Government Shutdown? Maybe. Being Prepared? Essential.

by Alan Chvotkin, Partner

  • News Insights

In a few days, on October 1st, our Federal Government will start a new federal fiscal year. Regrettably, even now, we still don’t know whether the Federal Government will remain “open” for business or whether there will be a partial or full “shutdown” of all but essential activities.  If Congress and the President are not able to enact appropriations by midnight on September 30, or at any time in the future when appropriations funding may expire, there will be a “lapse in appropriations,” and agencies will be prohibited from any new spending.

Any shutdown, whether for a short or a long period of time, and whether for partial or full effect, has significant impact on programs, government program recipients, and, of course, on the uniformed military, federal civilian employees, and federal contractors. However, while the basic laws and policies regarding this “lapse in appropriations” are clear, the application of those policies will vary significantly across the federal enterprise and for contractors.

For example, some activities, such as providing social security checks or Medicare benefits, will continue unaffected. Yet it is likely that national parks will be closed, as will many federal facilities. Some federal employees will be performing “essential” services and must remain “on the job” but without pay, such as air traffic controllers or TSA screeners, while others will be furloughed for the entire shutdown period. Some federal contractor employees will continue working because they support “essential services” or their contracts are already fully funded with available prior appropriations, while others may be denied access to federal facilities or must stop working because their contracts lack the “new” funds in the new fiscal year.

But keep a close watch on affected agencies, programs and contracts. Circumstances may change rapidly for a program or a contract, shifting from being open to having to close or stop, and even from being closed to being required to reopen or restart.

Only a few in Congress and the White House have the ability to enact the funding to keep the Government “open.” For the rest of us, we can only prepare for a government shutdown as best we can.

What can contractors do to prepare before, during and after a shutdown?

First, know where your employees are. Being able to contact all of your employees, including those on business travel and vacation, will be essential because employees may have actions to take to address the specific impact on their work.

Second, know the funding status of your active contracts. Continue performing those active contracts unless directed by your federal contracting officer to stop work. If directed to stop work by a government contracting officer, do so as quickly as possible. Don’t forget to stop the work of your subcontractors and vendors.

Third, know how to communicate with your contracting officers and those above the contracting officers in their chain of command. Many contracting officers will likely be furloughed and unavailable to do “official” work. But there is always someone with the authority to act in urgent circumstances, should that be necessary.

Fourth, separately and fully track the time and expenses associated with stopping work on a contract if directed to do so, including by subcontractors, and accounting for the time and expenses incurred in keeping employees in a “ready” state to be able to resume work at the end of the shutdown period. This documentation is essential to seeking any recovery after the shutdown ends.

Fifth, submit all of your invoices for work already performed, according to the requirements and schedule of your active and open contracts. Overwhelming, contractor invoices are submitted and processed electronically, and federal employees may be available to process valid invoices received. Even if some federal payments are delayed, at least your invoices will be in the queue for payment when the authorized government officials resume work and funds are made available.

Sixth, bolster your finances and cash flow availability to prepare for delays in government payments for work already performed and for any gaps in receiving payments because work was not able to be performed during a shutdown. Most contractors will do everything they can to continue the pay and benefits of their active employees during this stressful period.

Finally, adhere to deadlines even if the agency or activity is shuttered or there are no federal employees on the job. For example, if a weekly report is required under a contract, submit the weekly report on time even if the government recipient is furloughed. If you have a proposal due, submit the proposal by the deadline according to the solicitation delivery instructions. Most offices will not have time or the resources to formally change due dates. And, of course, keep careful records of your actions.

When the government reopens, many contractors will be able to submit claims and requests for equitable adjustments to compensate for the financial and schedule impacts due to any work stoppage, but there are timelines for making those submissions, too. While you can’t turn back the clock for time lost, you may be able to obtain an extension of time to perform the work that was adversely affected by the shutdown, and you may still be able to be compensated for the pay and benefits you paid the workforce during the shutdown period, provided you have good records.

The bottom line is that a shutdown will have numerous and often secondary and tertiary impacts that must be identified and acted up before, during and even after the shutdown ends. Contractors that are prepared for any shutdown are in the best position to mitigate its harmful effects during the event and recover and resume normal operations as quickly as possible after it ends.

Centre Law will continue to closely monitor these essential government functions. If you have any questions or need any additional information, please do not hesitate to contact the author or the Centre Law attorney with whom you normally work.