Despite their intended purpose of keeping the government spending at even levels while budget negotiations occur, continuing resolutions actually cost the government more money, according to government contractors who spoke at a CR roundtable with Rep. Steny Hoyer, D-Md., on Feb. 1, 2018.
“Just holding the government flat actually drives costs,” said Ann Darrin, engineering manager at the Johns Hopkins University Applied Physics Lab. “There’s no cost savings in continuing resolutions. Actually, it’s the opposite, it drives the costs up, because you can’t start [projects] in a timely manner, you can’t plan, you have to recover, things just get dragged out and you can’t take advantage of new technologies that are coming in.”
Over four months into the 2018 fiscal year, Congress has yet to pass a full budget and has instead relied on four continuing resolutions to fund government operations. According to Hoyer, Congress is likely to pass a fifth CR next week, which will keep the government open through March 22, 2018.
Hoyer added that continuing resolutions hurt contractor relationships with suppliers, as the contractors can’t know when full funding will enable them to purchase the materials they need.
Continuing resolutions and government shutdowns cost contractors large sums of money in planning and personnel according to Jonathan Kelly, president of the Goddard Contractors Association and program manager at Science Systems and Applications Inc. His own company recently ran the numbers on just how much the CRs had cost them.
“The planning for the four was about a quarter-of-a-million dollars, with unproductive schedules and trips and all of that. The actual shutdown itself, although it only lasted roughly three days, was another quarter-of-a-million dollars. So, in all, we lost in unproductive time where we could have hired roughly five or six more people if we’d had the money,” said Kelly.
“And that’s the hard costs. There’s also the soft side of anxiety of employees, the morale — especially the younger ones who’ve come out and never had to do this before — they suffer more. And it will affect the recruitment and stuff like that.”
According to Hoyer, those hurt most by the CRs and shutdown are small companies and low-level employees, who rely more heavily on weekly incomes.
The structure of many government contracts, which rely on phases that have to be approved prior to moving forward, also drives up costs during a shutdown, as many contractors are stuck in a completed phase while the next waits on budget authorization.
“I think on existing contracts where you have that phased approach, you ramp up over time — it’s not just a flat line — and when you’re dealing with CRs, you don’t get to ramp up. And so your program inevitably ends up getting lengthened out, stretched out, when it really wasn’t supposed to. It wasn’t planned that way,” said Georgie Brophy, director of space infrastructure and civil programs at SSL Government Systems.
If that stagnation goes on for too long, contractors risk having to redo the work they’ve already completed.
“If they can’t award a task because of continuing resolutions for the next phase, then you just put the stuff on the shelf and wait. And the stuff on the shelf gets old. So once the stuff on the shelf gets old, you have to redo it,” said Mina Samii, senior vice president and chief operating officer at Earth Resources Technology.
Contractors also lose out on hiring crucial talent needed to complete future phases, since they don’t know when the funding for that phase will be available. According to Kelly, if contractors can’t hire talent right away, the candidate often already has another job by the time the contractor is able to do so.
“When we have a lot of CRs where none of the new starts happen, it’s sort of like just keeping things going at a low level, so it’s very stagnant. So we lose productivity, we lose our edge in terms of being able to start new projects,” said Samii. “We lose good people who will end up saying, ’Forget about this, I’m just going to work for industry.’”
Because of these challenges, early budget decisions can end up saving the government a lot of money by preventing contractor costs.
“We can actually save money by having the right plans, by having the right staff in place, by having the new starts that take advantage of the new technologies that are offered to us,” said Darrin.