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Latest federal shutdown hits contractors hard; At many firms, employee morale suffering

By Peter Behr
Thursday, March 3, 2011; 12:23 PM

From The Washington Post archives

Published: December 22, 1995, Friday, Final Edition

Two of the top computer technicians at Automated Information Management Inc. in Lanham turned in their resignations yesterday, one small sign that the partial federal shutdown is having a troubling impact on smaller contractors in the Washington area.

AIM Vice President Warren Steen had to lay off the two technicians early in the week because the Labor Department, whose contract pays their salaries, does not have a new budget and has ordered Steen's firm and other vendors to stop work.

In response, the technicians are headed for jobs with rival companies whose federal contracts are secure, or for companies that do not do business with the federal government, Steen said.

"We're starting to lose employees who can't afford to be out of work and not get paid," he said.

For the second time in a month, many of the Washington area's 10,000 federal contractors are trying to grapple with frozen contracts, disrupted projects, furloughs and juggled vacation schedules -- and a heightened sense of anxiety about the future. The billions these companies receive from the government annually are a cornerstone of the region's economy.

And unlike the first shutdown before Thanksgiving, this time there is a sharp division in the contracting community between the haves and have-nots -- as the departures from Steen's company demonstrate.

The fallout has been minor so far for contractors, such as EDS Government Systems, that work with departments whose 1996 appropriations bills have been approved. Those agencies include the Defense, Energy, Agriculture, Transportation and Treasury departments and the General Services Administration, company executives said.

But for such firms as AIM, whose employees' livelihoods depend on contracts with the Labor and Commerce departments, the Environmental Protection Agency, the National Aeronautics and Space Administration and other departments closed by the furloughs, the immediate consequences have been painful and the outlook is more and more worrisome.

James H. Wilson Jr., director of environmental services for E.H. Pechan & Associates Inc., a small Springfield-based EPA contractor, said the emotional whiplash of the stop-start-stop federal funding battle has damaged morale among the company's employees and even made him question his commitment to federal contracting services.

"In the long run, people like me are going to ask: Is this a trend that's going to continue? Is this a business I really want to be in?" asked Wilson, 44, who studied both engineering and public policy as preparation for a career dealing with issues of governance.

At many Beltway contracting firms, some employees who usually commute together or sit side by side have been affected in dramatically different ways. Those whose contracts are unaffected are working this week. Others have been locked out of federal agencies or sent home because their contracts have been frozen.

Federal departments that have received their funding provide the bulk of contracts to area firms, a total of $ 12.4 billion in fiscal 1994. But the departments and agencies that are closed down also are critical to the area's economy, having provided $ 3.7 billion in contracts in that same year, according to the Federal Procurement Data Center.

As was the case during the pre-Thanksgiving shutdown, large federal contractors have sought to find other work for employees whose contracts have been frozen or who have been locked out of federal offices where they work.

The impact, for instance, has been minimal at IFC Kaiser International Inc., a Fairfax-based environmental engineering and consulting company, whose contracts have not been frozen in most cases, said Marcy Romm, senior vice president for human resources. "We're still having employees use vacation time, floating holidays and comp time. That's assuming that everything gets back to normal in the beginning of the calendar year," Romm said. "If not, we'll have to reassess it."

Most smaller companies don't have that luxury, officials said.

"If we were TRW [Inc.]," which is based in Cleveland and is one of the area's largest contractors, "we'd have the flexibility to reassign people to some other effort for short periods of time and work our way through this," Steen said. "When you only have 300 people to work with, you don't. You're left with no choice but layoffs."

The situation is similar at Labat-Anderson Inc., a McLean company whose employees operate libraries, records centers and hot lines for the EPA and other federal offices.

"We have 165 people out on furlough. If we can't bill the government, we can't pay the people," said Lydia Theunissen, a vice president of the company. "I'm worried about the morale of these employees. The longer they're out, the less likely they'll feel that their job is secure." And the more likely they'll be to look elsewhere for jobs, she said.

"The best and the brightest are the ones who go looking first," Theunissen said.

At E.H. Pechan Associates, the feeling of anger and disenchantment with the federal government was expressed in a small if symbolic way this week, said founder Ed Pechan.

Two arrays of costly computer memory were pulled out of one computer in the office that is used on an EPA contract -- and plugged into a second computer that handles the firm's small but growing sideline as a provider of Internet connection services to private companies. The government is not a customer, Pechan said.

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