10 insights for navigating a federal government shutdown for FY 2024
Federal government shutdowns are not uncommon, but many contractors are still caught off guard when they occur. Understanding what steps to take before a shutdown can help protect your contracts, employees, and cash flow if federal operations pause.
Will there be another federal government shutdown on October 1, 2023?
September 30 is the end of the fiscal year. Will the government be open on October 1, 2023?
It’s September 28, 2023 so we don’t know what will happen in the next two days.
A federal government shutdown are commonplace to the point that it’s almost a given that it will happen, even if it’s for a few days. Whether or not you agree with the reasons the budget or continuing resolution (CR) didn’t pass, the effect on government contractors can be devastating if they are not prepared.
The question for federal government contract is “Do you know what to do if the federal government shuts down?”
Are you prepared for a federal government shutdown?
Our CEO has successfully navigated numerous federal government starting back to 1995. Using her extensive operational knowledge, our CEO wrote detailed processes on how to navigate a federal government shutdown for one of her other businesses. With the threat and almost inevitability of a shutdown every federal fiscal year, she included it in that company’s Standard Operating Procedures manual.
This is a high-level look at some of the things a government contractor should do in advance of a shutdown.
Let’s take a closer look at the key areas
What is a Continuing Resolution?
A federal government shutdown is understood as the federal government shutting down non-essential functions until a budget or continuing resolution is passed. You’ve probably heard the term Continuing Resolution or CR used. But do you know what it is?
A CR is an appropriation in the form of a joint resolution that provides budget authority for federal agencies, specific activities, or both to continue operation until the regular appropriations are passed/enacted. A CR is basically a stop-gap measure for a specific time period that can range from short-term (weeks or months) or long term like a full-year extension.
So the federal government may stay open if a CR is passed. What should you do just in case there is a shutdown?
Stay up-to-date on the potential federal government shutdown status
Federal government shutdowns don’t happen in a vacuum. There is media coverage leading up to the end of the federal government fiscal year (September 30) that specifically talks about the budget process and the likelihood of a shutdown or the passing of a continuing resolution, which will allow the federal government to stay open.
Talk with your federal government POCs
During the week prior to 9/30, reach out to the COR or contracting officer to ask what your company/team should do if the government shuts down. If the contract is fully funded, then you may be directed to keep working. If it’s not and you have essential personnel working on the contract, then you may be directed that these employees will keep working, but the other ones can’t work. If it’s not funded, then you will probably be directed to stop work until the government reopens.
It’s important to talk with the contracting officer or COR for direction and not the project/technical POC. The contracts office has the sole authority to provide direction. They will work in tandem with the project/technical POCs. If there is any discrepancy, reach out to the contracting office.
Talk with your employment attorney
If you have employees that will not work during the shutdown and you’ve never been through this before, then we recommend reaching out to your employment attorney to ensure the language in communications to employees is correct. If you don’t have other work that they can do, then the employees will most likely be furloughed. Language surrounding applying for unemployment during this period, using accrued leave, and accepting outside work will be included in the communications. We can’t stress enough why this needs to be right so the company doesn’t create legal headaches.
Don’t wait until the last minute to do contact your employment attorney. You’ll need time to get things done and do advance planning. And yes, you’ll have to spend money on this, but if it’s not done correctly, it could cost you more money in the long run.
Plan for delayed government contract invoice payments
If your company has invoices that have been submitted but not paid, they won’t be paid while the government is shut down. There will be lag time when the government reopens so you may not be paid right away.
Call your banker
If you have a bank line of credit or cash in the bank, you’ll most likely have to tap into it until payments resume. Prior to the shutdown, we recommend you talking with your banker to ensure they are aware that your A/R will be affected, and you may need a float if you don’t have enough available funds on our LOC. Communication with your banker is key, and this is why we say you need a banker (a person) not just a bank.
Ensure your employees are paid on time
Very important – government employees may be directed to work even though they will not be paid until the govt reopens. HOWEVER, government contractors do not have this luxury. If your employees that work on government contracts are working during a government shutdown, then they need to be paid on their regular pay date. If not, you may run afoul of state laws, and may end up paying penalties and/or triggering an audit as a result of you not paying your employees on time.
Communicate with your employees
Keep open lines of communication with your employees. This is a stressful time. They will worry about how their bills will be paid, especially during an extended shut down. If you know people are stressed and have an Employee Assistance Program, provide the information again (even if you’ve previously given it out).
