Federal Contractors Need to Prepare for a Long Government Shutdown

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A shutdown of government operations for any length of time will have a significant effect on the contractor community, especially small businesses.

A government shutdown over Christmas and New Year’s is not certain, but federal contractors need to have preparations in place to weather what could be a long lapse in work.

While the last two shutdowns earlier this year were short-lived—one in January lasted a weekend; another in February lasted five hours—Friday morning tweets from President Trump suggested the impending closure could be much longer.

“If the Dems vote no, there will be a shutdown that will last for a very long time,” he tweeted at 4:24 a.m.

“President Trump’s Christmas shutdown will be incredibly harmful for government contractors who support their federal employee partners but aren’t made whole after government reopens,” Rep. Gerry Connolly, D-Va., told Nextgov in a statement. “These people have families, mortgages and other daily expenses. They shouldn’t be held hostage during the holidays by Republicans for a wall that Mexico was supposed to pay for.”

Federal employees exempted from furlough through the shutdown won’t be receiving paychecks but they will generally get backpay once the standoff has ended. Federal contractors who are paid for time worked, rather than salaried, can’t be paid for time they didn’t work. For those living paycheck to paycheck, this could make things tight around the holidays.

“Contractors have to go through a lot of non-value-added work in dealing with a shutdown that political circumstances dictate,” Alan Chvotkin, executive vice president and counsel for the Professional Services Council, which represents some 400 government contractors, told Nextgov. Federal employees “are almost always compensated, and I’m glad they do, but contractors can’t make up for hours lost. So, a shutdown has more serious financial implications for contractors than for federal employees.”

This is particularly true for small businesses, Chvotkin said, as they often concentrate their work on a single agency. For some, a single agency might not just be their primary client, but their only client, he noted.

Chvotkin said PSC is working with the Office of Management and Budget to get clearer, more specific guidance for federal contractors in the event of a shutdown. The organization submitted a white paper in October, though, ironically, current priorities have put that on the backburner.

“The ripple effects of a government shutdown will have far-reaching impacts across Virginia, and while federal employees may later be reimbursed for working through a shutdown, that isn’t the case for federal contractors,” Sen. Mark Warner, D-Va., told Nextgov, noting the large contractor community in the wider D.C. metro area and throughout the state of Virginia. “A shutdown is expensive and inefficient, and particularly now, it makes no sense to further damage our economy by taking away people’s paychecks over the holidays.”

As Friday night’s deadline nears, contractors should ensure they have as much information as possible about their agency customers’ shutdown contingency plans and “develop internal strategies to mitigate the impact of a prolonged shutdown,” Deniece Peterson, director of federal market analysis for Deltek, told Nextgov in January.

“Contractors should treat [their] shutdown plans like a real project with a project owner and resources assigned to identify and document how schedules, costs, employee status would be affected,” she said.

Peterson laid out seven things contractors should have in such a plan in a Jan. 21 blog post, including identifying and documenting added costs incurred due to the shutdown and creating contingency plans for paying employees and subcontractors.

While contractors aren’t able to do government work during a shutdown, they might be expected to return to work immediately once Congress approves funding. To bridge that gap, contractors should have other, temporary work ready for their employees to keep them on the clock and ready to return.

“The Trump shutdown will hurt the men and women who work side-by-side with civil servants every day,” Rep. Elijah Cummings, D-Md., said in a statement to Nextgov. “Contractors help to provide critical services that will be halted and it will severely affect the government’s ability to serve the American people. I urge President Trump to do the right thing for the American people and avoid a shutdown.”

Charles S. Clark contributed to this report. 

Editor's note: This article was updated with a statement from Rep. Elijah Cummings.