In what is now an annual rite of passage, federal contractors face another potential government shutdown. This one looks more likely to happen than in years past. But fear not, it’s not our first rodeo. Here’s some quick, actionable advice. Is it different from any other article you’ve already seen on this subject? Not really, but it’s funnier and more to the point, we promise.
Evaluating Your Contracts:
Review all of your contracts ASAP. Not on Sept 30. NOW.
Mission-Critical? Then business as usual (breathe a sigh of relief, contemplate your life decisions including why we work in government contracting, promise yourself that you’ll consider the commercial market, and get back to work).
NOT mission-critical? Read on as you’ve got work to do.
Mixed set of contracts…Read on as you’ve got planning to do. Some of your business will be okay, some will be impacted and you’ll be navigating between the two.
Open Dialogue with Contracting Officers:
Hopefully, you already have a great relationship with your contracting officer. If you don’t, the end of fiscal year/potential govt shutdown isn’t the best timing, but here we are.
Right now, you know your contracts folks are absolutely slammed with fiscal year-end shenanigans. Now these poor people have shut-down concerns as well. They generally do not have time to answer your questions. They don’t know any more than you do on whether this thing is coming to a grinding halt on Oct 1st or not.
If you can get them on a quick call, be extremely conscious of their limited time, and the fact that everyone is calling with the same concerns and be clear about what you are proposing to do. KNOW YOUR CONTRACT before you engage and try not to ask anything that quite honestly, the answer is “read the contract.”
Make sure you and your contracting officer agree and are aligned on what type of contract you have. Here’s what we mean:
Mission Essential – Exempt from Shutdown (see bullet one re questioning your life decisions and say a quick prayer for the rest of the industry).
Possible to Perform – Have sufficient funding to ride out the shutdown, and no need to enter a Government facility.
Impossible to Perform – Given the nature of the work, performance cannot be conducted due to the shutdown. This is the biggie and you had better have a plan.
Diligent Expense Documentation:
Keep meticulous records of expenses related to the shutdown, including those incurred due to contract modifications or stop-work orders. Accurate documentation will be critical for any potential reimbursement claims. Open separate charge numbers for employees to charge if required. You will want to track this separately so you know the impact.
Consider how the shutdown may affect your employees. Explore options for reassignment, training, or making the most of idle time. Talk to your HR folks about training, talk to your Ops folks about process documentation needs. Talk to your proposal folks about past performance summaries and updated resumes.
Work closely with your HR department to handle potential employee furloughs if necessary and let’s hope you don’t have to.
Expedite Pending Actions:
Take proactive steps to expedite any pending actions, such as outstanding invoices, modifications, or deliverable approvals, before a shutdown occurs. Get the AR out, get on top of your payments, try your best to move any modifications through your internal review QUICKLY. Any FFP deliverables that you can deliver and bill for? Now’s the time.
Collaborate with Subcontractors:
Review subcontract agreements to ensure they include pertinent clauses related to a potential shutdown. Engage in clear and effective communication with subcontractors to align efforts and manage potential impacts together.
Over communication is key here. They need to know for their own planning and are looking to you as prime to have figured it out. Gentle reminder to your subs of the “don’t talk directly to the customer” clause (seriously, the government has enough on its plate) but also, send out info as quickly as possible, even if the info is “we don’t have an update.”
Cash Flow Management:
Prepare for the possibility of invoice payment delays. What does your line of credit look like? Have you called your banker recently? Check in with them to give them a heads up on how things look after your contracts review. Zero bankers are mad about proactive clients that understand and know the state of their business. Over communicating here is always in your best interest. If it’s going to be tight, start those conversations NOW.
Any stop work or shut-down without work will absolutely have an impact on your indirect rates, your margins and your corporate budget for the year. Let’s hope it is minimal but take the time to review financial impacts so you know how the year will end up financially and adjust as necessary.
This too shall pass. But damn, Congress doesn’t make anything easy these days.
About BOOST’s CEO, Stephanie Alexander
Stephanie Alexander has spent more decades than she wants to admit supporting high growth government contractors with an eye towards their bottom line. She is the CEO and founder of BOOST LLC which supports back-office functions for government contractors. She is a co-founder and Partner at govmates, a free teaming platform and technology scouting tool to connect business across the federal landscape.