The federal government is facing an imminent shutdown if Congress fails to pass a spending bill by midnight on October 1, 2023.
Generally, a government shutdown means all government civilian employees will be furloughed unless one of the following exceptions applies:
- A few agencies have statutory authority (commonly referred to as an anti-deficiency act or clause) to maintain certain operations even without congressional appropriations. The best-known example is the Civil War-era Feed and Forage Act, which ensured the continued supply of necessary items like clothing for the troops.
- Situations where the suspension of the function would imminently threaten the safety of human life or the protection of property.
- The function is necessary to discharge the President’s constitutional duties and powers—usually includes the operation of the White House, military operations, and diplomatic activities.
- Certain government functions that an agency must continue in the absence of appropriations because their continuation is “necessarily implied” from the continuation of other explicitly authorized government activities. Two examples are payroll processing within the government and the publication of the Federal Register.
For contractors, a shutdown will generally mean the government will not award any new contracts, the government will be delayed in processing payments, and option periods may not be exercised.
Contractors, however, are generally expected to continue to fulfill their obligations under existing contracts unless the Contracting Officer issues a Stop Work Order, the contract terminates, or the relevant obligated funding is exhausted.
During a shutdown, Contractors can take the following steps to protect their business:
- Contact the Contracting Officer and ask:
- Is the work performed under the contract deemed an “essential” activity necessary to protecting life and property?
- Should contract performance continue in the event of a shutdown?
- Do NOT unilaterally stop performance. Wait until you receive a Stop Work Order, termination notice, or other communication from the Contracting Officer to stop work under the contract.
- Review the “burn rate” under the contract and determine when obligated funding will run out and work with the contracting office.
- Document, document, document. Keep careful records of what you are told and by whom, as well as if you incur additional expenses because of a shutdown. This will help if you need to file a claim for an adjustment.
- Stay updated on the situation. Check for any guidance issued by your contracting agency.
- Review the agency’s respective contingency plans for the shutdown, which are published on the White House’s Office of Management and Budget (OMB) website.
- Review your contracts and subcontracts to determine in advance what payment and other performance obligations will be impacted.
- If furloughs and reductions in force are expected, review federal and state labor and wage laws to determine what notices are required for your workforce.
If you have any questions or concerns, contact a Fluet Government Contracts attorney. Our Government Contracts team is here to help you navigate the evolving situation and to protect your business.
NOTE: Some links contained in this article lead to sites outside of Fluet’s organization and are not affiliated with Fluet. This article is for general informational purposes only and is not comprehensive of all legal requirements or situations. Nothing in this article or Fluet’s website constitutes legal advice or creates an attorney-client relationship. If you have questions regarding the information provided, we urge you to seek legal assistance from your legal advisor.