The
breakdown in talks between the White House and Congressional leaders last week
has left many senior Congressional members believing that the partial
government shutdown could be with us for several weeks. Both political parties seem to have
substantial unity for their respective positions – at least for now. While the House has voted on passage of
individual agency spending bills, Senate leaders have said that they will not
consider any measure to re-open the government until a bi-partisan deal has
been worked out with the White House. For
contractors, this means that the payment on invoices already sent to closed
agencies will continue to be delayed, closed agencies will not be able to have
their employees travel or meet with industry, and, importantly, that employees
that work on federal sites that are now closed, will not be paid via their
usual charge numbers. It is
highly unlikely that contractors will receive “back pay” when closed agencies
eventually re-open. Additionally, agencies that are closed, with only essential
employees at work, are highly unlikely to take meetings with contractors for
business development purposes. The
situation continues to shift in some “closed” agencies as well. Those that generate their own user fees, such
as the Interior Business Center, are at least somewhat open, for now. When user-fee money is spent, however, some
of those agencies may shift to closed, or reduce operations from what
they are currently. The US Courts office
has announced that this is the course they are likely to follow. Some contractors have also reported
disruptions in offices that should be open as they have their FY’19 funding.
Allen
Federal continues to predict that the partial shut-down will last at least until
the end of January.
Financial markets, contractors, federal employees, and – importantly –
those who depend on government programs such as SNAP, will begin to be
seriously impacted after that time. Once
that happens, pressure will only grow on Congress to develop its own solution,
with or without White House support.
DOD agencies could risk losing some of the money
they’ve already been appropriated if it is not spent or committed soon,
according to knowledgeable sources with whom Allen Federal has spoken. These agencies are not accustomed to
receiving their full-year appropriations relatively close to on-time and, as
such, had not planned to commit appropriated money until later in the fiscal
year – about the time they’ve received it the past two fiscal years. Acquisition offices recently finished all of
the work needed to get FY’18 money full accounted for, but now must work
quickly on FY’19 money. If
not, DOD financial officials may sweep uncommitted money from certain accounts
beginning in mid to late March.This
presents an opportunity for contractors who have small or “ready to go”
projects that DOD customers can act on quickly.
The more these projects match with overall DOD priorities like security,
cyber, cloud, and mission support, the better your chances for closing short term
business. It may be, however, that
easier to execute projects that don’t precisely align with priorities will be
funded as program managers race to commit dollars before they are lost. Indeed, failure to spend allocated dollars now may
mean that offices receive reduced allocations in future years. As such, the pressure could be on. Make sure that your DOD teams are speaking
with customers about “shovel ready” projects that can meet real needs
quickly. You can help your customer and
yourself.
Talented workers with special skills always have
options. Sitting at home not getting
paid is not an option they need to endure, especially if there are
readily available alternatives. As the
partial-shutdown stretches on, the risk of a brain drain from both the
ranks of federal and contractor employees increases. Younger feds aren’t wedded to the idea that
they have to stay in government for some number of years to get their
retirement. They’re more mobile as a
group then their older counterparts.
Plus, many want to be seen as actively contributing. Contributing to high score on Grand Theft
Auto IV doesn’t count. Contractors
workers feel the same way, and their retirement packages tend to be more
portable. Add to this competition
in specific markets – like Amazon’s move to suburban Washington – and a
scenario where government agencies lose experienced, talented workers becomes
much more possible. Contractors
have a slight edge here in that they can shift workers to overhead accounts, at
least for some time, and can offer other incentives. Companies need to think broadly about this,
too, because it’s no longer the case that a worker will jump from contractor to
contractor. Talented workers can, and
will, jump right out of the federal space entirely if they perceive
other segments to be both more meaningful and reliable. This isn’t an issue companies can ignore,
even though it can be an expensive one when revenues are down. Maintaining a talented, experienced, and
well-known workforce is key to having an edge now and when government agencies
do re-open.
When
was the last time your federal team spoke to your state team about discounts? How about discounts to commercial
customers? If you don’t know the answer,
there’s a pretty good chance your company has a Schedule compliance issue. Don’t let a failure to communicate put your
company in the compliance hotbox. Allen
Federal has worked with many companies to set up, or improve, processes and
practices that help ensure compliance with minimal internal hassle. Contact us today to see what we can do for
you at info@allenfederal.com.
The government was poised to experience a partial shut-down as we went to press. Here is the good, bad, and the ugly about conducting contracting business while some of your customers are not around.
1. GoodAgencies that control most of the discretionary spending are open and have their money. DOD, the VA, HHS, Education, Labor, and Energy are all open for business. While any inter-agency operations they share with others may be impacted, they are otherwise running on a normal basis.
2. BadDHS, Treasury, Transportation and others are mostly closed. Only “essential” operations like airport security are functional. If you’re a company supporting those essential functions, your people should be at work. When you get paid for that work, however, depends on when the agency officially re-opens. This goes for all outstanding invoices your company may have with closed agencies as well. No pay till this is resolved.
3. Ugly Uncertainty abounds on whether your service workers working on a client site can show up. Generally, unless the work they do is considered essential, the answer is no. This means that you can’t charge for their work since they’re not working on that contract. Rather than lose good people, especially when a closure is likely to be short, is not something most contractors contemplate. Instead, they shift those workers to overhead and bite the financial bullet. At press time there was no clear way or time frame out of this morass. It will likely be until January before there is. Keep the egg nog at hand and put another log on the fire.