Here we go again. Back in March, I discussed the impact of the brief government shutdowns in January and February and risks associated with what could have been (had the stand-off gone on much longer).
Today, news from the White House and Capitol Hill raises concerns over another possible shutdown in September (when the government will run out of money without action by Congress and the President).
In light of this uncertainty, I thought it made sense to again share practical steps that contractors can take to get prepared. That includes creating a plan for how to address existing contractual obligations without assuming unnecessary risks in the event that the government does, in fact, shut down (again). It is far better to think about and address these issues in advance, rather than face the real time pressure of a last minute budget deal (or failed deal).
Let’s start with the bad news: Your government contract (like almost every other procurement contract) will very likely be impacted by a shutdown. The Anti-Deficiency Act prohibits Federal agencies from exceeding appropriation limits unless the contract falls into a narrow exception. For contractors, that means a Stop Work Order. Remember that the risk of continuing performance in the event that funding is not available may fall on your company.
Now, some good news: By thinking ahead and planning in advance, you can mitigate risks and place your business in better position to weather the storm. Here are a few practical pointers aimed at doing just that:
- Review Your Contract. Understanding how the government funds your contract will shed light on how it likely will be treated by the agency in the event of a shutdown. According to the Office of Management and Budget, most “routine ongoing activities” will not be authorized to continue during a lapse in appropriation.
- Communicate with the Contracting Officer. Just like your business, the agency is also likely working on a plan on how to administer on-going contracts during a shutdown. A mutual understating with the CO will go a long way towards avoiding disputes when the work inevitably ramps back up.
- Develop Contingency Plans. Work internally to create a contract specific contingency plan to mitigate risk in the event of a funding issue. These will vary greatly depending upon the specifics of each procurement, so bringing in outside consulting and expertise to set up an individualized plan may reap benefits, particularly for more complex work.
Of note: these tips – and the last one in particular – are not limited to government shutdown concerns alone. Any government contract can experience unanticipated delays or even a long-term suspension of work. Thinking ahead and creating a plan is the best way for contractors to avoid assuming unnecessary performance risks.