Sequestration and Government Shutdown Update

A Government Shutdown is here and Sequestration took effect on March 1, 2013.  Now that there is no deal in place to fund the Government, a shutdown has caused much of the federal government to close and prevent the execution of programs supported by the contracting community.   Any questions?  Contact Eric Crusius.

Shutdown and Sequestration Resource Center

For the benefit of the contracting community that Centre serves, below is some information the could be helpful when wading through the shutdown and sequestration maze: 

  1. Centre attorney Eric Crusius, Esq. is appearing on NPR on October 17, 2013 during the evening Marketplace program.  He will be discussing the shutdown.
  2. Centre has released a White Paper about the shutdown, the debt ceiling impasse, the effects on contractors, and best practices.  E-mail Eric Crusius (ecrusius@centrelawgroup.com) to obtain it.
  3. The WARN Act provides specific problems for contractors due to the uncertainty of the affects of sequestration.  For more information on the WARN Act, click here.
  4. Visit our blog, Centre Knowledge to read the entries, Now That Sequestration Appears Likely, What Should Contractors Do?  and On the Precipice of Sequestration: The Boy Who Cried Wolf is Crying for Real for even more information on sequestration.  
  5. On November 30, 2012, Eric Crusius appeared on Federal News Radio to discuss sequestration.  Click here to listen.
  6. Eric Crusius gave a presentation to a DC-area NCMA chapter about sequestration in November.  E-mail Eric to obtain a copy of that presentation.
  7. Contact Eric Crusius, Esq. at ecrusius@centrelawgroup.com, if you have sequestration questions.

Scroll down below for the latest news, FAQs, and important links.

The Latest News

The latest news about the shutdown and ongoing sequestration:

October 17, 2013

Now that the Government has reopened, do not forget to file any claims you have for wind down and start-up costs.

October 14, 2013

Columbus Day weekend did not yield a deal.  The Speaker just finished a news conference in which he announced that they do not have a specific plan yet.  We will keep watching.

October 10, 2013

It appears that the House GOP will put forth a “clean” debt ceiling bill to raise the debt ceiling until November 22, 2013.  The Senate GOP wants to also include a measure opening the Government, but does not appear to be in the cards on the House side.  Stay tuned….

October 8, 2013 (second update)

The Washington Post is reporting that House support for a “clean CR” is falling.  Two House GOP members have rescinded their support for a “clean CR.”

October 8, 2013

Some good news – many civilian DoD employees are back to work!  Secretary Hagel used the Pay Our Military Act as justification to order most DoD employees back because they support troops in the field.  This does not necessarily mean DOD-based contracts would restart.  More details are in the updated White Paper.

October 3, 2013 (third update)

Have a bid protest with GAO? They are not considered essential.

October 3, 2013 (second update)

Centre will be a releasing a White Paper tomorrow on the shutdown and possible debt ceiling crisis.  Request it by e-mailing us (ecrusius@centrelawgroup.com).

October 3, 2013

GovExec has an interesting article about why the shutdown may last longer than people think.

October 2, 2013

A reminder for prime contractors: make sure your subcontract agreements allow you to temporary cease accepting work.  If not, primes could be required to accept service/products from their subcontractors even when the Government is shut down.

October 1, 2013

The Government has shut down.  Look out for stop work orders and terminations for convenience.  Unless you hear otherwise, keep working.

September 29, 2013

The White House has a helpful resource page about shutdown contingency plans.  Get it by clicking here.

September 24, 2013

We are unfortunately live again and tracking news updates.  Stay tuned for the latest.

March 4, 2013: 1:03 PM (second update)

One area of concern that is subject to the sequestration machete is our nation’s efforts to defend the ongoing cyberwar.  The Federal Times has more here.

March 4, 2013

Now that sequestration has taken hold, furlough notices are starting to roll out.  This one is from the Department of Justice.

Our white paper will also be out soon.

