The partial government shutdown began at midnight on December 21, 2018. As the shutdown entered its twentieth-fourth day, many government contractors were rightfully concerned about the status of negotiations between Congress and the president, the length of the shutdown, and its impact on their current and future contracts. As for the status of White House/Capitol Hill negotiations and the likely length of the shutdown, it is hard to say.
Contractors can take important steps to maintain their highest level of performance on current contracts and plan for an end to the shutdown. The following contract and business management steps should be kept in mind:
- Take stock of your current government contracts. Whether performance on your contract continues through the shutdown depends on the nature of each contract, as opposed to the work status of the agency client. The partial shutdown was due to the failure to fund nine government agencies, including the Departments of Justice, State, Homeland Security, Treasury, and Commerce. Some agencies remain open, at least for the time being.
Make sure you are fully abreast of the status of your contract (e.g., are there any pending modifications or contract options?). Engage your contracting officers (COs) and seek clarifications on ongoing contract performance deadlines, etc. but be sensitive to the situation of your COs; they may not know much more than you about the shutdown status as it pertains to their agency.
- Prepare your business for the current slowdown. Payment on outstanding invoices will likely be delayed. Confirmation of newly issued invoices will not happen in a timely fashion. Contractors should begin to tighten their belts where possible. For example, contractors will continue to incur indirect costs during the shutdown, driving up actual indirect rates relative to provisional rates that may be in place on fixed-price and time-and-material contracts. Contractors with nimbler cost structures are in a better position to minimize the profitability impact should a shutdown persist for a long period.
- Plan for the future business impact. Funding on current government contracts may decrease over time. Current open solicitations and submitted proposals will gather dust (at least for the time being). General federal procurement may even slow noticeably over the medium to long term. Revisit your medium- and long-term business plans, contract backlogs, and target markets. Uncertainty and business turbulence are good pause points for recalibrating business plans and the allocation of finite business resources.
Again, the unpredictability and accompanying severity of the current shutdown can be stressful. However, using this pause to gain a better understanding of the tactical status of your current contracts, potential future awards, and business overall can mean that the time is not lost and profitability is not severely impacted.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions, position, or policy of Berkeley Research Group, LLC or its other employees and affiliates.