Government contractors brace for federal shutdown

September 29, 2013

Federal contractors are getting pretty good at preparing for a disruption in their work — and that’s the problem.

With the threat of a government shutdown looming, company executives spent much of last week bracing for interruption, just as they did before sequestration began earlier this year and when a shutdown nearly occurred two years ago.

“Even though we don’t want to admit this, we are better prepared,” having dealt with previous disruptions, said Greg Baroni, chief executive of Vienna-based contractor Attain.

Still, executives said they’d rather their staff spend that time on building the business instead of guessing whether some temporary halt is imminent.

Executives at Unisys’s Reston-based federal systems business spent recent days doing what they have been doing during past stoppage threats: reviewing the status of the unit’s top 65 contracts, which generate over three-quarters of its revenue.

“Unfortunately, we’re getting familiar with dealing with this,” said Ted Davies, president of the federal unit. “You do all the preparing you can.”

Still, there’s only so much planning companies can do, given the uncertainty about whether and how long a shutdown might last and what percentage of a company’s employees might be deemed essential.

Contractors said they assumed they would get little notice about whether their employees would go to work or not. And then, they would have to decide — on a contract by contract basis — what to do with those workers.

Even contractors whose work would be deemed essential can hit stumbling blocks, said Elizabeth A. Ferrell, a partner at McKenna Long & Aldridge who specializes in government contracting.

“Contractors that interact on a regular basis with the government for design reviews or acceptance of goods or technical direction ... those people are not going to be around,” in the event of a shutdown, she said. Additionally, contractors that work at government facilities “may be willing, ready and able to perform on a contract that has funds on it, but they can’t go perform because the facility is shut down.”

David Langstaff, chief executive at Chantilly-based TASC, said contractors have little choice but to deal with the uncertainty.

“This is not the way to run a railroad; nevertheless, this is the new normal for us,” he said. “In one sense, we feel prepared, given that we have been through this a few times.”

Workers must also make plans. At Unisys’s federal business, “there are opportunities for [employees] to do other things, possibly,” Davies said. “For many employees, they have vacation they can take, there’s some work-arounds we can do.”

The impending shutdown had executives at Arlington-based Binary Group last week trying to win as many contracts as possible while operations were normal, said Rose Wang, founder and chief executive.

“We’re going to do everything we can to minimize the impact to our employees,” she said, but added that even a short shutdown would weigh on employee morale and productivity.

In past shutdowns, federal employees have been reimbursed for time missed, said Alan Chvotkin, counsel at the Professional Services Council, an industry group. But contractors have not fared as well.

“Contractors have never been reimbursed,” Chvotkin said. A shutdown has been “just lost revenue, lost salary to those affected.”

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