What happens if the US government shuts down?
Believe it or not, the US is the only government in the world that can shut down. And right now, the likelihood of a shutdown is imminent. Arguments over controversial bills, such as those involving Ukraine spending and immigration, are the catalysts for what may be an involuntary furlough for many government employees and contractors in the coming days.
Imagine waking up on October 1st, the start of a new fiscal year, only to discover that U.S. government services have come to a screeching halt. It’s a familiar scene where countless federal employees suddenly find themselves on an involuntary break—furloughed without pay. This unwelcome reality happens when Congress doesn’t approve funding on time.
Now, consider the operations at a major airport. Transportation Security Administration (TSA) workers would still be present, inspecting luggage and ensuring traveler safety. Nearby, air traffic controllers still manage the maze of planes, ensuring smooth landings and takeoffs. All without immediate pay.
Think about the defense staff stationed across the country, the police officers patrolling our streets, and many others. These are "essential" workers, meaning their roles are so pivotal that their absence could threaten national security, health, or safety. So, even without a paycheck, they'd remain at their posts, performing their duties with their usual dedication.
Once Congress finds a resolution and the government machinery cranks back to life, these people typically receive back pay. It's a testament to their service and commitment. However, this is only sometimes true.
Let's look at the agency side, focusing on contracting professionals. Take Jessica L., a dedicated contracting security professional at a federal agency. She'd still need to show up, manage her projects, and support her team, even if her paycheck isn't guaranteed upon government reopening.
Shifting our lens to the Department of Defense (DoD) and the Department of Homeland Security (DHS), standard protocols kick in with admirable precision:
The U.S. military remains robust. The funding crisis leaves our 2 million soldiers, sailors, airmen, and marines undeterred. Stationed globally, they continue their watch and mission. However, the scenario changes at the Pentagon, home to military strategists and dedicated civilian employees. Of its 800,000 civilian members, approximately half would find themselves furloughed. Picture this: Anna M., a civilian analyst working on a crucial project, suddenly halts work while her military counterpart, Lieutenant Smith, continues.
The Department of Energy's National Nuclear Security Administration, a crucial entity in our nation's defense arsenal, doesn't skip a beat. They press on, ensuring that our nuclear weapons are maintained and secured. Think of Dr. Reynolds, a nuclear physicist, still monitoring and assessing data, ensuring the safety of the nation's most potent weapons.
The border remains fortified. Border Patrol agents and immigration enforcement officers stay vigilant. Simultaneously, customs officers persist, a vital cog in international trade and security machinery.
Delve deeper into the operations of the Department of Homeland Security's plan, and you'll find entities like the Secret Service and the Coast Guard actively continuing their operations.
While funding lapses present significant challenges, the U.S. government's resilience and the commitment of its military and civilian workforce ensure that essential services continue. Yet, it's paramount for Congress to recognize the implications of delays and act swiftly to ensure seamless operations and the well-being of its personnel.
What or who is causing the government shutdown?
The United States Constitution, with its eloquent foresight, has entrusted members of Congress with the responsibility of overseeing our nation’s purse strings. It unequivocally states, “No Money shall be drawn from the Treasury but in Consequence of Appropriations made by Law…” Through these words, Congress is responsible for precisely determining how to allocate public funds. A prerequisite of legislative appropriation before the spending of public funds forms the bedrock on which our constitutional democracy rests.
Before October 1, Congress must adopt a myriad of bills, referred to as appropriation bills, which serve as the lifeblood of our vast governmental machinery. Our nation’s diverse federal programs and agencies rely on the cadence set by these bills to perform their duties. And so do you – the defense contracting firms, who play an instrumental role in buttressing our agencies.
At the heart of this system is a foundational premise: a federal entity can only utilize funds with the guiding hand of an appropriations law, giving it the green light. However, there are moments of tension. Occasionally, the chambers of our legislative body – the House and Senate – alongside the President, find themselves at an impasse, unable to agree on a spending blueprint.
In such instances, Congress usually enacts interim spending measures. Yet, there are times when the stakes are high and issues, like federal rate adjustments, become so charged that a middle ground eludes the parties involved. The widening chasm between political factions only adds to the intricacies of forging an appropriations consensus.
The repercussions? A pause on all operations deemed non-essential casts a shadow of uncertainty over the lives of thousands of federal employees, leaving them temporarily without their usual responsibilities.
Is there a continuing resolution for 2023?
