As the standoff between President Donald Trump and Democratic lawmakers continues, the federal government’s partial shutdown is presenting unenviable dilemmas for the government services industry. Business owners are considering emergency financing options and some employees are working at their own direction but may not be paid back, experts told the Federal Times.
Political disagreements over $5 billion in funding for a southern border wall showed no signs of abating Jan. 2, after Trump met with incoming House Majority leader Rep. Nancy Pelosi, D-Calif., and Sen. Chuck Schumer, D-N.Y.
Some 800,000 government workers are affected by the shutdown, which is set to enter its third week.
For government contractors, the impasse may bring uncomfortable dilemmas.
Some government contractors may face cash-flow shortages if the shutdown continues, Alan Chvotkin, executive vice president for the Professional Services Council, told Federal Times. Because some contract-workers are still required to perform their contracts but their employers are not being paid, the government service providers face an unexpected cash-flow deficit, Chvotkin said.
The financial impact of this budget shortfall will vary based on the size and cash reserves of each contractor, he said.
“Smaller companies that do not have a large number of contracts may not have the cash reserves, and the risk for them is greater,” Chvotkin said.
These companies may ask their employees to take time off, ask them to take training days or will ask banks for lines of credit to cover the timing of any cash-flow shortage, he said.
The practice of “working at risk,” when government contractors perform services without funding or a contract, is common during shutdowns, Guy Timberlake, chief visionary officer of the American Small Business Coalition, told Federal Times.
“Some companies will take a loss since they may not be able to invoice some or all of the time worked by employees during the shutdown,” Timberlake said. The practice “is not specific to one industry, but spread across healthcare, intelligence, cybersecurity and other sectors.”
Some government employees are also working without pay.
According to Senate Democrats, 6,503 staff from the State Department, 35,000 Internal Revenue Service and more than 50,000 staff from them U.S. Department of Agriculture are currently working without pay.
The last time government contractors faced such a dilemma was in 2013 during a 16-day shutdown. That may be a case study for government contractors and their employees.
“Some contractor employees were reportedly laid off during the shutdown and furloughed contractor employees were not necessarily paid by their employer during or after the shutdown,” according to a Government Accountability Report that analyzed the impact of the 2013 spending shortage.
The effects of today’s shutdown are being felt in other ways as well.
In most circumstances, the Pentagon cannot enter into new contracts with defense firms, according to the National Defense Industrial Association. Nineteen Smithsonian museums and the National Zoo closed to the public on Jan. 2 because of their funding shortfall. The National Institute of Standards and Technology website, which offers guidance on federal cybersecurity standards that are often used by businesses, has a temporary homepage.
Justin Lynch is the Associate Editor at Fifth Domain. He has written for the New Yorker, the Associated Press, Foreign Policy, the Atlantic, and others. Follow him on Twitter @just1nlynch.