How Contractors Can Prepare for a Government Shutdown
Government | 5 Min Read
The government Fiscal Year is coming to a close on Thursday, September 30, which means time is not only running out to use up annual budgets, but the clock is ticking for Congress to approve government funds for next year. This year, there’s a very real chance that the funds may not get approved in time, causing the federal government to shut down.
Congress has a hefty agenda this week as Democrats are trying to pass a short-term bill to avoid government shutdown, raise the debt ceiling, push through a $3.5 trillion spending package, and pass the $1 trillion bipartisan infrastructure bill. If both parties can’t agree on this legislation, the Office of Management and Budget (OMB) warns that government agencies will need to prepare for a government shutdown by Friday, October 1.
What does this mean for government contractors and the General Services Administration (GSA)? Since GSA is a self-funded agency, it continues to function even if other agencies begin to cease operations, but contractors can still be affected by the shutdown. Let’s talk about what a government shutdown is and how to prepare for it.
What is a Government Shutdown?
A government shutdown happens when Congress doesn’t enact the annual spending bills on time and government agencies run out of money to pay their employees. While it may seem like an easy fix just to pass the critical legislation on time, enough Democrats and Republicans in Congress need to agree on the bills, which doesn’t always happen.
During a shutdown, nonessential federal workers are furloughed, meaning they are sent home without paychecks, while essential federal workers have to continue working without getting paid. Some government agencies close completely, while others have to remain open. The agencies that continue operations include:
- Law Enforcement and the Judiciary agencies such as the FBI, DEA, Bureau of Prisons, Customs and Border Protection, Coast Guard, Secret Service, etc.
- Airport security (TSA)
- State Department (as they are able)
The majority of the workers for the agencies listed above are required to work as normal without pay until the shutdown is reversed.
What Happens to GSA When There’s a Government Shutdown?
GSA is a self-funded agency, meaning it does not rely solely on government spending bills to keep it going. When there’s a government shutdown, it continues operating unlike other government agencies. This is because GSA generates funds from the Industrial Funding Fee (IFF), a fixed percentage of reported sales under GSA Schedule contracts. If you’re a GSA Schedule contractor, you’re familiar with paying the 0.75% IFF either monthly or quarterly, depending on when you choose to report your sales.
However, GSA is not untouched when the federal government ceases its operations. A lot of contractors rely on services and support from the Small Business Administration (SBA) which closes during a government shutdown. This means that contractors submitting things like Small Business Subcontracting Plans may receive a notice of rejection or delay from their Contracting Officers because the SBA is unable to review their plans.
If a government shutdown happens, most GSA employees will be operating as normal, and will be responding to requests from GSA Schedule contractors. Contractors can still submit modifications and other compliance requirements. However, since other federal agencies will be affected and might close down completely, contractors could see several delays in their work with other agencies.
How to Prepare for a Government Shutdown
If the government doesn’t figure out a way to raise the debt limit which they are currently disputing, agencies will have restricted access to the funds that often pay contractor invoices. This doesn’t mean that your contracts will cease operations, but it’s a possibility. Here are some things you can do to hopefully mitigate the effects of a government shutdown.
Figure Out if Your Contract Will Be Affected
A government shutdown doesn’t necessarily mean you will stop working on your contracts. Contracts that revolve around multi-year funding or tasks with a specific deadline are generally safe, but if your contract is tied to annual funding, it could be impacted. Contractors should be on the look-out for “stop-work” notices from their respected agencies. These can come out on the first day of the shutdown, or even days later.
Contractors should also review their contract’s option periods. Some may expire by the end of the year on September 30, while others may continue until later in the year.
Stay On-Top of Your Invoices and Keep Detailed Records
You should keep performing on your contracts unless told otherwise. However, the government may not have the ability to pay your invoices during the shutdown. This is why you’ll want to keep detailed records of your work, costs incurred, and turn your invoices in early. Later on, you may need to adjust your contract price accordingly to account for any extra costs incurred from shutting down and then starting back up, or increased costs of performing during a government shutdown.
Communicate with Your Contracting Officer
You’ll want to open a line of communication early with your Contracting Officer (CO), so if decisions are made about your GSA Schedule contracts or if an agency has a specific shutdown procedure, they can update you in a timely manner. This way if your contract is directly affected, you can quickly spring into action and notify your affected employees and vendors. It’s important to note that your Contracting Officer may not know any more than you at this time but will update you as information becomes available.
The bottom-line is don’t wait to contact your CO, because in some agencies, they are considered as non-essential employees and may not be around to answer your requests if a shutdown happens.
It’s Important to Plan Ahead for a Government Shutdown
Although GSA operations are safe from a government shutdown, there are ways you can still be affected as a GSA contractor. While the threat of a government shutdown looms over us, you should start preparing a plan to make the process go smoothly. This plan should include an effective way to notify all the affected employees, arrangements for employees during a “stop-work” order, and a strategy for handling subcontractors. It’s also important to remember that you can still submit modifications, browse GSA sites, and communicate with GSA Contracting Officers and other GSA POCs during this time.
If you have any questions about keeping your GSA Schedule up to date during this time or any other questions related to your GSA Schedule, we would be happy to help you.
About Stephanie Hagan
Stephanie Hagan is the Content Writer and Digital Editor for Winvale where she helps the marketing department continue to develop and distribute GSA and government contracting content. Stephanie grew up in Sarasota, Florida, and earned her Bachelor's of Arts in Journalism and Rhetoric/Communications from the University of Richmond.