Contractors would face shutdown with uncertainty

Some government contractors could wake up on Oct. 1 not knowing whether or not to show up for work.

In the event that Congress does not pass a continuing resolution to fund the federal government past the end of the current fiscal year, agencies will be required to shutter non-essential operations – those who do not support the protection of life and property – in keeping with instructions from the Office of Management and Budget.

For contractors, the impacts can be varied. The rule of thumb is that if your program is funded you can continue to work, said Stan Soloway, president and CEO of the Professional Services Council. If a contractor works in an "excepted" area, because it is critical to the protection of life or property, that contractor might also be allowed to keep working. And work could continue on contracts that have carryover money left from the current fiscal year, or that aren't reliant on FY2014 funding.

"Companies need to really know all of their contracts in terms of type, as well as funding source, and when the money expires," Soloway said. "We will not know, even after midnight on Oct. 1, much like some civil servants will not know, what the order is going to be: who is essential and who is unessential."

A number of other factors come into play. Some contractors working onsite in federal facilities will find their access curtailed. Contractors whose onsite work is supervised by federal workers deemed "non-essential" by their agency will have to stay home. Even contractors who work offsite could have to stop work on contracts if supervising officials are furloughed as the result of a funding gap.

A key problem for contractors will likely be getting marching orders in the event of a partial shutdown, said Kevin Plexico, vice president of information solutions at contracting consultancy Deltek. "Agencies are developing their plans as we speak. There might not be time for information to flow down to those people who are on the front lines of a contract," Plexico said.

The Department of Homeland Security published a notice to contractors Sept. 26 outlining procedures in the event of a partial shutdown. Their basic message is: If you don’t hear from us, it’s business as usual. Contracting officers will provide notice for contracts that are altered or terminated as the result of a lapse in funding, wrote Nick Nayak, Chief Procurement Officer at DHS. "If a contract will not be affected by the lapse in appropriations, DHS does not plan to provide any separate notifications or communications of that fact. Unless a contractor is provided a formal notification to the contrary, all DHS contractors must continue to comply with all terms, conditions, requirements and deliveries specified in their contract(s)," Nayak wrote.

Payment for ongoing work could also be suspended in some cases. "If the proverbial check is in the mail, they'll get the check, because the postal service will keep operating," Plexico quipped. But contractors who continue working might not be getting checks for ongoing work until a funding mechanism is in place.

Contractors working on their own premises on fixed-price contracts could choose to keep working, assuming that a shutdown won't last long, Soloway noted. "Contractors face a complex web of both internal analysis of opportunity and external forces" that influence their decisions, he said.

Agencies are being given some latitude to determine what contracts should be suspended in light of a partial shutdown. The OMB memo suggests as an example, a building that is temporarily shuttered might not need its trash cans emptied on a daily basis. "Contracting staff will need to work closely with agency counsel in making and implementing these decisions to minimize costs to the government," the memo advises.

Larger contractors could spare their personnel from furloughs by encouraging them to take paid time off during a shutdown, or by scheduling non-billable activities such as training or planning. The problem with that approach, Soloway noted, is that there's no way to know how long a shutdown might last, and when contractors might be called back to work.

Contractors are getting nervous about the prospect of a funding gap. "I think the mood is a bit more dire than it was just a month ago," Plexico said. However, both Plexico and Soloway noted that any shutdown is likely to be short-lived. Contractors are much more concerned about the larger budget uncertainties, including whether sequestration cuts will be continued, or if cuts will be more targeted by appropriators.

"The shutdown is an entirely different beast from sequestration," Soloway said. "We've been through this before. No one expects it to last ad infinitum, as the current fiscal debacle has."