Steps to Take Now to Mitigate Federal Government Shutdown Impacts

The federal government has shut down again. It happens. With fiscal year 2025 funding lapsed and in our rearview mirror, how can government contractors mitigate the risk of potential stop-work orders and financial hardship? In this article, we discuss areas to consider not only to mitigate your risk but also to avoid significant financial hardship.

Areas to Review During a Federal Government Shutdown

Contact Your Contracting Officer

If you have not already done so, contact them for their direction on how to proceed, even if they are not in their offices. Don’t be surprised to receive a reply to your emails since many may be working even if under reduced hours. From this communication, you want to determine which work must stop, which work can be continued, reach an agreement on the funding status, and identify any restrictions on your contracts due to the shutdown.

Documentation 

Typically, documentation is crucial to any government contract, but it becomes even more important during a government shutdown. Document any communications with the contracting officer and their representatives, as well as any contract delays, stop work orders, work interruptions, and the costs incurred with these delays. Try to minimize costs wherever possible and document those actions. Additionally, consider the documentation, including separate cost accounts, required for any potential requests for equitable adjustments resulting from these disruptions or delays.

Contact Your Subcontractors

Provide direction to them consistent with what you received from your contracting officers, with a minimum of providing direction on what work must stop, what can continue, and any restrictions on their subcontracts, including funding.

Follow Federal Government Guidance

Federal government agencies have experienced government shutdowns before and may have existing guidance related to accessing government facilities, oversight, and the use of government equipment. Make a note to follow any directions, but also ensure that your subcontractors are aware of this, if applicable.

Bills Do Not Stop

Businesses, especially small businesses, may experience financial hardship due to cash flow issues during government shutdowns. Communicate with lenders, suppliers, and other interested parties to manage your cash flow as best you can during this shutdown period. Remember that interest expense may not be an allowable cost in your government cost-type contracts, even if it was caused by the government shutdown. This may be especially important as the government shutdown continues.

Stay Proactive in Managing Contract Impacts

Stay engaged. Document impacts on your contracts. Continue to communicate with your contracting officers. Provide guidance to your subcontractors. Take steps to mitigate costs wherever you can. Monitor your cash flow and take any necessary steps to maintain financial health during this shutdown period. Everyone wants to see the shutdown end, but be prepared for it to last for an extended period of time.

Remaining Prepared Through Every Phase of the Shutdown

While government shutdowns can disrupt operations, preparation and communication are key to minimizing long-term impact. Understanding your contractual obligations, maintaining documentation, and staying in contact with contracting officers are essential steps in mitigating risk. Redstone Government Consulting supports government contractors throughout every phase of the shutdown by providing staff training on government oversight, assisting with government contract oversight, and offering expert guidance on contracts and grants. Our team of experts works alongside government contractors to help manage disruptions, ensure compliance requirements, and maintain operational readiness throughout the shutdown period and beyond.