The partial government shutdown, now in its 19th day, is already the longest in at least two decades. And its economic effect on greater Washington’s government-centric business community is starting to extend beyond the smallest, most vulnerable companies to include multibillion-dollar companies.
Executives from the government services giant Science Applications International Corp. (SAIC) said the shutdown is costing the company tens of millions of dollars as it approaches the end of its fiscal year. And representatives from the Aerospace Industries Association trade group said it could hurt U.S. exporters by holding up already-cumbersome export control paperwork.
In a letter to reporters on Tuesday, Eric Fanning, the chief executive of the Aerospace Industries Association, urged Congress and President Trump to end what Fanning called a “self-imposed crisis,” noting that the shutdown is already rippling beyond the ranks of government employees.
“Every day the shutdown lasts, the impacts grow and become more difficult and more expensive to fix,” he said.
Swift resolution appears unlikely. Trump has threatened to veto any spending bill that doesn’t include at least $5 billion for his proposed U.S.-Mexico border wall, and as of Tuesday afternoon, there appeared to be little progress toward a deal with congressional Democrats. Trump said Friday that he would be willing to keep the government shut down for “months or even years” to get wall funding.
Meanwhile, Fanning said closures at the State and Commerce departments have slowed the processing of export control licenses, which are required when U.S. defense contractors sell military hardware overseas. He noted that contractors working in closed U.S. facilities have been unable to report for work, and mentioned that research projects have been delayed at the Federal Aviation Administration, NASA and the National Oceanic and Atmospheric Administration.
SAIC chief executive Tony Moraco said Monday that his company has taken a hit of about $10 million each week since the shutdown began, and noted that the rate could increase as the shutdown continues. The losses are coming mainly from the company’s work with NASA, the Federal Aviation Administration and the Agriculture Department, he said.
He noted that the company expects $40 million to $50 million in cash payments to be behind by the end of the month. The shutdown could interfere with the company’s ability to meet its cash flow target for the current quarter, Moraco said.
The disruption comes at an inopportune time for SAIC. The company is working to close a high-stakes $2.5 billion deal to merge with Engility, another large defense contractor, which would make the combined company one of the Washington region’s largest IT employers.
SAIC is affected by the shutdown in a different way than many of its peers because its fiscal year runs through Feb. 1. Depending on how long the shutdown lasts, the company could take a financial hit when it reports results next month.
Moraco was confident, however, that the shutdown would do little to harm the company’s long-term profitability.
“We’ll see how that plays out,” he said. “But really the fundamental message there is that it is — it’s a short-term challenge.”