Contractors need to do homework before shutdown

By Jared Serbu
Federal News Radio

Budget experts who served in the Clinton administration during the 1995 government shutdown say a lot has changed in the federal government in the last 15 years. And contractors, who now make up a much larger share of the workforce, need to be ready if a shutdown happens again.

The continuing resolution currently funding the government expires in a little over a week. Congress has until March 4 to avert a shutdown, either with another continuing resolution extending 2010 funding levels or with a 2011 budget.

Barry Anderson, a former acting director of the Congressional Budget Office who also served at the Office of Management and Budget during the protracted shutdown of 1995 and 1996, said up until a couple of weeks ago, he thought the chances of a shutdown this year were close to zero.


He has changed his mind.

“I thought nobody wanted a shutdown,” he said. “I thought particularly the House Republicans had learned the lessons of ’95 and ’96 and didn’t want a shutdown. I was surprised to have a good friend up on the Hill call me up and say, ‘I think there’s going to be a shutdown.’ He said the Democrats want it. I said, ‘Oh, yes. They believe that it will be a political victory to have a shutdown. That the Republicans, particularly (House Speaker John) Boehner will be blamed. They are just as happy to have a shutdown as not.'”

Though he said he still believed the chances of a shutdown still are small, he said it would be prudent for contractors to prepare for the worst. Anderson, who joined two other shutdown veterans Wednesday on a panel sponsored by the Professional Services Council, said vendors needed to be in close touch with their agency contracting officers prior to a shutdown to determine the path ahead.

John Cooney, who served as OMB’s general counsel during the 1995 shutdown and who now works as an attorney with Venable, LLP in Washington, said his successors in the Obama administration are working in partially uncharted territory. Cooney, who also helped to craft the modern-day government shutdown plan during the Reagan administration, said one major difference compared to 1995 is the makeup of the workforce.

“You could be at the Department of Homeland Security and there might be 10 GS workers in a room and 200 contract employees doing the same functions,” he said. “That’s new, and that’s going to be difficult for the government to handle. The system was essentially designed to send home GS workers when the shutdowns occurred, and contractors were thought of people who were providing goods-not really services, but hard, physical products. That’s much easier to deal with.”

Cooney said a second major difference is in the information technology landscape. If a shutdown does happen, agencies and OMB will have to decide which agency functions are affected and which ones are exempted. Those functions are frequently mingled together on one website, and sometimes supported by a single contractor.

“So much more information about the government and that the government sends out to people is done over the Internet these days,” he said. “The IT function is going to be critical if there is a shutdown. OMB is going to have to think long and hard about what they do when the same computer system, the same website is supporting a portfolio of exempted and non-exempted functions. How is it going to draw the dividing line? Are you going to shut of the portion of the (Health and Human Services) website that tells seniors how to sign up for Medicare? The system that allows them to get benefits is still going to be running, but what about the PR aspects? What about the long-term planning? If the balloon goes up and there’s a shutdown, that’s going to be an enormous problem.”

Questions to consider

Cooney said there are a handful of basic questions OMB will have to ask about federal contracts in order to decide whether they’re exempt from the effects of the shutdown or not.

  • If a contract is funded by a multiyear appropriation or a no-year appropriation, the shutdown has no effect..
  • If a contract supports a program that is specifically authorized by law as not needing a specific appropriation, it is exempt? Cooney said there are very few of those. He cited a 19th century statute authorizing cavalry soldiers to buy food and supplies as one of the few notable examples.
  • Another test is whether a program is related to the safety of life or property to “some significant degree.”

Cooney said OMB applies careful scrutiny when it defines safety of life or property.

“It’s not pie in the sky,” he said. “It’s not 20 years from now we’ll have a new Joint Strike Fighter and that fighter will be necessary to protect the national security. The people who are trying to design the wing of the Joint Strike Fighter will probably not be exempted. But the people who are buying ammunition that’s going to end up being sent to Afghanistan in a couple of months probably are going to end up being protected, because there is a significant degree of direct relationship between what they’re doing today and the protection of human life or the protection of human property.”

Like permanent federal employees, contract staff generally will not work during a shutdown; at least they shouldn’t, said Alan Chvotkin, executive vice president at the Professional Services Council. He said the government is not permitted to use “voluntary” work by contractors to take the place of furloughed federal workers. He said unless work under a contract is exempted from a shutdown, contractors generally should not work — even if asked to do so by an agency.

“Be very careful about those circumstances when the customer says, ‘I really need this, we’ll sort it out later,’ or, ‘trust me, I think we can work this out later after the fact.’ You’re at risk,” he said. “Continuing to work when there’s no availability of funds could mean that you will not be compensated for it.”

On the other hand, he said contractors generally can be compensated for the costs of winding down a contract and putting it on pause if required to do so by a shutdown, as well as the costs of getting the program back up and running again. He says contractors should keep careful records of those costs.

Communication is key

Cooney said even contractors whose work is exempt from the shutdown need to keep in mind that if their workspaces are in federal facilities, they may not be able to get inside during a furlough. He said contractors also need to make sure they have a system to keep their employees posted on day-to-day shutdown status.

“The problem for contractors may be that there may be no GS employees around to give you physical access to your worksite,” he said. “The only people there will be the guards for the property, and they will be under instructions to turn people away unless they can prove somehow that they’re exempted. That’s among the reasons that you need to be very prepared. And if it looks like shutdowns are coming, you need to have some kind of plan the way you would need to notify them on snow days. Because OMB and the White House often will not pass the word to your agency until late in the evening as to whether people are supposed to come in the next day or not.”

Cooney, who helped to develop the first modern-day shutdown plan during the Reagan administration, said the plan is just as much a political tool as a practical one. He said it was designed to give the White House political leverage over a shutdown situation, and that federal workers and contractors should be prepared to see decisions that don’t appear to make a lot of sense from a good government standpoint.

“The first person who will get the call that workers are being furloughed will be the director of the National Park Service,” he said. “The White House really wants the Washington Monument and everything else (on the National Mall) shut down. We spent a disproportionate amount of time arguing about the Smithsonian, because the Smithsonian has both public funding and private funding, and the White House was battling furiously to shut them down, small as it is. They knew that that would generate publicity for part of the campaign to try to persuade the public that the president was right and that the congress was wrong, and look at the consequences for ordinary people who spent years saving to send their 8th grade class to Washington and now these poor kids are stuck out in the cold.”

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