form of shutdown insurance to stabilize finances and guard against a catastrophe. One form of this could be an actual shutdown insurance policy underwritten based on how much of a company’s work is deemed “essential” or “nonessential.” Whether any institution will offer such a product is something I don’t know.

A second form of “insurance” might come from contractors seeking higher fees from work that is likely to be disrupted to cover down times. Although contracting is extremely competitive, there comes a point at which companies that have cut to the bone will simply go out of business during extended or repeated shutdowns. Additionally, other businesses that might have entered the government space would pursue work elsewhere rather than take on the additional risk. That would eventually reduce the pool of companies competing and raise costs.

I don’t know how likely either of these scenarios are but I do feel like companies will begin to need to make adjustments to this new normal in order to survive going forward. What do you think companies will do if this is the new normal?

Image via igor kisselev/Shutterstock.com

Alan Pentz is a partner and co-founder of Corner Alliance, a Washington-based consulting firm that focuses on helping government clients build strategies to stay relevant in and capitalize on today's shifting technological landscape. He is a former Capitol Hill staffer and holds an MBA from the University of Texas at Austin. Contact him at apentz@corneralliance.com, or follow him on Twitter at @apentz

FROM OUR SPONSORS
JOIN THE DISCUSSION
Close [ x ] More from GovExec
 
 

Thank you for subscribing to newsletters from GovExec.com.
We think these reports might interest you:

  • Forecasting Cloud's Future

    Conversations with Federal, State, and Local Technology Leaders on Cloud-Driven Digital Transformation

    Download
  • The Big Data Campaign Trail

    With everyone so focused on security following recent breaches at federal, state and local government and education institutions, there has been little emphasis on the need for better operations. This report breaks down some of the biggest operational challenges in IT management and provides insight into how agencies and leaders can successfully solve some of the biggest lingering government IT issues.

    Download
  • Communicating Innovation in Federal Government

    Federal Government spending on ‘obsolete technology’ continues to increase. Supporting the twin pillars of improved digital service delivery for citizens on the one hand, and the increasingly optimized and flexible working practices for federal employees on the other, are neither easy nor inexpensive tasks. This whitepaper explores how federal agencies can leverage the value of existing agency technology assets while offering IT leaders the ability to implement the kind of employee productivity, citizen service improvements and security demanded by federal oversight.

    Download
  • IT Transformation Trends: Flash Storage as a Strategic IT Asset

    MIT Technology Review: Flash Storage As a Strategic IT Asset For the first time in decades, IT leaders now consider all-flash storage as a strategic IT asset. IT has become a new operating model that enables self-service with high performance, density and resiliency. It also offers the self-service agility of the public cloud combined with the security, performance, and cost-effectiveness of a private cloud. Download this MIT Technology Review paper to learn more about how all-flash storage is transforming the data center.

    Download
  • Ongoing Efforts in Veterans Health Care Modernization

    This report discusses the current state of veterans health care

    Download

When you download a report, your information may be shared with the underwriters of that document.