The market careens toward a government shutdown at the end of the month and plans, advice and guidance for how to operate during one are getting dusted off.
GovCon been here before. Every year there is the threat of a shutdown, as well as the brinkmanship and the political postering that goes with it.
According to market research firm The Pulse of GovCon, every fiscal year since 1998 has had continuing resolutions before a budget was passed.
But there have been few, true government shutdowns that result in a lapse in funding of more than 24 hours.
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There have been five shutdowns since 1995. One happened in November 1995 and then again from December 1995 to January 1996, before a final fiscal 1996 budget was passed. There was a 16-day shutdown in October 2013.
During President Trump’s first term, there was a three-day shutdown in January 2018. A 35-day partial shutdown unfolded in December 2018 and January 2019. It was a partial shutdown because five of the 12 appropriation bills had been signed into law.
So while shutdowns are the exemption, they are still a risk that needs to be managed for. Companies should be dusting off plans from previous years.
The most common piece of advice we hear is to start ahead of the shutdown. Do not wait.
Companies should be updating shutdown plans now, according to guidance from The Pulse and the business advisory and accounting firm Aprio.
Aprio has these specific suggestions:
- Evaluate your contracts.
- Talk to your contracting officers.
- Develop plans for employees and understand who may and may not be able to work.
- Push to get invoices paid, modifications issued, options exercised, tasks awarded before the shutdown.
- Talk to your subcontractors and offer them guidance.
- Talk to your banks about lines of credit and cash flow.
When looking at your contracts, classify them as either mission essential or not. Understand which contracts still have funding. Agencies generally post the contracts that are deemed essential, but you should know ahead of time which contracts are on the list and which are not.
Remember that employees who don’t need access to government facilities need to continue working. Unless the contracting officer tells them to stop of course.
The Pulse recommends creating a repository of your contracts – both prime and sub – to give you situational awareness. Include information on cost type and spending structures in each contract.
If you are a subcontractor, reach out to your prime to understand how they are going to handle things.
It is also critical to understand the regulations and laws around stop work orders when they come, according to Aprio.
Shutdowns and restarts are not as simple as flicking a switch. There are processes for stopping work and processes for restarting. Both incur costs.
It is paramount to track your expenses and understand what is attributable to the shutdown. This includes understanding the impact on indirect rates such as indirect employees who may be working on shutdown related activities.
Contractors will not get paid during a shutdown, so document everything.
“Track costs, stay in contact with contracting officers, and ensure compliance to position your business for post-shutdown recovery,” according to Aprio.
There is no one-size fits all solution, even at the same company. Companies must address the impact of shutdown on a contract-by-contract basis.