Ensure that what you do related to the shutdown complies with contract requirements
Depending on the length of time the govt is shut down, you may return to working and find out that you are behind schedule with deliverables and technically are in contract non-compliance. This may mean having your team has to work overtime (OT) to get back on schedule. Talk to the govt program manager, COR and/or contracting officer about the non-compliance and if you can bill OT to get back on schedule. If OT is not part of your contract, then you’ll have to eat the differential as you can’t bill it on your invoice. Depending on your contract, you might not be able to bill for the timeframe the govt was shutdown.
What if you’re a subcontractor?
If you’re a subcontractor, then you should be having the same conversations with the prime contractor as you would with the government points of contact. Make sure you’re talking with the right person. Usually, conversations about work stoppage or continuation happen with the prime’s contract administrator. If you’re directed to keep working by the program manager, get confirmation from the contracts shop. Otherwise, you may be working but might not get paid for it if it isn’t authorized by the right person.
Be prepared and proactive
Being proactive and communicating with your customer (the govt or prime contractor) and your team is essential. It will help you be prepared and be able to nimbly address things as they come up. It will also help “destress” your team. They will have a higher comfort level knowing your company is on top of things.
Document your process
Lastly, document your process for addressing potential and actual federal government shutdowns and include lessons learned when you update it every year. Being prepared makes a stressful situation much easier to handle. Writing it down means you have a starting point future shutdowns instead of trying to remember what you need to do. That not only takes more time, but it also increases the chances of mistakes being made.
Need help with next steps or have questions about this topic?
This is a 10,000 foot look at these key topics, although a deeper dive is necessary to ensure your company’s ability to navigate and survive a federal government shutdown.
We can help you with the preparation for this and future federal government shutdowns. Our expertise comes from understanding how a business operates from both the external facing and the internal facing sides of the organization. Our action item it to help companies strengthen their business operations functions. Your action item is to reach out to schedule a consultation.
Planning for the “What If”® is what we do and we can make an “oh sh*t” moment easier to navigate. Reach out via the contact page and we can set up a call to talk and we’ll figure out suggestions based on our initial conversation.
Tripod’s expertise is business operations. We focus on the interface between the revenue and non-revenue generating sides of your biz, create policies and procedures for all company departments and divisions, and excel at Planning for the “What If”™. A Strong Foundation = a Solid Company!
We’re also happy to answer questions about this post. Leave us a note in the comment section, or reach out on the contact page.
The tripod is the company’s attorney, accountant, and banker. These three individuals work with the business owner(s) to lay an initial structural foundation. There is a 4th very important component that is the top piece connecting the 3 legs of the tripod — the insurance broker. Many companies wait to connect with an insurance broker; however, this creates potential risk exposure. It’s essential to get the correct insurance policies in place before the company begins providing products and services to their customers.
The company then builds their revenue and growth on this foundational tripod.
The challenge of business operations
The challenge is most business owners and executives find business operations tedious, and it takes a backseat to activities that directly generate revenue. They often don’t have a solid understanding of business operations because it includes a lot of specific and nuanced areas that they may not have been exposed to before starting their business. Then after the business opens, many business owners focus on what they know — the services and products they sell. And most are really good at selling because they know their industry and ideal customer.
The issue is that without a strong foundation, the business may not survive over the long haul or when faced with challenges that have legal and monetary ramifications. Why? Because a company cannot sustain itself only through revenue.
So, why don’t entrepreneurs invest time and money in their business operations? Partly because they may not realize how important it is for long-term business success.
Diana also believes this is due to industry and entrepreneurial programs not offering outside services and training in business operations topics, particularly to small businesses.
Do a search for consulting services and you’ll find a lot of listings for sales, marketing, opportunity identification, recruiting, etc. But you won’t find many for business operations coaching and consulting. The reasons are two-fold. First, the other industries are associated with increased revenue and are a lot more fun to teach and provide. Second, because many of those consultants don’t realize the importance of business operations so they don’t incorporate it into their own business model.
Our mission
Our mission is to help organizations with their planning for the “what if”™.
What if we grow?
What if we want/need to hire people?
What if we need to expand to other states?
What if we want to sell the business?
What if we are sued?
What if we…
We help you plan for the “what ifs” you may know about and identify ones that you thought wouldn’t affect your business.
