With only two days left until the federal government’s new fiscal year begins, Congress remains at an impasse over a dozen spending bills that must be signed into law to keep the government running, leaving many government contractors wondering about the potential impacts on their businesses if there is a government shutdown in the coming week.

Under the Anti-Deficiency Act, federal agencies cannot spend or obligate any funds without approval from Congress. 31 U.S.C. § 1341. When Congress fails to enact appropriation bills, federal agencies are required to only carry out “essential” services, such as those related to public safety, and all other functions come to a halt. This is known as a government shutdown.

As we push towards the September 30, 2023, deadline, contractors should use this time to develop and refine their contingency plans in the event of a government shutdown. There are some practical steps contractors should consider taking as the potential shutdown approaches.

  • Contact your Contracting Officers (COs). Even prior to a shutdown, companies should contact the COs with oversight of their federal contracts to create an action plan in case of a prolonged shutdown. Because COs are responsible for administering contracts and providing direction regarding those contracts, communicating with them during uncertain times is key in helping ensure the Company is receiving clear instructions about any open approvals, which activities can continue, and how to best prepare for and navigate the shutdown. Companies should correspond with their COs in writing and include questions that will help the Company determine the extent of the shutdown’s impact on its business. 
  • Inventory and analyze contracts. While a funding lapse may halt performance under some contracts, it may not impact others. It is important to remember that many contracts are fully funded. Meaning, the relevant funds have already been obligated to cover the price of a fixed-price contract, or the estimated cost of a cost-reimbursable contract. FAR 32.703-1. Although performance of these contracts may not be impacted by a shutdown, the Government may stop work on contracts that are already funded if performance depends on government facilities that are closed, government employees who are furloughed, or government contracts that require further funding during the shutdown. A shutdown may also impact fully funded contracts if performance is delayed, if the contractor expects to exceed the current budget, or if other events occur that require a cost adjustment. Ultimately, taking inventory of your government contracts will help you determine whether, or how, the shutdown will impact them, and provide you with a framework for asking your CO for additional advice. 
  • Plan for changes in compensation and contract awards. A shutdown contingency plan should also consider future contract awards. Because the Government cannot obligate annual funds to begin performance on new contracts during a shutdown, new contracts may not be awarded, and options may be exercised without the disclaimer found at FAR 52.232-18, the clause covering Availability of Funds. Even where funding is available under an exception, agencies may furlough all or some of the employees responsible for issuing solicitations, evaluating proposals, and making award decisions. Accordingly, contractors should understand that some of the proposals they have submitted may not be reviewed until after the shutdown. 
  • Document everything. Contractors are encouraged to document all communications with their CO, and any instructions or guidance provided by the Government regarding the availability of government facilities, personnel, and other resources that are essential to performance of their contracts. Contractors should also maintain detailed records of any work performed by their employees under government contracts and, where feasible, consider implementing practices to keep track of time spent winding down and resuming contracts, employee expenses, and efforts to minimize costs.  
  • Strictly comply with existing deadlines. Contractors are advised to assume that all proposal and litigation deadlines remain unchanged unless they are officially notified otherwise. This is especially true for filing bid protests, appealing CO final decisions, submitting proposals, and other solicitation deadlines.  

If you have any questions regarding the implications of a government shutdown, or any other nuances involving your government contracts, awards, or protests, please contact the authors of this post.