A government shutdown for the fiscal year 2023 is looming on October 1, given that Congress hasn’t enacted the 12 annual bill appropriations. While this might not be the US’s first shutdown, a government closure leads to dire consequences for the economy, government employees, and civilians relying on federal government services.
If you’re a government contractor, this article will guide you through the practical steps to bracing yourself for the imminent government shutdown.
What is a government shutdown?
A government shutdown occurs when Congress doesn’t enact funding appropriations that are signed into law by the President. Every year, lawmakers are supposed to enact 12 different spending bills to fund various government agencies and federal programs and to keep the government running.
Under the Anti-Deficiency Act (ADA), federal agencies can only spend their appropriated funding if authorized by Congress. Should Congress fail to enact 12 appropriation bills, government agencies should cease all non-essential functions until Congress legislates.
The gravity of government shutdowns ushered lawmakers to draft and propose a bill that prevents government shutdowns. Dubbed the End Shutdowns Act, Senator Tim Kaine and US Representative Don Beyer (D-VA-08) introduced this legislation to prevent government shutdowns and allay their disruptive impact on government employees, federal government contractors, and civilians who depend on these government services from day to day.
The lawmakers added that the legislation would also counter politicians who utilize government shutdowns and their lasting economic damage as a negotiation tactic.
How does a government shutdown affect civilians and services?
Some of the ways government shutdowns affect the nation
While government shutdowns are not everyday occurrences, the halting of crucial federal functions brings a domino effect on other services and civilians. Here are some scenarios:
1. Government employees cease working and getting paid
During government shutdowns, thousands of federal employees are told not to report to work and remain unpaid until the shutdown is lifted. While civilian federal employees are furloughed during a government shutdown, military personnel, law enforcement officers, air traffic control officers, and national security agents are still required to report to work without pay.
Once funding resumes, the government is required to pay employees retroactively. Federal employees should note that under the terms of the Anti-Deficiency Act, employees reporting to work during a shutdown when they’re told not to could face fines or be imprisoned.
2. Disaster relief efforts are delayed
Government shutdowns could delay critical disaster relief efforts, such as those for wildfires, hurricanes, and warfare. If worse comes to worst, the Federal Emergency Management Agency (FEMA) warned that its Disaster Relief Fund could be fully depleted if Congress doesn’t legislate funding soon.
With the imminent government shutdown, the US Senate proposed a bill that would continue funding the government until November 2017, 2023. Senate Republicans and Democrats put forward the bill in the hopes of preventing the upcoming government closure and include Ukraine support initiatives in its Stopgap Spending Plan.
Despite a government shutdown, warfighters continue to brace themselves to bolster defense tactics and protect the homeland and territories. Click here to register for the Army Acquisition Priorities: Balancing Readiness and Modernization Forum and learn more about the Army’s efforts.
3. Federal safety-net programs get reduced support
Food stamps and nutrition aid programs may continue even during the shutdown, but with reduced financial support if funding isn’t passed by September 30.
If the government closure extends, the White House underscored that an estimated 10,000 children would lose access to childcare and food and vegetable funding. Disruptions in funding could also force childcare centers to close down, thus negatively impacting the overall health of thousands of children across the United States.
4. Public spaces are closed down
Government shutdowns also gravely affect the tourism and recreation industries. Extended periods of closure could force museums, public parks, national park facilities, and recreation centers to close down. According to the National Park Service, a government shutdown that occurred in 2013 led to a loss of $500 million in visitor spending.
Traveling in and out of the country would also be disrupted by a government shutdown. Passport offices would also cease operations, making it difficult for civilians to arrange their travel papers for work or leisure.
In 2019, air traffic controllers threatened to walk off their jobs if they continued to report to work without pay and compensation. Such a bold move urged Congress to pass funding appropriations and was seminal for the December 2018 government shutdown to end.
5. Health and human services are put to stop
Health institutions may still function during a government shutdown, albeit with reduced support and labor. If the shutdown extends, health and human services may be put to a halt completely, National Institutes of Health (NIH) preventing admissions from new patients and the processing of grant applications.
