Small biz left holding the bag on pre-shutdown work

Without the cash reserves and diverse portfolios of major contractors, small businesses with contracts at shuttered agencies are facing big problems -- and to top it off, they're having problems collecting on work done before the shutdown.

"The government is good at paying their invoices, except when they're not," said David Berteau, president and CEO of the Professional Services Council.

The partial government shutdown has reduced staff in some of the key agencies where invoices are processed for companies doing business with the civilian side of the federal government.

As a result, Berteau said on a Jan. 24 press call, contractors are facing problems getting paid for work that was completed before the shutdown -- in many cases for work that was appropriated and obligated under the previous spending bill. The complex process by which agencies receive invoices and disburse funds requires federal employees, and many of those employees are furloughed.

"The money's there. The people aren't there. It's a comedy of errors," Berteau said.

PSC and the Chamber of Commerce, which hosted the press call, are pushing the federal government to authorize the return of workers to pay such outstanding invoices. According to Berteau, the Office of Management and Budget is working on revising current guidance limiting the circumstances under which payments can be made to contractors who are owed money by shuttered agencies -- even on work covered by previously obligated funds.

PSC and the Chamber are pushing for the change in policy.

"This will keep companies in business that would otherwise go out of business," Berteau said.

An OMB press representative did not return an email from FCW confirming that a policy update was in the works.

According to current guidance, even the fact that the federal government might have to pay penalties on late payments "does not provide a legal justification under the Antideficiency Act for an agency to continue to make payments during a funding lapse."

Further, as Berteau noted, the complex payment system that requires an invoice to be "accepted" before the clock on the Prompt Payment Act -- which provides for the addition of interest to late payments -- starts ticking.

"If this sounds like it's complicated, it's because it is," Berteau said. He warned that the affected companies have already "self selected…to put up with this bureaucratic dynamic… If we drive them away, it's going to be hard to get them all back."

An analysis by the Chamber of Commerce and Bloomberg Government found that across shuttered agencies, about $2.5 billion in small business contracts were at risk because of the partial government shutdown, based on data on 2018 contracts. More than 41,000 contractors are potentially affected, from IT and engineering to janitorial services and retail.

Neil Bradley, executive vice president and chief policy officer of the U.S. Chamber of Commerce, said that one third of the 41,000 small business contractors affected by the shutdown have no rainy-day fund to see them through this cash crunch.