/ d3sign

Process and payment questions are always paramount in shutdowns

How and when contractors get paid if the government shuts down are among many questions contractors have. Here is a glimpse at some answers.

Preparing for the possibility of a government shutdown and making adjustments during a shutdown should be second nature now for agencies and contractors alike.

In what seems to be a fiscal year-end tradition, companies in the government market face these questions and others as a shutdown looms:

  • Should I show up for work during the shutdown?
  • Will we get paid?
  • When will we get paid?
  • If we don't get paid on a normal schedule, what do we do next?

The first order of business here is a reminder that while many federal employees are immediately taken off the job when a shutdown starts, contractors keep going until they get some sort of formal direction to stop.

The halt comes in the form of a stop-work order from the contracting officer, or if the current funds on a contract run out and no else one in government is there to obligate new money.

Other scenarios exist where contractors may be required to support certain activities even if there is no available funding, as the head of the main trade association representing government services companies told a group of reporters Tuesday.

"If a contractor is required to support an excepted activity and funding for that contractor expires or is exhausted, the company has to sign it obviously, but the government can issue a contract that the company will proceed without any guarantee that they'll be paid for that work," Professional Services Council David Berteau said.

Regarding the matter of stop-work orders, multiple days are required to undo those directives that can be issued in less than a day. Agencies need between three and five days of recovery for every day they are closed to catch up to where they were before a shutdown, Berteau said.

For the 2013 government shutdown, that translates to between 48 and 80 days of catchup work. The partial shutdown of late 2018-early 2019 lasted 35 days, which brings the catchup period to between 105 and 175 days. That's a lot of weeks for agencies to get back up to speed.

On the matter of invoices to get paid, this reminder Berteau offered is noteworthy: the line for those submissions to get processed is based on when an agency's payment office accepts them, not the order in which they are submitted.

Agencies can of course extend the time with questions about what is on the invoices, but the 30-day clock to pay them only starts upon the official acceptance.

"Most companies keep track of what's been kicked back from their invoices for correction and amplification by the payment office," Berteau said. "It's useful for a company to go back, look at where their invoices have been questioned previously, make sure that they're not making those same slips, so the internal review before submission is key."

Claims and settlements of cost incurred from the shutdown must be submitted within 30 days after the shutdown ends, but resolutions can take at least a year to happen.

Everything described throughout this article means companies must be in constant contact with program offices and anyone else involved in that payment cycle, Berteau said. The same holds true for communications with their lenders and other partners at financial institutions if and when those payments are interrupted, Berteau said.