Contractors Are Reminded the President Always Wins in Shutdown Battles

Going back to Ronald Reagan, “the president has won every shutdown battle ever,” attorney John Cooney, who was Office of Management and Budget general counsel during the 1995-96 government shutdowns, assured contractors on Monday.

Ever since the OMB first drafted agency procedures for handling shutdowns in 1980, “The White House has been ready with a PR strategy to make Congress look awkward, to gain advantage so that [the administration] doesn’t catch criticism because services are not being delivered,” Cooney said during a forum on shutdown preparations for contractors convened by the Professional Services Council. What tactics, he asked, would House Speaker John Boehner have that are different?

Now a partner at Venable LLP, Cooney cited two big differences between the 1990s shutdown and that of 2013 – instant communication via the Internet and greater agency reliance on contractors.

Once a shutdown takes effect, the situation is “dynamic” and must be followed program by program, day by day, he said. If there is a hurricane, then workers at the Federal Emergency Management Agency get called back; if refugees arrive from Libya, refugee specialists get called back, and Congress may act to permit other emergency exceptions when health and property are at stake. “There’s no law that says furloughed contractors get paid,” Cooney said. (There is also no law that furloughed federal employees get paid, though Congress has decided to give them back pay following past shutdowns).

The White House and the Justice Department nowadays more carefully scrutinize agencies and contractors who may be tempted to violate the law against voluntary work during a shutdown. But contractors “may lobby to get their contract funded” either under an emergency or through “multi-year or no-year” funding streams.

The Defense Department has more recourse for continuing contractors under the 19th century “food and forage” principle, Cooney said.

Though OMB may already be discussing shutdown preparations with agencies—with an eye toward funding the president’s priorities—it won’t publicize them until “the last minute,” to avoid charges of encouraging the budget stalemate, he said. Contracting officers and contract administrative personnel are usually among the first agency employees furloughed, Cooney added, leaving contracts with no access to databases or email with agency managers—and contractors who work inside agencies may lose access to workspace. Until the shutdown occurs, he advised, “keep in close contact with your contracting officer.”

Lisa Ashcraft, vice president for contract operations at Abt Associates, underlined the importance of starting early with planned communication and documentation of all shutdown-related work. “The weird relationship” should start now, she said, before contracting officers are no longer accessible. “But until you get that Stop Work Order, that piece of paper, your responsibility is to continue—it’s your duty,” she added.

Coping with the shutdown is an “iterative exercise” as the idle days and crisis unfold. Within contracting firms, she advises appointment of one person as a focal point and the engagement of senior leadership in planning. “Document what is happening, and establish charge codes and segregate costs” between pre- and post-shutdown expenses, Ashcraft said. Coordinate in advance with subcontractors, she said. Decisions on whether to furlough employees—particularly those with special expertise or security clearances—are tough calls. But some expenses may be recoverable within the 30-day window by a request for equitable adjustment.

Alan Chvotkin, executive vice president and counsel for the Professional Services Council, warned contractors against continuing to work on contracts that are “at risk” during a shutdown—even though some agencies will ask. "It’s a slippery slope,” he said. “A Stop Work Order requires contractors to minimize costs to the government,” but they don’t mandate furloughs---that’s a business call, he said. Contract employees cannot supplement federal employees’ work or displace them. Companies with fixed-price contracts can generally continue working, in contrast with those with cost-plus arrangements.

Chvotkin cited a recent NASA rule warning that contractors who work on agency premises must be “actively denied access” to a closed building, to be eligible to recover costs of lost work. “Furlough costs are generally recoverable,” he said. 

(Image via Flickr user David Fulmer)