As most federal contractors have learned, disruptions to the regular order of the congressional budget process have led to a heavy reliance on “continuing resolutions” for funding the government in recent years, and this year is no exception. Without quick action by Congress and the president, funding is set to expire tonight at midnight, leaving countless federal programs in limbo. And affected by those programs, of course, will be myriad contracts for supplies and services ranging from commercial IT acquisitions to construction contracts.
How a funding lapse and associated shutdown may affect a contractor’s performance depends on a variety of factors, including the funding source of the contract, its importance to “essential” government functions and the reliance on furloughed employees for contract performance. However, there are a few general steps that every contractor should take in the event of a funding lapse in order to understand their rights and responsibilities:
- Communicate With Your Contracting Officer: In the event of a funding lapse, the responsible contracting officer (CO) will remain the point of contact for contract administration. It is up to the CO, not the contractor, to decide how to proceed appropriately in response to a lapse of funding, whether through a stop-work order, a change order or contract termination. Unilateral actions by the contractor can result in unreimbursed costs for unauthorized work, or government claims and default terminations for a failure to continue performing essential functions. Accordingly, it is vital for contractors to obtain explicit guidance from their COs on what to do in light of a funding lapse.
- Record Everything in Writing: As the ordinary gears of government suddenly grind to a halt and COs and their superiors scramble to fill the gap, it is likely that some contractors will be asked to continue performing with nothing more than a vague promise of future consideration. Without a formally executed direction from the CO, however, contractors have little guarantee of ever collecting on those promises. Obtaining written direction from the CO in the form of a stop-work order, change order or other appropriate documentation can save contractors the delay and expense of litigating uncertain claims for equitable adjustment if government agencies pull the rug out from under them after funding is restored.
- When in Doubt, Meet Your Deadlines: The closure of federal offices such as the Government Accountability Office, the Boards of Contract Appeals and contracting offices does not automatically toll any of their deadlines for filing protests, claim appeals or proposals. While these agencies may extend deadlines after funding is restored, there are no guarantees, and any contractor failing to meet its deadlines during a shutdown is inviting trouble.
As already noted, every contracting situation is different when funding lapses. Some contracts are sufficiently funded past the imminent shutdown, while others may be subject to an exception allowing continued performance. Contractors are well-advised to maintain a solid understanding of their contracting inventory and an open dialogue with their COs in order to properly understand the possible effects of lapsed funding on their obligations as early as possible. However, where such preparations are no longer feasible, the above guidelines can help contractors navigate the treacherous waters of a government shutdown in a way that minimizes their risk exposure.