Shutdown begins to affect contractors

Beyond the financial pinch of stalled contracts and delayed payments, federal IT contractors are beginning to face hiring and regulatory compliance issues as the partial government shutdown wears on.

Shuttered online services at Citizenship and Immigration Services (CIS) and the Commerce Department, for instance, are on TechAmerica's list of top shutdown-related problems.

E-Verify — the service that allows employers to confirm eligibility to work in the U.S. for new hires via I-9 employment forms -- won't be available until CIS gets its funding restored. E-Verify is the only operation at CIS funded by an appropriation.

Although use of E-Verify is generally voluntary, federal contractors are required to participate, and several states require participation as well. CIS said on its web site that employers still have to complete I-9 forms within three days of an employee starting to work. It said it would extend time periods to resolve disputes after the shutdown ends.

Because forms aren't being processed, contractors are caught between complying with the law and facing the loss of employees if they don't pass CIS's post-shutdown database check.

"It's a problem," said Julie Pace, a contract and immigration law attorney at The Cavanagh Law Firm in Phoenix. She said federal contractors can hire while E-Verify is down, but advised that I-9 forms for new employees be kept readily available and the information on them filed to E-Verify as soon as the shutdown is resolved. It could take as long as two days, she said, for CIS to restart E-Verify once funding is restored.

Technical difficulties for private companies have also cropped up in which automated payroll systems won't issue checks for newly hired personnel that haven't been given the OK by E-Verify, Pace said. Companies with E-Verify capability wired into their payment systems "never envisioned a time when E-Verify wouldn't be available."

Online functions at other federal agencies have also been stilled by the shutdown. The loss of the Department of Commerce's Bureau of Industry and Security (BIS) could begin to affect private companies trying to do business beyond the federal marketplace, TechAmerica noted.

For instance, companies that sell potentially sensitive IT and other tech goods to countries on which the U.S. has placed export controls, such as China and India, can't get the proper approvals to ship because BIS' online Simplified Network Applications Process, or SNAP-R, isn't working during the shutdown. SNAP-R allows uniform processing for users to submit export license applications, commodity classification requests, encryption registration and re-export license applications via the Internet.

According to Liz Hyman, CompTIA vice president of public advocacy, the shutdown is disproportionately hurting smaller managed services providers, which have a tougher time dealing with even brief interruptions in cash flow from government contracts.

 "It all boils down to cash reserves," she said. "Access to capital for services-oriented companies is different. They don't have inventories," leaving them with not much leverage in cash-strapped times.

That doesn't mean smaller companies don't have any alternatives, however. Small firms subcontracting to a larger prime supplier "could reach out to the prime and find other opportunities," Hyman said.