6. Work on existing contracts continues
Since funding has already been allocated for these contracts, work will continue for the remainder of the performance period unless the contracting activity calls for a stop-work status or terminates the contract completely.
If funds for a contract are depleted, it is up to the contractor to halt the performance until the shutdown is lifted or take the risk of continuing work. Contractors may choose the latter and file for reimbursement for the work they’ve accomplished once funding resumes.
It is worth mentioning that while existing contracts may have partial mobility, the government cannot award new contracts, implement modifications, or issue options that need funding that has yet to be authorized.
What should government contractors do during a government shutdown?
With just a few days left before Congress decides to enact all 12 bills, here are some of the ways government contractors can prepare for the upcoming government shutdown:
Deal with Subcontractors
Subcontractors have a direct working relationship with the contractors. During government shutdowns, prime contractors shouldn’t neglect them as they run the risk of owing their subcontractors more money than what the government owes them.
Contractors should carefully review the terms and conditions of their agreements and check if they’ve negligently agreed to pay subcontractors fully after the shutdown since the government doesn’t guarantee such a reimbursement.
Contractors should also communicate with their subcontractors regarding pay and work stoppage. Should contractors call for a work stoppage, subcontractors should halt all tasked performances until the shutdown lifts.
Deal with Employees’ Benefits
Contractors should also consider their employees’ benefits, as these may be impacted if they are furloughed for longer periods of time. With employees reducing their working hours during a shutdown, they may lose their COBRA health plan coverage.
Government contractors should consider how the shutdown will affect their employees and how they’ll cover their benefits. Employees should be allowed to continue their coverage under COBRA, but they should have the option to pay for their plans themselves. This option allows employees to follow the maximum COBRA continuation period and maintain their benefits and insurance plans.
Alternatively, contractors may also opt to handle a portion of their employees’ insurance plans, although these will be deducted from their pay.
Meet deadlines for proposals and legal actions
Despite the government shutdown, government contractors should treat their contract deadlines as valid and effective–especially for submitting bids and filing bid protests.
With the government shutting down by the end of this month, contractors must plan to meet all the deadlines from contracting officers. They should also consider contacting the contracting agency regarding changes to their deadlines and additional instructions.
Document Performance, Costs, and Personnel
Whether the government shutdown will last long or just a few days, it’s imperative that government contractors document and take inventory of their existing contracts, personnel assigned to those agreements, and the costs.
Having a paper trail of everything going on during the shutdown would make it easier for contractors to keep track of work that has been finished, remaining funds, the eligibility of their contracts for exceptions, and whether employees on impacted contracts can be reassigned or be asked to take paid vacations.
Added to that, documenting contract activities allows contractors to corroborate any agreements between all the parties involved, mitigate cost anomalies as soon as possible, and seek recovery of expenses efficiently once the shutdown ends.
Frequently Asked Questions
What happens if Congress can’t agree on all the bills?
In the circumstance Congress can’t agree on all 12 bills, they may opt for a continuing resolution. This short-term settlement allows the US government to continue running while working on the disagreements on the annual appropriations.
If Congress enacts some of the 12 appropriations, only agencies with approved funding can spend their appropriations, while the others need to shut down. This event refers to a partial government shutdown.
What is a government default?
A default is when the government is unable to pay creditors and some obligations. This puts federal payments at risk–mandatory payments, all kinds of government spending, debt interests, and payments to US bondholders–and may cause more disastrous consequences than shutdowns.
How long does a government shutdown last?
There is no fixed time period for when government shutdowns should last. It ends when Congress enacts all 12 bill appropriations for federal government funding.
The longest government shutdown to date was the most recent, spanning 34 days long, from December 18, 2018, to early January 2019. Former President Donald Trump was forced to concede and end the shutdown when he didn’t receive the funding he demanded for the construction of the border wall.
Click here to learn more about government shutdowns and what US lawmakers do to prevent them from occurring and from crippling government functions and the US economy.