Tips for Small Businesses

January 29, 2018

Tips for Small Businesses in the Event of a Government Shutdown
Despite assurances from Congress that a shutdown will be avoided in the future, it still is a real possibility. Hopefully, you already have received some helpful guidance from your contracting officer about the effect such a shutdown will have on your particular contract and the actions you should take in such event.  The Department of Defense, in fact, has published guidelines for contractors in the event of a Government shutdown; some civilian agencies, such as the Department of Energy, the Department of State and the Department of Homeland Security, have issued guidance as well.  In addition, the Office of Management and Budget has provided guidance to contractors should the shutdown require furloughs for government employees. 
If you haven’t received any specific guidance from your contracting officer or from the agency for which you perform the work, here are answers to some general questions that small government contractors may have in the event of a Government shutdown:

  • Will the Panda Cam stay on? 
    • The National Zoo’s Giant Panda Cam continued streaming during the last shutdown, and likely will continue to do so if there is a shutdown in the future.  However, it always could be turned off at any time.
  • Should I continue performing my contract?
    • If your contracting officer has issued you a “Stop Work” order, you must stop work.
    • If you have not received a “Stop Work” order, you should continue to perform provided your contract is “fully funded” or not otherwise subject to federal appropriations.  Most fixed price contracts are fully funded upon award. Most cost type contracts are not.  Cost type contracts include FAR clauses such as “Limitation of Cost,” “Limitation of Funds” or “Availability of Funds.”
    • If your contract is incrementally funded, only work to the extent funding is available.  If you perform work that has not been funded, you probably will not get reimbursed for the work. 
    • Typically a shutdown does not affect an agency’s “essential personnel;” likewise, some contracts that provide for “essential” services, such as those for Homeland Security, likely will continue uninterrupted in the event of a shutdown.
  • What if I am unable to continue performing my contract?
    • Document thoroughly your efforts to perform the contract and identify in detail the obstacles that prevented you or your employees from performing the contract work.  Remember that, even if a federal facility may be closed during a shutdown, that closure may not prevent your employees from having access to the site and continuing to work.
    • Make efforts to mitigate any costs associated with the inability of your employees to continue to work on the contract; document these efforts as well.
  • If I can’t perform my contract, what should I do with my employees?
    • If possible, have employees that otherwise would be doing contract work do work charged as overhead to the company, such as proposal preparation work. 
    • Generally speaking, if your employees are “non exempt” (subject to the Fair Labor Standards Act) you have more flexibility in choosing an option.  Employers may furlough non-exempt employees, reduce their hours and reduce their pay (provided it is above the statutory minimum wage rate).  Most importantly, employers do not have to pay non-exempt employees for time not worked. 
    • Employers with “exempt” employees do not have as many options.  While employers may reduce the pay or hours of an exempt employee, doing so could affect their “exempt” status.  Employers also have to pay exempt, salaried employees a full week’s salary even though the employee does not actually work the full week.  On the other hand, employers may be able to ask these employees to take Paid-Time-Off.
    • As the examples above demonstrate, it’s best to consult your employment lawyer before taking any action to mitigate the costs of idle employees.
  • Will I be able to recover any costs that result from the shutdown?
    • Maybe.  It largely depends on your contract. If you receive a “Stop work” order under FAR 52.242-15, you should be able to recover at least some of your costs associated with the shutdown provided you have done your best to mitigate the costs you incurred as a result of the shutdown.  Also review the FAR clause; any request for reimbursement has to made within 30 days of the end of the period of work stoppage.
    • Even if it is not clear whether you will be reimbursed for the costs you incur as a result of the shutdown, document those costs under a separate charge code and minimize those costs to the extent possible.
Obviously, communication is key.  Communicate early and often with your contracting officer before a possible shutdown.  Be transparent with your employees.  Update them as you learn information and discuss with them any plans you will implement if a shutdown occurs.  Send a message that you are in it together with them.  As for the costs associated with a shutdown, your ability to be reimbursed for those costs depends first on your efforts to mitigate your costs and second, your efforts to document those costs carefully and consistently in a detailed manner. So, do both.
If you have any questions about any of the above, please feel free to reach out to the Government Contracts and Employment teams at Protorae Law for assistance.