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With a Congressional FY 2014 appropriations bill unlikely to be approved before midnight, September 30, 2013, government agencies and the contractors that perform services for those agencies, particularly the Department of Defense, will be immediately constrained in their ability to continue operations due to the absence of approved funding.

The funding lapse will probably lead to not only DOD civilian employee furloughs and discontinuance of or restricted services to military personnel, but also constraints on government contractors in performance of government contracts.  While government contractors may continue their operations where FY 2013 funding has already been obligated that will carry contractor operations into government FY 2014, contractors will be unable to push forward with any existing authorized contract work contingent on FY 2014 funding obligations.  

Moreover, new contract awards, or the exercise of options which require FY 2014 monies will be delayed, and unless contractors have existing backlog on other work (commercial) to cover labor costs for existing employees who were expected to work under those yet-to-be funded contract activities, furloughs or layoffs of contractor employees may be required.

Absence of approved funding for government procurement agencies that support those contractors could have multiple adverse consequences for government contractors.  Should DOD civilian furloughs be required creating a reduction in government contracts administration personnel who typically interact with contractors, resolution of contracts issues and problems will be delayed with an impact of further slowing the process of expeditious delivery of services. 

Other consequences of funding hold-ups for 2014 may include delayed payments to contractors for services delivered under existing funded contract work, which when combined with undetermined delays in future contract awards, could have a devastating impact on a contractor’s cash flow, operating capital and ability to continue as a going concern.

No one is talking about a protracted shut-down, with the current thinking that a deal will be made among Congressional legislators within the next several days.  Even with only a few days’ delay of an approved FY 2014 appropriations bill, the temporary disruption will take several weeks before contractor problems created by a shut-down completely subside.

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Written by Darryl Walker

Darryl Walker Darryl Walker is a Emeritus Advisor for Government Compliance with Redstone Government Consulting, Inc., and formerly served as an Owner and Technical Director for the Beason & Nalley Government contract consulting group for over ten years. He provides content for our Government Insights Newsletter, provides training courses to government contractor and business community leaders, and consults with government contractors regarding a vast range of issues including cost proposals and presentations, internal controls, proposal preparation, compliance with the FAR and Cost Accounting Standards, litigation support, specialized claims, defective pricing issues, liaison with procurement and DCAA audit officials, and accounting and management systems compliance. Prior to joining Redstone Government Consulting, Darryl worked with the Defense Contract Audit Agency (DCAA) for almost 34 years in a variety of technical and management capacities. During his tenure with DCAA, Darryl provided audit services to a wide range of government agencies, including the Department of Defense, NASA, Department of Energy, Department of Interior, General Services Administration, and Department of Justice. During his experience with DCAA, Darryl audited over 3,000 government contractors throughout the Southeastern United States, Europe, and the Middle East. Education Darryl is a graduate of Texas Wesleyan College with a major in accounting and minor in economics.

About Redstone GCI

Redstone Government Consultants are a team of the most senior industry veterans and the brightest new talent in the industry. Many have held senior government positions including leadership roles in the DCAA. Our new talents bring significant accounting and software experience along with fresh perspectives, inspiration and energy to our team. Through our leadership and combined experience, we provide a unique perspective, bringing both government and contractor proficiencies to bear and ensuring rock-solid government compliance for our clients.

Topics: Government Shutdown, Defense Contractors