By Carten Cordell – Staff Reporter, Washington Business Journal
37 minutes ago (May 6, 2019)
The longest partial government shutdown in history may have ended three months ago, but contractors are still feeling the effects.
Seeking to understand the economic toll of the 35-day budget impasse on the contracting community, the House Subcommittee on Government Operations disembarked from Capitol Hill Monday to hold a hearing at George Mason University on the shutdown’s impacts and what Congress can do to not repeat them.
Like federal employees, contractors can be forbidden from working when a shutdown occurs, but unlike those employees, they aren’t afforded considerations like back pay from Congress for the lost time.
Couple that with an ongoing backlog of unpaid invoices from prior to the December shutdown, a loss of employees, stunted recruiting efforts and other ongoing effects and you have a government contracting community that is still navigating its recovery, officials said.
“When your only customer doesn’t pay you for nearly four months and you have reached your company’s borrowing capacity, you face the dire prospect as a business owner to file for bankruptcy or sell off parts of your business for pennies on the dollar,” said Alba Alemán, CEO of Citizant, a Chantilly-based technology contractor. “We were within days of having to make that decision."
Alemán said her company amassed more than $4 million in debt during the shutdown so it could keep paying its employees and faced ongoing delays in receiving contract revenue from work done before December as contracting officers continue to sort out the invoices.
David Berteau, president of the Professional Services Council, a contractor trade group, testified that up until two weeks ago, some member companies still hadn’t received payment for invoiced work.
Larger contractors like Leidos Holdings Inc. were able to defer some of their losses by reassigning personnel to projects at agencies like the Department of Defense, which had received a full appropriation, but it still experienced a $14 million loss in revenue in its civilian business, CEO Roger Krone said.
Those employees may choose not return to their previous assignments once the shutdown ended, he added, while others will have to work for “years” to rebuild the paid time-off they used to continue to be paid.
“Everyone thinks the shutdown ended [Jan.] 25,” he said. “The shutdown ended on the 25th for government employees. The shutdown didn’t end for our employees until we got a letter from a contracting officer authorizing us to come back to work. That took weeks.”
Members of the subcommittee were sympathetic to the plight of contractors and have floated legislation to ease the financial burden, proposing everything from contractor back pay to limiting Congress’ own pay during a shutdown to ending them with perpetual continuing resolutions while budget negotiations play out.
But while thought of a scenario where Congress and the White House could remain on a continuous CR cycle is a bitter pill that contractors are willing to accept, they said they would prefer actions to ensure invoices are paid during a shutdown, contracts won’t expire when the government is closed or, most elusively, an appropriated budget.
“At PSC, we actually decry continuing resolutions as a very, very bad way of governing,” Berteau said. “About the only thing worse is a shutdown. So the idea that an automatic continuing resolution would prevent a shutdown is a very appealing idea. Clearly, a far better approach is, in fact, to use regular order and fully fund the government appropriations.”
While potential solutions continue to develop, what everyone can agree on is that the contracting community shouldn’t be left out in the cold should another budget dispute arise.
“Federal contractors and their families should not be penalized for a government shutdown they did nothing to cause,” said subcommittee chairman Gerry Connolly, D-Va.