March 1, 2013: 11:50AM (third update)

Boehner emerged from his meeting with the President announcing that there was no deal.  Obama is speaking live and taking questions regarding sequestration.

March 1, 2013: 11:10 AM (second update)

OMB has released a memorandum regarding sequestration.  OMB now estimates that cuts will be 9% for non-defense programs and 13% for defense programs.  The memo also emphasizes the importance of communicating with stakeholders as the effects of sequestration.

March 1, 2013

Today is sequestration day.  Some time today, President Obama will sign the order to begin sequestration, though that is not expected until after meeting with Congressional leaders this morning. 

February 28, 2013

Politico reports what we all know at this point.  Sequestration is unstoppable.

February 27, 2013: 11:15 AM (third update)

GovExec.com has a rundown of the latest furloughs expected with sequestration.  In their rundown include government employee furloughs and some contractor furloughs (by agency).

February 27, 2013: 10:45 AM (second update)

NBC News is reporting that President Obama will meet with Congressional leaders on Friday – after sequestration is scheduled to take hold.  That means, in all likelihood, that sequestration will happen for at least a short time.

February 27, 2013

Following-up on a story mentioned a few days ago, a few GOP senators are floating a plan that would replace the sequester with a plan that would give the President the authority to allocate the cuts to different agencies. Also, Federal News Radio reports that military leaders are making last minute pleas to Congress to avoid sequestration.

February 26, 2013: 5:55 PM (third update)

Speak Boehner has “drawn a line in the sand.”  According to Politico.com, he has insisted that taxes will not be part of any deal to avert sequester – even the type that closes loopholes.  This does not leave a lot of room for negotiation ahead of the March 1, 2013 deadline.

February 26, 2013: 8:40 AM (second update)

NBC’s Chuck Todd reported this morning that the two sides in the sequestration battle have not yet and do not even have plans to meet at this time.  Meanwhile, The Washington Post details how Newport News shipyard workers view sequestration and Politico.com reports that a trio of Virginia GOP congressmen are sounding the alarm over sequestration.

February 26, 2013

Senate GOP members seem to be backing off a plan to give President Obama flexibility with how the sequestered funds would be cut.  Politico.com reports that the senators will meet on Tuesday to discuss proposals that could give President Obama some wiggle room.

Meanwhile, the sides are nowhere near the negotiating table to discuss a deal to avert sequestration.

February 25, 2013: 4:50 PM (fourth update)

The Washington Post reports that there has been no progress in averting sequestration.  It appears we are still in the finger pointing phase.

February 25, 2013: 12:50 PM (third update)

Contractors, if you have not already, now is a good time to get in touch with your customers to try and determine the impact of sequestration on your contracts.  You can also learn about sequestration by attending Centre’s Annual Review course that has the latest news, regulatory changes and updates jam packed in a one day session.  Locally, it is offered at the Tower Club in Tysons Corner this Thursday and is also being offered in San Jose, Bethesda, Atlanta, Denver, and Virginia Beach.  Go here for more information.

Also, Federal News Radio has an article up about expected furloughs as a result of sequestration.  OMB does not have definitive numbers yet, but they are working on it.

Jonathan Allen also has an update over at Politico.com of the latest sequestration news.  In it, he confirms what we are seeing: there is absolutely no dialog between the two sides to avert sequestration.

February 25, 2013: 11:15 AM (second update)

Politico.com reports on a troubling consequence of sequestration: cuts to cybersecurity initiatives.  Just recently, security firm Mandiant issued a report claiming that the Chinese military is behind vasts amounts of hacks that have included contractors and Government agencies over the past decade.  Ironically, there are hackers now circulating a tainted version of the report that allows the sender to hack into the recipient’s computer.  If you would like a copy of the report, e-mail Eric Crusius or go to Mandiant’s website.

Government Executive also has a snapshot of some programs that will be affected by sequestration.

