Once again, the government stands on the precipice of a shutdown. As the clock counts down—the deadline for a budget or another continuing resolution is midnight on Friday, April 8, 2011—agencies have started preparing for the consequences. Contractors should be prepared as well.

If existing appropriations are exhausted and the government shuts down, the Anti-Deficiency Act may require some contractors to stop work. If the contractor's work falls within an exception to the ADA however, the government may be authorized to incur additional obligations without having appropriations in place. Two potential exceptions are discussed below.

Will the contractor's performance abate an imminent threat to human life or government property?

The Anti-Deficiency Act prohibits agencies from incurring obligations in excess of appropriations, except for emergencies involving the safety of human life or the protection of government property. Contractors that take action in such emergencies will be able to recover their costs or the fair value of their services. In order to qualify under this exception, the threat to life for property must be imminent when the contractor performs—a mere nexus between the contractor's activity and life or property may not suffice.

In one particularly harsh decision, a man who towed a Navy seaplane to shore after an emergency landing was not entitled to recover his costs because there was "no sudden emergency involving the loss of human life or the destruction of government property." The plane landed intact and was not in immediate danger of sinking. 10 Comp. Gen. 248 (1930).

The ADA's emergency exception does not apply to funding gap situations (like a shutdown) unless the lack of funds is due in part to events that are beyond an agency's control and that were unforeseeable when the agency determined its funding needs. USAID, for example, could not exceed its available appropriations to fund contractors' disaster relief efforts in foreign countries. B-152554 (1975). Similarly, a District of Columbia public hospital could not exceed its available funding, even though its ongoing operations provided services that were essential to the safety of human life. B-285725 (2000).

Is the contract necessary for the military's sustenance?

A second exception to the ADA's prohibition, which exists primarily for defense contractors, is found in the Feed and Forage Act of 1861. Passed during the Civil War, this law continues to authorize the Department of Defense and the Coast Guard to purchase clothes, subsistence, fuel, quarters, transportation, or medical and hospital supplies without an appropriation in place. In exercising this authority, the Government cannot exceed its needs for the current year and must provide Congressional notification.

This law was intended to serve as an assurance that military commanders would be able to sustain their forces without concern over appropriations:

It will thus be seen that contracts for the subsistence and clothing of the army and navy, by the secretaries, are not tied up by any necessity of an appropriation or law authorizing it. The reason of this is obvious. The army and navy must be fed, and clothed, and cared for at all times and places, and especially when in distant service. The army in Mexico or Utah are not to be disbanded and left to take care of themselves, because the appropriation by Congress, for the service, has been exhausted, or no law can be found on the statute book authorizing a contract for supplies. The above act confers upon the secretaries full authority to contract for these supplies . . . . [The Floyd Acceptances, 74 U.S. 666, 684-85 (1868) (Nelson, J. dissenting).]

In 2001, DoD issued an administrative regulation limiting its authority under the Feed and Forage Act as being limited to emergency circumstances where immediate action is necessary. Nevertheless, the Act has been invoked a number of times in modern contexts to obligate substantial amounts of money. Indeed, it was invoked to obligate as much as $1.6 billion in 1990 for Operation Desert Shield, and was invoked most recently following the attacks of September 11, 2001, though it was not used since Congress acted quickly in passing an appropriations bill.

Contractors working with DoD or the Coast Guard would do well to examine their contracts in light of this exception as it gives DoD considerable flexibility to procure anything it deems necessary, regardless of whether an appropriation is in place, provided the need arises out of an emergency and is used in that fiscal year.

For additional material on the contractor's response to the government shutdown, check out the entry we posted in February, just before the last shutdown crisis. As to general questions of appropriations law, we find the GAO's Principles of Federal Appropriations Law (Red Book) to be useful.