Navigating the shutdown as a government contractor

Sep 29, 2023

A government shutdown can throw a wrench into your plans as we start a new fiscal year. Our no-nonsense guide gives you a tactical playbook to not just survive, but grow during a government shutdown. Equip yourself with the know-how to keep your projects moving and your revenue streams flowing, even when the bureaucracy grinds to a halt.

How to survive a government shutdown as a contractor

Just as we escape the busy end of fiscal year, the evergreen threat of a government shutdown is looming once again. You'd think by now, given the repetitiveness of it all, we'd have a clear roadmap. But, with each federal office having its own discretionary powers, predicting how contracts will be managed during a shutdown is as reliable as a coin toss. Let's arm you with some actionable insights to handle a potential shutdown.

Setting the Stage

Federal agencies run on money, and so do contractors. That money comes from appropriations bills, which are supposed to be signed into law by the end of the fiscal year—September 30, 2023, this time around. Failing this, we're talking about a government shutdown.

Remember, a shutdown isn’t a binary event; Congress could pass some appropriations and not others, leading to a partial shutdown. And of course, we could see temporary patches like a continuing resolution.

Although full-on government shutdowns are rare, when they happen, they hit hard. The 2019 shutdown, for example, lasted a record 35 days.

The Legal Cornerstones: Antideficiency Act & Co.

The Constitution and the Antideficiency Act make it illegal for the federal government to spend more than it has or commit to future spending without legislation. This affects how contracts are managed.

During a shutdown, don't expect new contracts, modifications, or the exercise of optional clauses that hinge on unappropriated funds. And even for existing contracts, especially those that are incrementally funded, you might be left hanging without the funds for ongoing performance.

Exceptions to the Rule

A government shutdown doesn't freeze all activity. Contracts with full funding, and those deemed essential for life and property, generally continue. OMB's Circular No. A-11 lays down guidelines on what stays afloat during a shutdown. Key takeaways include:

  1. National security measures.

  2. Pre-funded contracts.

  3. Emergency services.

What to Do When Work Stops

You need to check whether FAR 52.242-15, the "stop-work order," is included in your contract. If your contract is impacted by the shutdown, expect a written order from the contracting officer specifying what to suspend and how to manage costs.

Proactive Steps for Contractors: A 5-Point Action Plan

1. Engage with Contracting Officers (COs)

Prompt and open communication is non-negotiable. Get into a room with your COs and outline a shutdown strategy. Document every instruction and correspondence to safeguard against future disputes.

2. Loop in Your Team

Your employees are your biggest asset and need to be in the know. Establish a rapid communication channel for quick updates.

3. Reach out to Subcontractors

Alert your subcontractors and vendors about the shutdown. Gauge how delays would affect future deliveries and coordinate with your COs accordingly.

4. Weigh Your Options

Consider reallocating employees to other projects or opting for furloughs instead of layoffs to maintain benefits.

5. Document, Document, Document

Keep a record of your shutdown and restart efforts, and the associated costs. This documentation will support any future claims for equitable adjustment and can become your bible for future shutdowns.

In the end, a shutdown is a bump, not a blockade. Take this as an opportunity to stress-test your contingency plans and emerge stronger. Keep your documentation clean and your communication lines open. After all, in the realm of government contracting, the only constant is change. Prepare now, so you're not scrambling later.

The Govdash team is here to help in any way possible during this time. Don't hesitate to reach out.

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