It Appears The Government Shutdown Has No Apparent End In Sight
January 16, 2019
We recently posted a story in
this blog about the temporary closing of E-Verify due to a partial lapse in federal
funding. We brought it to your attention thinking it would be a temporary inconvenience and to direct you toward agency resources.
Since then it appears the
government shutdown, which primarily involves funding for a border wall,
has no apparent end in sight. While it only affects certain agencies — Departments of Agriculture, Housing and Urban
Development, State, Homeland Security, Interior, Justice, Treasury,
Transportation, Commerce, and others — the repercussions will be felt more widespread the longer the lapse continues.
While the news focuses on the impact on federal employees as
well as federal services such as Social
Security checks, airport screening, national parks, and museums, and the
ability of the IRS to conduct business, the impact
on federal contractors is not insignificant. Affected contractors are
increasingly asking questions so we wanted to take this opportunity to provide
a little information regarding its impact
on federal contracting and to direct you toward contracting information that
may be helpful.
A very helpful resource to better understand federal
contracting legal issues when there is a lapse in funding is the Congressional
Research Service report titled,
Government Procurement in Times of Fiscal Uncertainty, dated April 6, 2012
(R42469). A copy of this report can be viewed at
https://fas.org/sgp/crs/misc/R42469.pdf Below is a summary of key issues:
- Both contractors and the agency personnel that
administer contracts are paid with
appropriated funds. Generally, if there
is a lapse in appropriated funds, this would
cause a lapse in the ability to award and manage contracts as well.
- The federal government generally has broad
discretion to cancel a solicitation at any time during a procurement before award.
- The federal government also has broad
discretion regarding exercising an
option. Contractors are not entitled to
any recovery of lost profits if the government chooses not to exercise an
- Funding lapses generally prevent the
government from entering new contracts or allocating new funding to cost-reimbursement
- The government is permitted to make reductions
in scope, alter the period of performance, or terminate contracts.
keep in mind that each circumstance is different, so there is no single answer to many of the questions we receive. It
is important to note that past government shutdown experience has shown that
some agencies are willing to work with government contractors and consider
equitable adjustments, or other tools
such as overtime, to offset lost work. Contractors should be documenting lost
hours, and the impact on deliverables should this option become available.
Additionally, some unintended contract
events occurred as a result of the shutdown including the previously mentioned
shutdown of E-Verify, as well as limited functionality of the Civilian Board of
This is not a legal opinion as to what contractors should
do during a shutdown; rather it’s an
effort to direct you toward some useful information.