February 25, 2013

While we will have additional updates throughout the day today, with sequestration less than a week away and no negotiations in sight, we thought a little humor would be appropriate:

  • Gawker.com explains sequestration through Kate Upton and Ryan Gosling (please note that some of the pictures of Ms. Upton may be work inappropriate): http://gawker.com/5986069/kate-upton-and-ryan-gosling-explain-the-sequester
  • With the National Zoo part of the sequestration cuts, The Washington Post polled some of the Zoo’s residents to see what they thought of sequestration: http://www.washingtonpost.com/blogs/wonkblog/wp/2013/02/22/these-21-animals-have-strong-feelings-on-the-sequester/

On a more serious note, one inevitable consequence of sequestration would be an increase in bid protests with budgets tightening.

February 23, 2013

GovExec.com reports that BAE Systems has issued WARN Act notices to 3,500 employees.  These notices, however, are linked to the upcoming expiration of the continuing resolution on March 27 and not the sequester.  The impact of sequester, BAE states, is too speculative to require the issuance WARN Act notifications.

Also, here are some upcoming deadlines to keep handy:

  • March 1, 2013: Sequestration
  • March 27, 2013: Continuing resolution that funds the Government expires
  • May 2013: Debt ceiling expected to be hit

February 22, 2013

While there is no solution in sight, one idea being floated by the GOP is to allow agencies discretion on how to cut sequestered budgets.  We’ll keep abreast of this as word leaks out the TSA cuts could impact airport screening wait times and FAA cuts cuts shudder some airport control towers.

According to DefenseNews.com, one DoD memo (from the military’s top weapons buyer) has given program heads the okay to talk to contractors about the impact of sequestration.

We will have a section on sequestration at Centre’s Annual Review class.  Annual Review provides everything you need to stay current in the ever-changing field of government contracts. Use this as a refresher on the developments in contracting over the past year and as an opportunity to network with others.

Annual Review will be given in Tysons Corner, VA, Bethesda, MD, San Jose, CA, Atlanta, GA, Denver, CO, and Virginia Beach, VA.  More information can be found here: http://www.centreconsult.com/annual-review/

February 21, 2013

The House held a hearing on contractors’ WARN Act obligations last week.  The video can be found here: http://edworkforcehouse.granicus.com/MediaPlayer.php?view_id=2&clip_id=125

February 20, 2013

The Washington Post reports that the blame game for the impending sequestration has already begun.

Centre has resources to help you understand the consequences of sequestration:

  • Read Eric Crusius’ blog on Centre Knowledge: Now That Sequestration Appears Likely, What Should Contractors Do?
  • Contractors who face sequestration cuts may have WARN Act obligations.  Learn more here.
  • Eric Crusius gave a presentation to a local NCMA chapter about sequestration and the debt ceiling.  To obtain it contact him at ecrusius@centrelawgroup.com.

February 18, 2013

Once again, things are coming down to the wire.  Here are the latest tidbits of information:

  • Politico.com reports that one GOP Senator states his belief that ““I think the sequester’s gonna happen” and a GOP Representative agrees, stating that “greater chance that they’ll be implemented than not at this point.”  Read more: http://www.politico.com/story/2013/02/house-republicans-predict-sequester-will-happen-87581.html
  • Meanwhile, the House went into recess.  This means there are just four legislative days left to avoid sequestration.  Read more: http://www.politico.com/blogs/on-congress/2013/02/house-dems-grouse-about-recess-vote-157172.html
  • Also, Obama’s top cabinet officials are warning about the negative effects of sequestration.  Read more: http://www.washingtonpost.com/politics/federal_government/cabinet-officials-caution-against-automatic-spending-cuts/2013/02/14/174d7d88-76cc-11e2-aa12-e6cf1d31106b_story.html
  • The Washington Post reports about other sequestration warnings.  Read more here: http://www.washingtonpost.com/blogs/federal-eye/wp/2013/02/14/sequester-warnings-are-piling-up/
  • The Federal Times reports on the Democrats’ latest proposal to avoid sequestration.  This bill will have an uphill battle because it calls for 1:1 cuts and tax increases.  Read more here: http://www.federaltimes.com/article/20130214/AGENCY01/302140004/Senate-Democrats-8217-sequester-bill-would-cut-defense-27-5B?odyssey=tab|topnews|text|FRONTPAGE
  • The Hill reports that sequestration looks “inevitable.”  Read more: http://thehill.com/blogs/on-the-money/budget/283339-with-2-weeks-until-deadline-85b-sequester-looks-inevitable

February 7, 2013

News is starting to trickle out about the effects of sequestration.

