Time to start planning for a government shutdown

A possible shutdown double whammy is looming after Labor Day, as the government rapidly approaches both the statutory limit on federal borrowing and the start of fiscal year 2018 without the needed spending appropriations.  Neither is likely to shutter the government, industry executives predicted on Aug. 14, but the risk is real enough that agencies and contractors alike must start preparing.

Professional Services Council President and CEO David Berteau, in a presentation to federal contractors, said it could come down to the last weekend of September before either shutdown risk is averted.

Since Sept. 30 falls on a Saturday, it could complicate negotiations between Congress and the president, leading to a technical shutdown while most federal offices are closed for the weekend and pushing a decision on whether to truly close agencies to Sunday night. Berteau said that kind of last-minute decision is “95 percent” likely.

Alan Chvotkin, PSC's executive vice president and counsel, and John Cooney, a partner at Venable LLC, warned contractors that a shutdown of any kind would affect agencies unevenly, depending on their funding and rules. For instance, Chvotkin said cloud service providers would probably still provide “continuity of service” for agencies, but warned that it’s up to agencies to support those cloud services, and illegal for contractors to replace federal employees, even temporarily, for that support.

If the debt ceiling is not raised, it’s a different situation, according to Chvotkin. Contractors still must fulfill their obligations, he said, but government may be unable to pay them. He advised firms to accelerate their invoices now if possible, or defer them if the government declares it has run out of money.

Berteau said it is worth federal contractors’ time to make preparations for both possible eventualities. Preparations for a shutdown, he said, shouldn’t be left until the last week of September.

Cooney said the impact will vary even within a single agency, depending on how projects are funded and the kind of shutdown involved.

“There are two kinds,” he said. One is a “soft shutdown,” in which the president and Congress buy time to negotiate a solution. The second type, a “hard shutdown,” comes if those negotiations aren’t successful and federal agencies run out of funds. Those funds, he said, can come from both single- and multi-year appropriations as well as from other revenue streams that are not tied to the congressional appropriations process.

“Work is halted on a case-by-case basis,” he said.

During a shutdown, the speakers said, agency contracting officers can be the lifeline to contractors, but they may not know more than anyone else, as agencies tend to keep their shutdown plans close to the vest at the president’s direction. And like most government employees during a shutdown, contracting officers are generally prohibited from using their work phones and facilities, complicating things even more.

It’s been four years since the last federal government shutdown, Cooney noted, so it's well worth reviewing what happened. It’s also an unusual dynamic this time around, he added.

The shutdown mechanism was retooled in the 1980s to give the president more power to “weaponize” it to force a solution with Congress, he said. That dynamic is an odd thing for a Republican-controlled Congress and a Republican in the White House.

“It will be difficult for the president to use it against Congress” in the current environment, he predicted.