Why government contractors could be some of the hardest hit during a shutdown

If lawmakers fail to strike a deal on the budget and a shutdown happens, many government contractors and their employees stand to be among the hardest hit.

David Berteau — president of the Professional Services Council, a trade association for government contractors — said while federal workers may not feel the impact of a shutdown until they get their first paycheck, for contractors and their workers, it can be felt immediately.

Berteau said many contractors are required to keep working unless something gets in the way of them doing their work, and they are told to stop.

“If a stop work order is issued, then you no longer can pay that person unless you’re willing to pay them out of other funds that will run out because you’re not getting reimbursed by the government,” Berteau said.

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Berteau said seeing a stop work order is common, because many contractors depend on things such as access to federal properties and interactions with feds to do their work.

“You may have something you have to deliver to the government — a software program, a package, an airplane — and there’s nobody to sign off on accepting the delivery,” he said.

Additionally, a stop work order could be given if a contractor runs out of money for a project.

Berteau said when a shutdown happens, some contractors may still be waiting for the government to pay an invoice because it takes around 30 days for that to happen. Thus, a shutdown could lead to a backlog of those payments.

Also, a lack of staff could lead to invoices not being approved or no money being available to pay contractors for their work.

After previous shutdowns, including the partial shutdown in 2018 that lasted more than 30 days, many contractors have better plans to react to a shutdown. Such plans include communicating with government liaisons about what will happen and communicating with employees about what to expect.

“Internal communications is really critical and important,” Berteau said.

Different from other shutdowns, this time around, he said, both the government and federal contractors have a bigger risk of losing employees, due to a worker shortage after the pandemic.

“This puts a big pressure on both the government and the companies to keep the skilled workers they have because if you leave the government employment and go to work for a commercial company, you might not come back,” Berteau said.

Recent legislation guarantees feds will receive backpay after a shutdown, but the same isn’t true for contracted employees.

“There’s never been a designated backpay for contractors, even though they were affected and driven into that situation by the same dynamics as the government civilian employees,” he said.

Berteau said another concern for contractors is if the budget can will be kicked down the road with a one or two-week continuing resolution.

“Very little happens in the contract world in that case, other than potentially, maybe, paying invoices, but only if you’re at the very top of the list,” Berteau said.

While time is running out, the hope among contractors is a last-minute deal can be made.

Mike Murillo

Mike Murillo is a reporter and anchor at WTOP. Before joining WTOP in 2013, he worked in radio in Orlando, New York City and Philadelphia.

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