With continuing resolution discussions seeming to go nowhere, the chances of a government shutdown are rising. Contractors and federal employees will feel it first. For more, Federal Drive Host Tom Temin spoke with David Berteau, President & CEO of the Professional Services Council, who has developed a contractor checklist that might help you.

Interview Transcript:

David Berteau These issues have been around really ever since the debt limit deal was cut back at the end of May and signed by the president on June 3rd. Because one house, one part of the Congress, the House of Representatives began to walk away from that deal almost from the beginning. So we don’t have, we don’t appear to have agreement across the Congress and with the White House on what the funding level would be. But we know two things for sure. We know that on midnight, September 30th, fiscal year 23 will come to an end. And we know that if something hasn’t been passed by Congress and signed by the President, that our fiscal year 24 will start with a shutdown. Everything else we’re going to have to monitor and watch between now and then. So the real question is what is the impact of that? It’s been a lot of media coverage, including you’ve had a number of things on your show covering Congress and covering the impact, you know, on military and civilian personnel. But there hasn’t been a whole lot of discussion about the impact on contracts and contractors. So I’m happy to be with you this morning to cover that.

Tom Temin Well, the impact on contractors is probably mixed because some of them say you’re supporting the operations of FAA towers, then you’re going to keep working. But if you’re developing the next generation of digital services, that could come to a halt.

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David Berteau Is that different for contractors, though? Because every contract that’s in place right now is funded with prior year or fiscal year 23 appropriations. So no current contract relies upon next year’s appropriations. Obviously, they haven’t been appropriated yet. The funds haven’t been available yet. So for contractors there, most of them are funded and your requirement is to actually keep on working independent of the accepted status of your customer or the program that you’re supported. With a number of caveats. But it’s really important to stress that key point. You have a contract. There’s no clause in that contract that says if the government shuts down, you stop working. You actually have to keep working because that’s what your contract calls for. So there are caveats, though. What if a contractor can’t get in touch with a government person that they need to have to approve something, to accept a deliverable, to move on to the next step? What if they can’t access a facility? What if they can’t access the data that they need for whatever reason? Or what if the money runs out? Well, the money won’t run out on day one. But if the shutdown is long enough, the current funding could run out or the government could decide to issue a stop work order. All of those reasons why you would stop or be affected. But none of them are presumed on minute one of day one of the shutdown.

Tom Teminn But if the shutdown does continue at some point, unless there’s an emergency declaration like keeping the airports going or something, then the money would run out, as you say, and that would stop a contract, because a contract to be a contract has to have consideration and not just the order to keep working.

David Berteau And it’s interesting, you read and sort of you know, one of the first things that we recommend to our member companies is read the guidance that agencies are putting out and we have for our members on our website, we have a shutdown resource center that that has all of the guidance documents that have been issued by all the agencies that we can find. Only a handful have been updated for fiscal year 23. Most of the rest of them are one year to year, in some cases three or four years old. But the new ones that are issued will make a key point of saying that, you know, if your contract supports an accepted activity, that is something that has to keep going even under a shutdown, even though the workers aren’t getting paid, you may be offered and asked to extend your contract even if there’s no money. You know, it’s not always clear what options the company has in terms of accepting, you know, I’m going to work without pay for an undetermined period of time. But most of our members are so committed to the mission that, of course, they’re going to continue supporting that mission going forward. We learned a lot, by the way, Tom, from that partial government shutdown back you remember Christmas of 2018 that extended for 35 days. And one of the things we learned is you better prepare for a longer time than you might have thought at the front end.

Tom Teminn Yes, because I think the political positions are even more intractable now than they were then, if that’s possible.

David Berteau If you look back at that shutdown and by the way, that’s the last one that was even partial to go back to a full government shutdown, you have to go back ten years to 2013 where we had a 17 day shutdown to start October 1st of fiscal year 14. But what you learned in that process is that not all the people ask the right questions ahead of time. In that shutdown in 2018, 2019, We ended up coming out right where we would have been had the legislation in place been passed. And that doesn’t look to be the case this time.

Tom Temin We’re speaking with David Berteau, president and CEO of the professional Services Council. So that being the case, and we can anticipate perhaps a longer shutdown. You have published kind of a checklist for member companies of what to do in anticipation of this and enduring it when it happens. What are some of the key points on that checklist?

