Morgan called her boss, the president of Unispec
Enterprises, a contracting firm that provides personnel to government agencies. He told her that the shutdown had left him unable to pay the company’s premiums. Soon, all 75 of Unispec’s technical writers, data analysts and economists — most of whom have their coverage through the firm — would learn of the lapse in an email.
“In 15 years, I’ve never once missed a payroll,” Wesley McClure, Unispec’s founder and president, said in an interview. “I’ve never once been without insurance, either for me or my employees, but that’s where we are.”
With the shutdown now over, Morgan, 62, is reporting back to her job Monday as an administrative planner for the Pipeline and Hazardous Materials Safety Administration. But the mile marker of reopening federal offices belies the continued suffering and long-term financial damage on the legions of federal contractors whose lost wages may never be reimbursed. In the case of Unispec, health insurance remains in limbo, and the next full paycheck may still be four weeks away.
How the shutdown so quickly shredded the personal safety net of employees at Unispec reflects the razor-thin profit margin and unsettled nature of business for government contracting firms and their employees.
Relied upon for decades to depress growth in the government’s hiring of civil servants, federal contractors have become an auxiliary force that often does much of the same work as rank-and-file government staff, but with secondhand job security.
Unlike the 800,000 career federal employees who have been promised full back pay in coming days, government contractors — who are thought to number in the millions — have no legal claim to the five weeks of lost wages. And because Unispec cannot pay its employees until it has billed the government and received payment for their work, it will be another four full weeks, Feb. 28, before Morgan is eligible to receive a complete paycheck, McClure said.
And in the government’s temporary reopening, even that is no certainty. President Trump has set a new deadline, Feb. 15, for Congress to deliver funding for his proposed U.S.-Mexico border wall. Without the funding, he has warned, the government could shut down again.
“It feels like we are still hostages,” Morgan said. “I’m just so happy to be going back to work and to be able to get on with our lives because I need our health insurance to fill these prescriptions. But who knows if this will all happen again in three weeks.”
Morgan’s husband returned home from the hospital on Jan. 19. But his supply of the costly medication that keeps his multiple sclerosis in check, a drug covered under her policy, will last only until Friday, she said. Although Medicare pays for some of his medical expenses, the drug is not covered under that program.
She isn’t the only Unispec employee affected by the lapse in coverage.
A 27-year-old analyst is paying only half his January utility bills, fearing he otherwise might be unable to afford his prescription antidepressant. A 35-year-old writer with asthma and a history of pneumonia canceled her gym membership during the shutdown to save money and is afraid to jog outside and risk getting sick. And a 39-year-old program manager recovering from a car accident that totaled her Honda CRV in December has canceled doctor visits.
Morgan has worked for 22 years as a program associate and project manager at the pipeline and hazardous materials agency in the U.S. Department of Transportation — first for other contractors and then for Unispec after the firm won the contract to help staff the office more than 10 years ago.
Since then, dozens of its employees have filled cubicles across the agency, reviewing budgets on pipeline safety and analyzing data on hazardous spills by trucking companies. Unispec employees now even book the appointments and write the speeches of the office’s director, a presidential appointee, according to McClure and agency documents.
A graduate of Howard University, McClure entered the workforce himself as a government contractor. He decided in his 30s to start a business, a goal since high school.
As a teenager, he had picked out a name for the enterprise — Unispec — that would fit right into the faceless world of government contracting.
“I wanted something recession proof — a binding contract with the U.S. government, you figure that’s worth something,” he said.
Over 15 years, McClure banked on the promise that the government would always pay up, borrowing and stretching to grow the company. After a decade, his employees had worked for over 10 federal agencies. For a time, one contract with the Federal Aviation Administration for 125 office workers had pushed his payroll to over 200.
Then, last year, Unispec was underbid and lost the FAA work. With the company bleeding money on overhead, it moved out of an office it had just rented. McClure downsized to a corner of a WeWork shared office space.
