Industry prepares for fiscal double-whammy in late September

The slow slide from summer to fall usually brings the anticipation of autumn leaves, football season and, for many in Washington, D.C., anxiety-inducing speculation of whether the federal government will once again shut down.

This year should be no different, as Congress will have until midnight Sept. 30 to figure out how to fund the government through appropriations for another year. Adding a wrinkle to the mix this year is the almost-simultaneous reaching of the federal government’s debt ceiling, expected around Sept. 29.

Given the current political climate on Capitol Hill and the recent struggle for both parties to agree on much, the Professional Services Council hosted an event Monday to help contractors navigate the possibility of an unprecedented one-party shutdown, as Republicans control the White House and both chambers of Congress. Even if the congressional GOP agrees on how to wrap up the annual appropriations bills, any opposition from President Donald Trump could complicate the process greatly.

PSC President David Berteau said hosting the event didn’t mean the trade association believed there was a likelihood of a shutdown or credit default of the federal government, but given the potential impacts, it is better for contractors to prepare. The good news is that Congress and the White House have always raised the debt ceiling whenever necessary. Experts warn of financial chaos if the government defaulted on its credit.

For a shutdown, “I think the likelihood is low, but I don’t know that I could put a number on it,” Berteau said. “I’ve been asking people that question for the last couple of weeks, and I’ve been getting numbers from 10 percent, 20 percent, even higher. No one has said the probability is zero.”

For IT and cloud service providers, the threat of a shutdown means staying in touch with agency contract officers to know when or if they are supposed to continue working. During a shutdown, a small number of high-level officials at each agency generally continue reporting to work.

“Agency websites are not designed for a shutdown,” said John Cooney, a partner at Venable LLP and a former deputy general counsel for litigation and regulatory affairs at the Office of Management and Budget. “They weren’t designed to cluster in one place. A server that serves all of the programs that are subject to being shut down — all the ones not exempted by law — you’ll find situations where the agency websites are supporting a mix of protected programs and unprotected programs.”

Each agency will approach its shutdown preparations in a different way, requiring frequent communications between contractors and their agency liaisons. By law, federal officials have to provide a point of contact at the agencies, as well as essential personnel to carry out operations for the protection of property, national security and life.

“There’s always someone home,” said Alan Chvotkin, PSC executive vice president and counsel. “There are a number of employees — there are not a lot of them in the Trump administration yet — but all presidentially appointed and Senate-confirmed report to work. There is always someone who is designated with authority for contracting.”

That means for some operations, like those maintained by cloud service providers, contractors will be able to continue work essential to the operations of an agency, but they must work with the federal employees onsite to conduct it. By law, contractors may not be brought in to do the work of a furloughed federal employee during a shutdown.

“There are still some minimal operations, support of those constitutional activities of the president or presidentially appointed officials,” Chvotkin said. “So to the extent contractor support or federal employees are required to maintain some semblance of systems or the security of those, those can continue, even in the absence of appropriations.”

As for contracted work, multi-year contracts not reliant on annual appropriations can continue through a shutdown, including non-severable contracts that are funded for services provided until a designated end date.

Task orders not yet awarded through various procurement vehicles could be impacted by a shutdown.

Ultimately, while there has never been a government shutdown triggered when one party controls the White House and Congress, Chvotkin said that contractors would still be wise to prepare for one.

“Now is the right time to prepare. Now is the right time to understand the nature of your contract, the source of funding and where you can find officials who can take certain actions,” he said.