David Berteau Well, there’s two areas, Tom, that you have to, the companies have to cover. And keep in mind, we always remind our member companies that PSC doesn’t give legal advice or accounting advice. These are just are what we see and talk about with them. But first are the external things. What kind of discussions do you have with your programs and your contracting officers? Yeah, you want to know before you get to the shutdown, will you be able to contact your contracting officer during a shutdown? Is the administrative contracting officer going to be working without pay or on leave Without pay? If that person is unavailable, who can you contact? How can you reach them? You know, who will accept delivery of of whatever your goods and services are that you’re putting out there? How can you reach those people who will approve invoices for payment and how can you reach them? And if that person is not available, then who you know. And we even have a situation that came up back in the last shutdown where it lasted so long that the next option on that contract had to be exercised, Well, who’s going to be there to approve the exercise of the option? How can you reach those? So those are important questions that you would ask. In addition to questions like will the facilities be open? Will I have access to the data, the network, the computer systems, etc.. Right. So how can you ensure that your employees will have access to that? Who do you contact if access is denied? And what remote work arrangements might be available? That’s something that’s different this time than all the previous shutdowns because, you know, three and a half years of COVID, we’ve got a lot of different work habits now than we’ve ever had before. And how do you accommodate those in your process? So those are some of the kinds of questions you would ask the government before you get to the end of the fiscal year.

Tom Temin But non excepted, federal employees would not be able to work legally even if they have telework capabilities. Remember, the Clinton administration had baskets to collect the Blackberries as people filed out of the office. So even if their home and their PCs are there on the dining room table or wherever, they’re proscribed from working.

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David Berteau That’s correct. And of course, you know, within an agency or within a component of an agency, a procuring contracting officer may be accepted, but the admin, that is the person who makes the award decisions. But the administrative contracting officer may in fact, be furloughed or laid off. Plus, you mentioned the Blackberries. There’s one other twist that I don’t know how that’s going to play out this time. And we’re really asking these questions of the government as well as that of our member companies. We have a lot of government employees now who use their own device. They’re no longer using a government device to do this. Right. And so there’s big questions. The guidance so far is is kind of, kind of silent on that point. Then there’s a second set of questions, which is what kind of, what do you do inside your company, sort of independent of the government? Right. You know, you certainly need to know all the critical dates associated with your current contracts. You know, what are the deliveries? When are they when are they there? What’s your flexibility? You know, what will that what impact that might have on non-government worksites? You may be at least facility that, you know, the government has a big chunk of the building and you know, what are your cash flow requirements? How will you meet them if invoice payments are delayed? You know, and regarding your employees, yeah, you need to know where they are. How are you going to reach them? It’ll be Sunday morning when the shutdown occurs. You know, they may be on travel, they may be on leave. You know, how do you how do you prepare to furlough those employees and those issues, the one that came up last time of eligibility for unemployment compensation, there’s the workforce notifications required under the WARN, the Warrent act and other labor law requirements at the state level. A lot of things that companies have to consider internally. So we provide a checklist. And, you know, once we have released that checklist publicly, we’ll be glad to provide it to you and you can post it on your website as well.

Tom Temin And probably not too many of your members could find alternate work, say, being scabs for General Motors or the Screen Actors Guild. So they will have to stay home from work if they happen to be in the right areas of the country. But I wanted to ask about the idea of delivery because you know, if your product deliver, then there’s nobody at the receiving dock to take that new copier center that’s on a pallet, you know, in shrink wrapped. But services contractors, the deliverable is either the presence of the people doing work, programing and whatever, or the delivery is something that you deliver over the network. And so there’s, you know, how do you deal with this concept of deliverable in the services context?

David Berteau That’s a great question. And that very nature of services deliverables cover a very wide array of possible things, including just hours worked, as opposed in addition to, you know, maintenance done and facilities repaired and, you know, software delivered and data analyzed and the results of that analysis delivered. So these are all things that you really need that companies really need to be talking about. With their program offices and their contracting officers said that the one thing that we know, Tom, is that the government’s guidance itself tends to focus on internal government functions, not on contracts and contractors. For instance, one agency we looked at 14 pages of guidance is about a half page devoted to contractors and contracts. And so a lot of the questions remain unanswered. This is why it’s so critical for government contractors, not just PSC member companies, but any government contractor to be asking these questions and having these dialogs and conversations. Because the guidance is not coming down from the top. It’ll have to be figured out at the programing contracting officer level.

Tom Temin All right. So everyone has got to be a Boy Scout and be prepared.

David Berteau That’s a good way to think about it. You know, we do this every now and then, so you’d think we’d remember. But ten years is a long time since the last government wide shutdown. And I don’t think a lot of people are in the same jobs that they were in at that point. And so they’ll say, well, I remember what we did before. Let’s do that again. Plus, as we mentioned before, a lot has changed in ten years.

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