By Mary Jo Juarez, APEX Accelerator Advisor at Kitsap Economic Development Alliance
The stopgap funding measure keeping the federal government running is expired on September 30. While Congress continued to work on a solution that is agreeable on how to handle funding for fiscal year 2026, the deadline was not met. There have been 21 federal government shutdowns in the last 5 decades with the most recent in December 2018 that lasted 34 days. Let’s take a minute and look at how a Federal Government shutdown can impact your business.
Who is Impacted?
The federal government civil service civilian employees, the military, and the contractors who have federal government contracts are all impacted. Contractors are impacted because whether they are required to work or to stop work – they will not be paid during a shutdown. This is because the federal workers who receive the invoices and process payments are not at work during this period.
How will this affect your business?
Contractors may receive written direction from their agency’s Contracting Officer or Contracting Officer Representative on how to proceed with any action on their contract. They may receive a Stop Work Notice directing them not to report to work or they may receive notice that they will need to be working because they have been deemed to be essential to the government. Regardless, the contractors will not be paid by the government during a shutdown.
Hopefully, every contractor received written direction from their Contracting Officer and were given the ability to have their questions answered immediately as government personnel may not be available after the shutdown. Unfortunately, many contractors were not able to get their questions answered. Pull out your contract and read it! You may also have to provide notification to your subcontractors as the government does not communicate with them.
Document, Document, Document!
It is important to document your costs during the shutdown. You may be required to continue working without payment during the shutdown, minimize work with no payment, or stop work completely. You will need to prepare a request for equitable adjustment after the government reopens.
Take a look at Labor & Industry’s options for laying off your workers. There are options for furloughs, standby status, and temporary layoffs. Some of these options allow for employees to collect unemployment while not needing to do job searches. These are the types of decisions that should be documented, including all costs to recruit new employees, training, etc.
Steps for preparation
Act now by completing these to-do items:
- Review your existing contracts with federal agencies to understand your obligations, particularly regarding any clauses related to terminations or stop work orders. Determine how critical each contract is to your business operations.
- Communicate with your contracting officers and point of contact within the relevant federal agencies. If possible, seek clarification on the impact of a potential shutdown on your specific contracts, including any guidance on how to proceed.
- Be sure your business has adequate financial reserves to weather a potential shutdown. This may involve setting aside funds, securing lines of credit, or exploring financial assistance options.
- Will a shutdown impact your supply chain? Identify critical suppliers and work with them to develop contingency plans in case of delays or disruptions.
- Consider the impact on your workforce. Determine which employees are essential for contract performance and which can be furloughed or assigned to other tasks during a shutdown.
- Maintain thorough records of all communication with government agencies, including emails, letters, and phone calls. Document any changes in contract terms, instructions, or directives provided by government representatives.
- Create a comprehensive shutdown plan that outlines the steps you will take if a shutdown occurs. Include details about how you prioritize contracts, manage finances, and communicate with employees and subcontractors.
- Over the long term, consider diversifying your client base to reduce reliance on federal contracts. This can help stabilize your revenue during periods of fluctuation.
- If the Federal Government sends you notice to terminate one of your contracts for convenience for the government, contact your APEX Accelerator immediately for assistance.
About the Author:
Mary Jo Juarez has over 30 years’ experience in government contracting; most recently working as a Navy Deputy for Small Business, helping the Navy meet their small business goals and educating small business firms in obtaining certifications, marketing, and opportunities with the federal government