Unispec was not prepared for the complete interruption of cash flow that the shutdown brought, after Trump abruptly walked away from an agreement in December to keep the government running.
The company operates with little cushion, and McClure had not pushed the government for early reimbursement for Unispec’s November work, which would typically be paid at the end of December. When it came time for Unispec’s holiday party on Dec. 17, five days before the shutdown, McClure announced raises and bonuses, expecting he would be reimbursed before New Year’s.
Instead, with his corporate credit line of $1 million almost maxed out and no revenue from nearly the last two months of work, the government shut down on Dec. 22.
By early January, McClure was scrambling to keep Unispec afloat. Rent, liability insurance, health-care premiums, business loans and even a LinkedIn bill for a recruiting page were all coming due.
He used his personal American Express card to pay creditors who would accept it, he said. A father of five, he planned for no paycheck for himself, and he placed the mortgage on his family’s one-story Maryland home in forbearance, he said.
“I was doing what I could,” McClure said. “I knew I could live on credit cards until the end of February. But there were bills I just couldn’t pay.”
On Jan. 10, he couldn’t cover the company’s $60,000 monthly premium to CareFirst BlueCross BlueShield. McClure said he attempted to persuade the company to push the payment back until after the shutdown’s end.
The company did not respond to a request for comment.
Sitting at home after 9 p.m. on Monday, Jan. 21, McClure typed out an email on his phone to employees.
“After negotiating with CareFirst for weeks since this very painful government shutdown, we regret to announce that, due to lack of payment, our group health insurance was terminated on Thursday (January 17th) effective 12/31/2018,” it began. McClure wrote that employees could be reimbursed for health costs after coverage was restored, a belief based on conversations he had with the insurer, and he ended the email with: “This pains me to send. I only hope this is over soon.”
In the interview, McClure said CareFirst initially told him it could take two to three weeks for benefits to resume after the shutdown’s end. On Friday, hours after Trump and lawmakers came to an agreement to fund the government, CareFirst issued a news release saying it would work with members to “potentially provide relief,” and McClure said he received a call from the company inquiring about how it might help.
Unispec was not alone in struggling to manage the lack of cash flow. Many contractors had warned employees that health insurance policies would be at risk beginning Feb. 1 if the shutdown continued. Even more would have faced difficult choices beyond that.
DB Consulting, a larger federal staffing provider based in Maryland, maxed out its $5 million credit line last week, Vice President Shawn Boyd said in an interview. The company applied for a $600,000 increase to keep paying wages and benefits for contractors still required to work during the shutdown in support of ongoing missions for NASA, Boyd said.
“After February, I don’t know if we’d make it,” she said.
A Montgomery County Chamber of Commerce survey of its membership during the second half of the shutdown revealed that some firms had already laid off workers, said Barbara Ashe, who runs the Chamber’s government contracting programs. And with over a month of lost revenue, every contractor will struggle for the rest of the year, Ashe said, especially smaller companies that tend to operate on thinner margins.
“The shutdown has completely wiped out all of their profits,” Ashe said. “Just to get out of the hole, you’re going to basically work the whole year to get back to zero.”
Ashe said the Chamber has been urging Congress to pass a bill securing back pay for federal contractors. But even identifying how many employees lost wages would be difficult.
The federal government maintains no comprehensive database of contract employees paid with federal dollars. A Washington Post analysis found that nearly 10,000 companies had active contracts with the federal government at some point during the shutdown. More than 6,000 of those are considered small businesses.
During the shutdown, two Unispec employees left for the private sector, McClure said. He said he is concerned that even speaking publicly about the hardship Unispec faced could hinder his ability to hire workers and win contracts.
“But I just never saw us here,” he said. “For the first time, this company will have zero revenue for an entire month — zero — that’s just something no business can fully plan for.”
Correction: An earlier version of this article incorrectly referred to a vehicle as a Toyota CRV. The text has been updated to reflect that the vehicle was a Honda CRV.
Ted Mellnik and Alice Crites contributed to this report.