How does it end? Is there a continuing resolution on the horizon? Should consensus elude our lawmakers, Congress has a mechanism at its disposal: It can enact a temporary funding solution called a continuing resolution. This serves as a bridge, ensuring the nation’s operations continue uninterrupted until a more enduring compromise emerges from the corridors of government.
However, there are moments when extraordinary circumstances summon the President to take unparalleled measures. When faced with imminent peril, the President might take emergency action, superseding even the Constitution's appropriations mandate. An example from our past saw President Lincoln authorize the use of two million dollars from the federal treasury during the onset of the Civil War, even without a formally sanctioned appropriations bill.
Government shutdown history
Since the birth of the United States, our government has faced 21 notable shutdowns, moments that encapsulate the ebb and flow of political discourse. The most recent and the most prolonged came to pass in December 2019. This particular shutdown stretched for 35 days, setting an unprecedented record.
Within this time frame, a staggering 800,000 federal employees found themselves in the throes of uncertainty — either furloughed or navigating the challenging waters of working without timely compensation. Furthermore, the ripple effect of this shutdown was felt far and wide, with countless individuals impacted by a sudden halt in government services. Among these were you, our respected peers in the defense contracting realm, a community no stranger to the intricacies of government operations.
The fiscal ramifications? Per the Congressional Budget Office analysis, the shutdown levied an $11 billion toll on the US economy. While the revival of federal operations and subsequent compensation to employees mitigated much of the economic downturn, the shadow of this event lingered. The CBO's projections indicate that roughly $3 billion in economic vitality couldn't be reclaimed, leaving an indelible mark on our economic landscape.
Do defense contractors get paid during a government shutdown?
Contracts awarded before the shutdown would continue, and the Pentagon could place new direct orders for supplies or services needed to protect national security. But even though money for other contracts may be sitting in a budget during the pre-award stage, these contracts can’t move forward because there’s no way to access the funds. (Read: Appropriations bills.)
Other new contracts, including renewals or extensions, couldn’t progress either. And payments to defense contractors such as Boeing, Lockheed Martin, and RTX, formerly known as Raytheon, could see delays.
However, a variety of contractors must continue to perform despite any shutdown. For example, any contractors working on a fixed-price contract for which funds already have been obligated or paid must continue to perform.
ProPricer helps you navigate a government shutdown
Suppose you’re a DoD contractor in the middle of a proposal. In that case, you can leverage ProPricer Contractor Edition “what-if” scenarios to easily re-configure and re-calculate costs in seconds, then let your government agency client know the financial impact on your funding slip.
Change in supplier pricing. Sarah D., a seasoned contractor for the DoD, faced a sudden spike in supplier costs during the last government shutdown. Instead of manually recalculating her entire proposal, she used ProPricer to run a what-if scenario adjusting for the new supplier rates. Within seconds, she could see the impact on her budget and make informed decisions.
Delayed project timeline. When the 2019 government shutdown hit, Thomas S.’s complex defense system installation project halted. Unsure of when work could resume, he leveraged ProPricer to model various resumption dates, allowing him to inform his government agency client of the financial impacts and potential funding slips for each scenario.
Shifting manpower allocations. Also, during the 2019 government hiatus, Jennifer B. temporarily reassigned her team. With ProPricer, she modeled different staffing scenarios, helping her reallocate resources efficiently and forecast the consequent budgetary shifts.
More than just a tool for internal recalculations, ProPricer is a communication bridge between you and your agency client. By swiftly reconfiguring costs, you can inform your client about the financial ramifications of any changes due to a shutdown—in real-time—and allow them to quickly review through ProPricer Government Edition, which most agencies have. This action cements your reputation as a responsive and adaptable contractor, fostering trust.
Reduce your chances of becoming a political bargaining chip.
Save the Date: Government Contract Pricing Summit
June 11 - 13, 2024
Discover the latest trends in government contracting and learn from industry leaders at the upcoming Government Contract Pricing Summit. Whether you attend in person or virtually, you’ll gain a wealth of contract pricing information.
See fascinating keynote sessions and live panel discussions on navigating shutdowns, speeding contract processes, and much more. Hear enlightening talks from subject matter experts working for government agencies, industry contracting firms, and private consulting businesses. Learn more >
Sources
- US Government Shutdown: What is it and Who Would be Affected?
- USA Today Video: If There’s a Government Shutdown, Here’s What You Need to Know
- Vox Video: Why the US Government is Always Shutting Down
- National Constitution Center: Appropriations Clause - A Common Interpretation
- CNBC Article: The Government Shutdown Cost the Economy $11 Billion
- PBS News Hour Article: The Government Shutdown - Who’s Affected and What Happens Next
