The Washington PostDemocracy Dies in Darkness

Government contractors feel the heat as shutdown enters week three

With broad swaths of the federal government shut down since Dec. 22, some D.C.-area government contractors say they are struggling to keep valued employees on payroll.

Private-sector organizations that serve federal civilian agencies like the Department of Homeland Security, the United States Agency for International Development (USAID) and the Environmental Protection Agency have been told to stop work on certain contracts, industry representatives say, with little indication as to what happens next.

It remains unclear whether and when a grand bargain to open the government will occur. President Trump has threatened to veto any spending bill that doesn’t include at least $5 billion for his proposed border wall. As of Friday he remained locked in a protracted standoff with lawmakers.

The Democratic-controlled House of Representatives has passed legislation that would reopen the government without the border funding Trump is asking for, but the White House vowed to veto it. Trump reportedly said in a Friday meeting with lawmakers that he would be willing to keep the government shut down for “months or even years” to get money for the border wall.

In the meantime, the government is offering guidance to contractors on an agency-by-agency basis, and contractors are starting to receive “stop work order” notices from agencies that are out of funds for the year.

Alan Chvotkin, general counsel for the government contractors’ trade group Professional Services Council, said companies serving the Federal Communications Commission, USAID and the EPA have been among those receiving stop work orders. Those serving the Defense Department and intelligence agencies are largely unaffected.

But the Department of Homeland Security’s Federal Emergency Management Agency, known as FEMA, last week posted a “blanket” stop work order affecting scores of open contracts.

“Any work done after receipt of this notice is at your own risk and will not be reimbursed,” FEMA head of contracting activity Bobby McCane wrote in a note to federal contractors. “I thank you for your assistance during this funding lapse.”

The companies affected by the FEMA shutdown include deep-pocketed tech companies and large government-services firms for whom the shutdown is little more than an annoyance. AT&T was ordered to stop work on a contract to provide cellphone data plans, for example; government-services giant CACI was ordered to stop work on three of its support contracts, and IBM was ordered to halt certain activities related to a government content management system.

Small businesses are feeling the impact of the shutdown more sharply. Smaller government contractors might rely on just a few contracts that provide a large portion of their annual revenue, and transferring employees onto other contracts can be difficult.

“There is a human side of this that doesn’t show up in the economic data,” said Stephen S. Fuller, an economist with George Mason University in Virginia who studies the local economy. “The people affected by this are also those who are least likely to be able to absorb it.”

Many of those receiving stop work orders from FEMA are small businesses.

They include companies like HME, which is engaged in facilities maintenance and support related to Hurricanes Irma and Harvey; R3 Government Solutions, a service-disabled-veteran-owned consulting firm based in Arlington, and Seventh Sense Consulting, a minority and veteran-owned small business based in Virginia, for example.

Seventh Sense Consulting managing partner Ron Lambo says about 25 of his company’s 120 employees have been affected by the shutdown. His company does some contract management support work for FEMA that is being held up as a result of the shutdown.

Those employees were paid through the holidays in large part by using vacation days, Lambo said, but as of Friday they are being sent home on unpaid leave. He said his company could be forced to lay some people off if the shutdown persists.

“At some point we would have to sever ties,” Lambo said. The government shutdown “could ruin our whole year over this silly wall,” he added.

Others say they have been disappointed at the level of coordination offered by the federal government.

Dave Cerne, chief executive of a Reston-based government contractor Acclaim Technical Services, said his employees entered the holidays with little indication how they would fare.

“We’re getting emails all day long saying, ‘What do we do? Do we come to work on Wednesday?’ ” Cerne said in a Dec. 22 phone interview. “There shouldn’t be so much uncertainty around [the government shutdown] because it happens almost on an annual basis, sometimes multiple times a year.”

Barbara Kinosky, a lawyer with the government contracting consulting firm Centre Law & Consulting, said contractors with on-site employees at civilian agencies such as Homeland Security have been hit particularly hard. She said she has heard from companies that are considering laying off some employees rather than keeping them on the payroll for work the company isn’t being paid for. She declined to name them.

“The government employees will most likely get back pay,” Kinosky said. “The on-site contractors who make the government work will receive nothing. No company can afford to keep employees on the payroll they cannot earn revenue on.”

Professional Services Council president and chief executive David Berteau said Congress should find a way to give contracted employees back pay for hours lost during the shutdown, noting “more and more of them are losing their work and their pay” as the shutdown drags on.

“These contractors work side-by-side with their government counterparts, motivated by the same goals of public service and safety,” Berteau wrote. “They deserve to be treated the same as their federal civilian counterparts.”