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.
Federal government shutdowns 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?
With the almost inevitability of a shutdown, our CEO wrote detailed processes on how to navigate a shutdown for one of her other businesses. She included it in the 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.
Prior to a shutdown
During the week prior to 9/30, reach out to the COR or contracting officer to ask what your team should do if the government shuts down. If the contract is fully funded, then you’ll probably 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.
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.
Payment of government contract invoices
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).
Contract compliance
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 to do 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 govt shutdowns and include lessons learned when you update it every year. Being prepared makes a stressful situation much easier to handle. And writing it down means you have a starting point for next year 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?
If you need help, please reach out. Planning for the “What If”™ is what we do. We’ve been through this many times and we can help 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.
