Though the shutdown’s over for now, contractors expect a long road to recovery

Now that the machinery of government has started moving again after the longest shutdown in history, the contractors who support the affected agencies are expecting a long trek back to normalcy, both for the projects they work on, and for their own firms.

In an exclusive, nonscientific Federal News Network online survey of nearly 100 contractors and their employees, conducted during the final week of the shutdown, 71 percent said their projects would be delayed as a result. Only 14 percent said their work would be able to get back on track within a week; 40 percent said it would take four weeks or more.

And several pointed out that spinning their activities back up would not come cheaply.

Impact of partial government shutdown on my company

 

“There is a significant hidden cost here,” wrote one respondent. “In many cases, it is very difficult to simply shut down and start up programs. Travel must be rescheduled. Program plans must be reworked. Staff must be rehired where lost. These are not insignificant costs.”

Another respondent said it would take seven to 30 days for invoices that have already been submitted to be paid.

“Additional funding, contract modifications, and invoicing against those will take 30-to-60 days once the agency receives appropriations,” they said.

New contracts, task orders went unsigned

The financial strain that companies, particularly small ones, endured during the shutdown came on a number of fronts. Not only were they unable to sign new contracts or task orders with the affected agencies, but since many contracting activities and pay providers were shut down, firms also couldn’t be paid for much of the completed work they’d already billed the government for before the funding lapse began.

“As a small business doing business with the government, our company is dependent on routine payments in order for the company to take care of the employees,” another survey respondent wrote. “They may or will get to a point where they have to let people go.”

Twenty-seven percent of survey respondents said their companies had already started to lose employees, but most said they had lost little to no staff by the end of the shutdown.

Impact of partial government shutdown on my company’s federal projects

 

“Only a few so far,” wrote one. “We’ve made every effort to keep people busy. But we have now (as of Jan. 24) reached a very real tipping point.”

Many firms appear to have done all they could to avoid laying off or furloughing their employees, knowing that replacing them once the shutdown ended would not be easy.

Agency contracts losing appeal, firms planning ahead

But there are still fears that the experience of the past month may prompt at least some employees to conclude that continuing to work in the government contracting space is not worth the personal financial risk.

“One of the insidious, long-term impacts of this could be the loss to the government of the skilled workforce that’s present inside their contractor base today,” said David Berteau, the president of the Professional Services Council, on the Federal Drive with Tom Temin. “Once those people go somewhere else, they may not want to come back to public service. Nobody knows how to quantify the impact of that, but the danger is very real.”

Some firms, having been through multiple shutdowns before, had already developed detailed, week-by-week strategies for how they would protect their workforces to the best of their ability even as their cash flow rapidly drew to a trickle.

How long will it take for your program or project to resume and reach its funding level from before the funding lapse?

 

Citizant, a small Chantilly, Virginia-based IT services contractor, began by asking employees working on projects that were still funded to donate their leave to colleagues who were impacted by the shutdown.

The same strategy let Citizant weather the 2013 shutdown without a single day of missed pay for any of its employees. This time around, its now-larger workforce of 80 employees donated more than 2,000 hours of leave, said CEO Alba Alemán.

“We also took the portion of our workforce that we could get on other projects and moved them over to deliver meaningful outcomes on programs where they are badged and cleared and able to do work,” she said.

But those measures weren’t enough during a longer shutdown, and the company had to move to a more aggressive cash conservation plan, which began by withholding pay from its top five senior leaders.

“It’s what we call our onion approach: You start in the middle, at the heart of the company, which is the part that hurts and you cry over the most,” Alemán said in an interview a day before the shutdown ended. “They took the first hit by not taking any compensation in January, in solidarity with our federal workers, and to protect our employees. The next layer has been shared services. We have about 11 or 12 shared services professionals, and they’ve all been asked to five days of leave without pay — just go do some fun stuff with your family, but stay connected. They all agreed, but some of them have actually said, ‘No, I’m going to work without pay. Just don’t even worry about it from now on.’”

Getting pay to employees ‘uneven’

Federal agencies were able to move extremely quickly to pay their employees after the shutdown ended, and the Office of Management and Budget has told them to make it a top priority to also pay their contractors. But the latter may be more challenging.

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Several of the government’s largest invoice processing agencies had large portions of their own workforces furloughed for the duration of the shutdown. Before they returned, contractors’ unpaid invoices had been stacking up, awaiting formal acceptance and payment since Dec. 22.

Alemán said her company’s experience getting payment for those invoices has been uneven so far. One of the key contracting officer representatives it deals with has been unreachable all week. But most customers have tried to move the process along as quickly as possible, before another potential shutdown arrives on Feb. 16.

“Our contracting officers and contracting officer representatives have been hyper diligent all week in approving November and December invoices,” she wrote in an email Thursday night. “They are all being extremely supportive despite their own hardships and frustrations.

Other obstacles arise for contractors in shutdowns

Aside from delays in getting paid, Berteau said there are other shutdown-related hiccups which could erect legal barriers that prevent contractors from continuing to perform work to which they’ve already agreed.

“If there has been a lapse in funding, now you have to have a new citation under the new continuing resolution that the president signed on Friday night, so you may have to go through some steps to get the funding going,” he said. “And if you stopped because you got to the end of a task and you couldn’t start the next task until the government accepted it, you’ve got to get that acceptance in and get the government to sign it.”

Lawmakers have made gestures toward compensating contract employees in ways that mirror the back-pay Congress had already authorized for federal workers who were furloughed or forced to work during the shutdown.

One proposal, offered by Rep. Tina Smith (D-Minn.), would press agencies to make modifications to existing contracts so that low-wage employees, such as janitorial staff who went without work during the shutdown, could receive similar back-wages.

But Congress has never before enacted legislation to help contract employees after a shutdown, and survey respondents doubted that it would do so this time.

In the survey, 79 percent of respondents found the prospect unlikely, including 45 percent who deemed it “very unlikely.”

“We heard it on WTOP in the break room, and everyone was like, ‘Seriously?’ We just think legislators are pulling lip service,” wrote one.

As a purely practical matter, back pay for contractors would be difficult to account for and actually implement, another respondent pointed out.

“Contractors can only be paid for work performed. Therefore those who are working will already be paid. Those working at risk, but not being paid will already be paid if the government makes the contract whole. There is really no mechanism to account for paying those contractors who have been furloughed and are not working. The best the legislation could do is ensure that those contractors working at risk are made whole at the end of the shutdown.”

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