The longest government shutdown in U.S. history ended in January 2019, but businesses that contract with the federal government are still seeing damaging effects for themselves and their employees months later, according to witnesses who testified at a May 6 House Oversight and Reform Committee hearing.
“Everyone thinks the shutdown ended on the 25th [of January]. The shutdown ended on the 25th for government employees. The shutdown didn’t end for our employees until we got a letter from the contracting officer authorizing us to come back to work,” said Roger Krone, CEO of Leidos.
“Where it may have been 35 days for government employees, it could be another 14 days or more for contractors. Because the contracting officer had to come to work, get through the pile of paper, figure out what contracts were under a stop work order, and then prioritize those and authorize the contractors to come back.”
Federal employees were guaranteed back pay for the time they were forced to stay home from work or work without pay during a shutdown. But contractors received stop-work orders or were unable to access the resources necessary for their contracts, and never received compensation for that time they were unable to go to work.
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Contracted companies, especially small businesses with narrow sources of revenue, were therefore not bringing in the needed cash to keep paying their own employees.
“I’ve heard from member CEOs that say, ‘I’m in a dilemma: either I keep paying my people, and I go out of business, or I quit paying them, and then they quit, and I go out of business,’” said David Berteau, president and CEO of the Professional Services Council, a trade association which represents government technology and services companies.
Part of the problem stems from the fact that most contracting offices were shuttered during the shutdown, meaning that even companies whose contracts were still funded could not communicate with the appropriate personnel to meet deadlines, did not receive payment for work already done or received incorrect information about the status of their work.
“As of two weeks ago, we still had member companies who had not had invoices paid for work done before the shutdown. Those invoices were still in process,” said Berteau.
“Companies have reported to PSC that some contracting officers have been totally non-responsive since the shutdown, perhaps because they are still digging out. Informal communications from the government indicate that for every day of the shutdown, they need three to four days to resume normal operations.”
Under that metric, contracting offices would not be back to normal until sometime between late May and the middle of June.
According to Alba Alemán, CEO of Citizant, during the shutdown her company was incorrectly issued a stop work order from the Department of Homeland Security, despite the agency’s head of procurement saying that contractors could keep doing work so long as they didn’t need ongoing guidance to do their jobs.
“The problem is they sent the notice the day after the shutdown, and they were no longer able to read their emails, so they didn’t know that. So they shut us down temporarily, and we got a copy of the memo, because one customer that was working sent it to us,” said Alemán.
Contracts that were scheduled for renewal or review during the shutdown were also allowed to lapse, meaning that contractors that would’ve otherwise had their work with government agencies continue were instead forced to walk away from that work.
According to Berteau, new contracts going through the proposal process are also significantly behind, because the contracting offices are still playing catch-up, meaning that new services or initiatives scheduled to take place under those contracts are also delayed.
Meanwhile, some experts at government agencies that contractors interface with on a regular basis decided to leave because of the shutdown’s impacts.
“Several key, highly technical leaders from the Department of Homeland Security left in the middle of the shutdown to go back to industry,” said Alemán.
And while some contractors were able to move employees from one unfunded contract to perform work on a contract at an open agency, security clearance and technical requirements meant that many employees would not be able to make the transfer in time.
Krone said that his company resorted to allowing its employees to take a negative balance of paid time off, meaning that they will have to continue working to earn the time that was already spent.
“It will take them years to build up that paid time off bank,” said Krone.