What Federal Contractors Should Know About the Government Shutdown

Those of us who have spent time working in—or with—the federal government over the past several decades know that government shutdowns are not entirely uncommon.  There have actually been a total of 21 government shutdowns over the past 50 years, with the last occurring in 2019 and the longest lasting 35 days. By the time you read this (assuming Congress did not reach a deal last night), we will experience shutdown #22—the fourth in a decade. For most Americans, the day after a government shutdown is nothing more than “business as usual.” For federal contractors, however, whose livelihood and career dedication are focused on supporting the government sector, a shutdown is far more significant, leaving many left wondering what to do next. If you are in the latter category, this article is for you.

The Department of War recently released its Contingency Plan for continuity of operations in the event of a government shutdown. This 16-page document provides general guidance and direction for various impacted groups and events (e.g., military and civilian personnel, temporary duty (TDY) travel, etc.). Government contracts and contractors make up a notable part of this guide. The following provides a breakdown of the DoW guidance that all impacted federal contractors should know:

Prior Contract Awards

A contractor performing under a contract (or contract option) that was awarded prior to the expiration of appropriations may continue to provide contract services, whether in support of excepted activities or not, up to the limit of the funds obligated on the contract prior to the lapse in appropriations if they do not require:

• access to Government facilities;
• active administration by Government personnel; or
• the use of government resources in a manner that would cause the government to incur additional obligations during the lapse in appropriation.

New Contracts

New contracts (including contract renewals or extensions, issuance of task orders, exercise of options) may not be executed, nor may increments of funding be placed on incrementally funded contracts or to cover cost overruns, unless the contractor is supporting an excepted activity. No funds will be available to pay such new contract or place additional increments of funding on contracts until Congress appropriates additional funds.

Termination of Contracts/Issuance of Stop Work Orders

The expiration of an appropriation does not require the termination of contracts (or issuance of stop work orders) funded by that appropriation unless a new obligation of funds is required under the contract and the contract is not required to support an excepted activity. In cases where additional funding is required and/or oversight, engagement, or inspection by Federal employees who have been furloughed is critical to successful performance under the contract and the contract is not required to support an excepted activity, the issuance of a stop work order, or the termination of the contract may be required.

Excepted Activities

The Department may continue to enter into new contracts, or place task orders under existing contracts, to obtain supplies and services necessary to carry out or support excepted activities even though there are no available appropriations. This authority is to be exercised only when determined to be necessary – where delay in contracting would create an imminent risk to the safety of human life or the protection of property, including endangering national security. Additionally, when authorized by the Secretary of War, contracts for covered items may be entered into under the authority of the Feed and Forage Act.

Notable “excepted activities” listed within the guide include, but are not limited to, the following:

• Authorized military operations, activities, or training/exercises required to achieve operational readiness and/or support national security objectives;
• C4ISR activities required to support national or military requirements necessary for national security or other excepted activities;

**Note: Not all intelligence activities are considered “excepted activities.”

• Activities necessary for Continuity of Government and Continuity of Operations;
• Emergency response operations and maintenance support;
• Contracting/logistics support for excepted activities;
• Legal support to excepted activities;
• Certain financial management operations to support an orderly shutdown;
• Inpatient care in DoW Medical Treatment Facilities;
• Acute/emergency outpatient care in DoW medical and dental facilities;
• Legislative affairs necessary to support excepted activities;
• Criminal, counterterrorism, and counterintelligence investigations; and
• Morale, Welfare, and Recreation and Non-Appropriated Fund activities necessary to support excepted activities.

Component and subordinate leaders within the DoW are tasked with continuously evaluating the circumstances of a contract lapse to potentially adjust their determinations regarding excepted activities.

Given the guidance provided by the DoW, a few notable recommendations are included below to ensure you remain fully compliant with any/all shutdown requirements:

1.  Do not panic.

While government shutdowns are never enjoyable, they are temporary and eventually lead to the “business as usual” we all hope for.

2. Do not make assumptions.

Many contractors may feel tempted to automatically assume their work belongs within the “excepted activity” category. Don’t let this be you. While all work is certainly meaningful, valuable, and important, the government may not identify your contract as an “excepted activity.”  Be careful here, as you do not want to place your company and/or employees at risk of performance without compensation.

3. Seek and obey the KO’s guidance.

Regardless of what you or others may conclude, the “buck stops” with the Contracting Officer (KO).  Therefore, pay close attention to their direct guidance and be sure to comply as directed.

4. If in doubt, ask the KO. Get the KO’s response in writing.

If there are legitimate questions regarding whether your contract is considered an “excepted activity,” seek immediate guidance from the KO. Additionally, do not rely on mere phone calls or oral statements in response; any government direction should be documented in writing to ensure you are covered in the event circumstances change and/or errors occur within the government.

5. Stay positive. We have your back.

Having served on both sides of a government shutdown, we understand your pain and the significant frustration that comes with such an event. Know that your friends at Ward & Berry are here to help. If you have any questions or need any assistance, please let us know. We will always have your back.