First, as reported by the Military Times, the Air Force prepared a slideshow for Congress that lists the effects of sequestration.  The AF details that it would have to layoff 180,000 civilian personnel for 22 days and that procurements would be delayed.  There is also evidence that the looming sequestration cuts are effecting military deployment decisions.  Also reported in the Military Times was the Government’s decision to cancel the deployment of an aircraft carrier to the Middle East due to the threat of sequestration.

Second, the Federal Times reports that agencies will soon be outlining their sequestration plans.

February 6, 2013

The outlook continues to look bleak for avoiding sequestration.  Here are two articles on interest:

  • Politico.com is reporting that Obama’s proposal to delay sequester was met with opposition from the House GOP and is essentially dead on arrival.
  • If we have not heard much about sequestration from individual agencies, there is a reason.  They are under a “gag order” by OMB according to Politico.com.

We will, of course, continue to monitor the situation and provide updated analysis when more facts become available.

January 31, 2013

As sequestration looks more and more like a possible reality, one way DoD and other agencies may deal with impending budget cuts is by rotating the professional contracting staff on and off furlough.  This could delay the procurement process for current or new programs.

Also, The Washington Post has an interesting article: As Sequestration looms, contractors don’t fret

January 8, 2013

The Bipartisan Policy Center has estimated that the US will possible hit the debt ceiling as early as February 15, 2013 – just five weeks from now.

January 4, 2013

For an analysis of the obligated and unobligated funds by Department, click here.  This is as of late-November.

Nextgov also has an interesting article why this deal was the worst of all outcomes for federal IT planners.

January 3, 2013

Government Executive has a good article on some practical implications of the Sequestration bill passed on January 1st.  The article mirrors Centre’s concerns about the continuing uncertainty for contractors because of the continuous kicking of the proverbial can down the proverbial road.  A lack of certainty (and subsequent decrease in use of obligated funds) can lead to more bid protests, lawsuits, and claims.

January 2, 2013

While we took a few steps back from the “fiscal cliff,” a few large problems remain.  First, the delay to sequestration was permitted, in part, by discretionary cuts to government programs (cut evenly between defense and non-defense projects).  It remains to be seen where those cuts will be.  Second, we are set up for a major budgetary (we will also hit the debt ceiling in February/March and funding bills expire in March) and sequestration showdown in February and early March.  As of now, there seems to be little give between the Democrats and the GOP.  We will continue to monitor the situation and update this page as events warrant.

January 1, 2013 (fourth update)

The House passed the Senate bill.  Sequestration and the Debt Ceiling threats will continue to live on for the next few months.

January 1, 2013 (third update)

The House is expected to vote on the Senate bill (which will avoid sequestration until March) later tonight.

January 1, 2013 (second update)

It appears the bill that passed the Senate last night is running into trouble in the House.  As of now, there is nothing standing in the way of sequestration from taking hold tomorrow.

January 1, 2013

The Senate passed a bill last night that would avoid sequester for two months.  The House will consider the bill today.

December 31, 2012 (fourth update)

The House just announced that they will be holding no votes tonight.  That ensures that we will certainly go over the “fiscal cliff” for at least a short time with respect to taxes.  Sequestration would take effect on January 2, 2013.

December 31, 2012 (third update)

While a deal is close (and may even be done) on taxes, there is no deal yet on spending (sequester).

December 31, 2012 (second update)

The Washington Post has a good primer on the “fiscal cliff” and sequestration.  It can be found here.  Also, the Pentagon has said as many as 800,000 workers could be furloughed if sequestration hits.

