Contracting Community Braces for Possible Government Shutdown
Government funding runs out on September 30 if Congress fails to act.
Contracting groups and experts are advising federal contractors on planning for a possible government shutdown at the end of the week and mitigating any adverse effects.
On Monday evening, Senate Republicans blocked a short-term government spending bill that would have also paused the debt ceiling as the United States is reaching its borrowing limit. The House passed the measure last week. Treasury Secretary Janet Yellen said in a letter to Congress on Tuesday morning that the United States will run out of flexibility on the debt ceiling on October 18. Government funding ends on September 30.
Sen. Chuck Schumer, D-N.Y., said during a news conference mid-Tuesday afternoon Democrats would be putting something on the floor “very soon” to fund the government. In the meantime, the contracting community has been bracing for a potential shutdown.
Unlike the most recent government shutdown, which was from December 22, 2018 to January 25, 2019, and was the longest in history, “this one would affect every federal agency,” said David Berteau, president and CEO of the Professional Services Council, which represents over 400 companies, on a briefing call on Tuesday.
The White House has “broad discretion over which federal government actions have to stop and which ones continue” during a shutdown and “that discretion, we see exercised on day one of the shutdown,” he said. “Contractors will follow very different procedures and rules, unlike the federal civilian personnel...It depends on the guidance from the contracting officers and contractors, of course, are not always paid afterwards.”
Contracts that aren’t contingent on new appropriations for fiscal 2022—“in other words contracts funded by prior year appropriations—would continue,” Berteau noted. “Initially, this would be the majority of contracts that are in place, subject to a few other constraints. Whether or not agencies continue to solicit contract bids, or whether they award contracts that have already been bid on may be paused or may continue.”
PSC is encouraging companies to analyze their current situations; plan for a variety of lengths of shutdowns; “communicate early and often with your contracting officers;” know how all employees will be affected, such as with leave and travel; “be as up to date as possible in their responsibilities for delivering whatever it is that they're contracted to provide; and [be] as up to date as possible [on] your invoices that have been submitted. A submitted invoice with available funds may be able to be paid,” Berteau said.
The contracting association also encouraged companies to ask their agencies questions regarding shutdown guidance, access to facilities, invoices, available period of performance, and timeline for activities and deliverables.
Also, “you can't wait until the end of the shutdowns to start planning for when the shutdown is over,” said Berteau. “We advise our companies to start getting ready as soon as the shutdown occurs,” which includes documenting everything, keeping track of costs, being ready to submit invoices when the shutdown ends, continuing to meet deliverables where feasible and being prepared for “an immediate resumption” of work.
During the briefing, PSC shared its list of recommendations on preparing for and responding to shutdowns it sent the Office of Management and Budget in September 2019 based on lessons learned from the most recent shutdown. “To date, little action has been done,” said Berteau. PSC is considering re-upping these suggestions even if there isn’t a shutdown this week.
A potential shutdown would come as federal agencies and contractors are working to implement the vaccine mandate that President Biden announced on September 9 for federal employees and employees of federal contractors and subcontractors.
“We do have a lot of companies that are worried that their unvaccinated employees, faced with a mandate, [will] go find another job somewhere else where there is no mandate,” Berteau said. Also, a shutdown “might slow down the implementation of the mandate” as there is a ramp up process.
Guy Brenner and Allan Bloom, partners at the law firm Proskauer, outlined in a post on Monday what federal contractors should be aware of. This includes wage and hour considerations, furloughs, completing paperwork, health insurance and unemployment benefits.
“A government shutdown will require many contractors to make difficult choices,” wrote Brenner and Bloom. “If there is a shutdown, contractors should consult with employment counsel familiar with government contracting requirements to ensure that short-term reactions to the shutdown do not result in costly legal liabilities.”
Last Thursday, following standard procedure, the Office of Management and Budget reminded “agency senior staff of the need to review and update orderly shutdown plans,” White House Press Secretary Jen Psaki said.
“It is never a good thing for the government to shut down, and that is why we are doing everything we can to prevent that from happening,” Psaki said during a briefing on Monday. “Most of the public health work would be exempted from a government shutdown, but that doesn't change the fact that having services shut down, staffing cut in different agencies is not in the interests of addressing any crisis we face, including the pandemic.”
There have been 21 government shutdowns since the Carter administration and many more occasions when agencies were planning for them, according to the nonprofit Partnership for Public Service. The most recent shutdown “dramatically reduced and in some cases halted a number of basic government functions and had adverse consequences for the private sector, the economy, federal employees and contractors, and the American people who rely on the federal government for services,” said a report from the Partnership. The last time all 12 regular appropriations bills to fund the government were finished by the October 1 deadline was fiscal year 1997.
“We've got some interesting dynamics at play here because obviously a lot of the Biden team are experienced in the ways of government, hopefully could have taken steps to avoid potential shutdown,” said Stephanie Kostro, PSC executive vice president for policy. She asked Berteau if he is seeing anything different this time than from an Obama-era shutdown?”
So far, that is “an unanswered question,” he replied.