December 31, 2012

A good news/bad news scenario: Politico.com is reporting that there has been major progress towards a deal on taxes, but there has been “no agreement” on avoiding sequestration (which is scheduled to take hold on Wednesday).

December 30, 2012

NBC News is reporting that fiscal cliff talks have hit a major snag.  The GOP is now trying to make an end run around President Obama and appeal to Biden directly.  Stay tuned.

December 28, 2012 (second update)

President Obama just gave a press conference and explicitly stated there was no deal in place yet.  Senate leaders will be working on a deal overnight.

December 28, 2012

President Obama is meeting with House and Senate leaders this afternoon in an effort to avoid sequestration.  We’ll have an update if events warrant.

December 27, 2012 (second update)

Some breaking news – the House has adjourned until the afternoon of December 31, 2012.  It appears a deal will be very last minute or not happen at all.

December 27, 2012

Various news outlets have been reporting that there is little chance of a deal before sequestration takes hold.  If you have not done so already, take the steps necessary (for contractors) to account for contracts, funding cycles and create new billing codes for contract wind-downs (if applicable) and for the government folks, take inventory of the tools available to trim obligations as efficiently as possible (contract modification, stop work orders, termination for convenience, etc.).

December 20, 2012

The Federal Times is reporting that today’s vote of Speaker Boehner’s “Plan B” increases the likelihood that sequestration cuts will take place.  Have you done everything to prepare for sequestration?  Read our FAQs below.  

December 10, 2012

The Washington Post’s Wonk Blog has a good update on the Sequestration negotiations here.  While there seems to be some momentum towards a deal (at least the sides are meeting), it does not appear that the debt ceiling issue will be resolved. In fact, the GOP seems gamed for a fight on this issue because they do not have much leverage with respect to the sequestration negotiations.

December 4, 2012

The CEOs of companies supporting DOD held a panel discussion at the Washington Press Club on Monday to talk about the adverse affects of sequestration. 

November 30, 2012

Eric Crusius of Centre Law Group appeared on Federal News Radio (1500AM) on Friday, November 30, 2012 to discuss how contractors could be affected by sequestration.  Listen to the interview by clicking here.

November 14, 2012

Eric Crusius of Centre Law Group presented to NCMA’s Bethesda chapter about the latest sequestration news.  To get a copy of the presentation, e-mail Eric Crusius at: ecrusius@centrelawgroup.com.

The Latest Analysis – Frequently Asked Questions

As questions come in from our clients and others in the contracting community, we will post them here for the benefit of everyone else.  Please note that these are general questions and may not be applicable to your situation.  Also, this is not legal advice – just general information.  If you need specific help, please feel free to contact us.

Should sequestration occur and my contract is terminated, how do I file a claim?

The best thing to do immediately is to account for all of your allowable expenses and understand what is allowable and what is not allowable.  Visit our website to learn more about the claims process.

How will bid protests be affected by sequestration?

Besides the fact that GAO may undergo some cuts, there will be a greater amount of bid protests as contractors fight for a shrinking pot of federal dollars.  To learn more about bid protests, please visit this page on our website.

How do I know which programs will be cut?

OMB released a report that contains “budget accounts” and if they will be subject to sequestration and by how much.  The report can be found here.  While it is not specific to the program level, it is a good start to see how your program may be affected by sequestration.

What are my WARN Act obligations?

While each situation is different (we suggest contacting an attorney), OMB issued a memorandum on September 28, 2012 instructing contractors to not give WARN Act notices to employees.  For more on this issue, see Eric Crusius’ blog post about it here.

Is VA exempt?

That is a murky question.  While VA cannot be cut by more than 2% by law, it is still unclear what can be cut from VA’s budget.  Stay tuned for more information.

Important Links

The White House (OMB): http://www.whitehouse.gov/omb/legislative_reports/sequestration

Contact Eric Crusius at ecrusius@centrelawgroup.com for more information.