Contractors Advise Lawmakers on How to Reduce Pain During the Next Shutdown

The familiar miseries of last winter’s 35-day partial government shutdown were catalogued from the point of view of contractors on Monday as Democrats on the House Oversight and Reform Committee convened a field hearing to send a message to fellow lawmakers.

Contractors ranging from a Fortune 500 firm to unionized custodians plus the owner of a private coffee shop catering to federal workers assembled at George Mason University in Fairfax, Va., to detail both the impact and their proposed solutions to the threat of shutdowns—three of which have occurred during the current Congress.

Though no one wants another shutdown, “We do not know what the future holds,” said subcommittee Chairman Rep. Gerry Connolly, D-Va., noting that the shutdown forced 1.5 million contractors to deal with a drop of 75 percent in contract obligations because of $9 billion that would have been spent by agencies on goods and services being frozen. “Congress must take action,” Connolly said, citing his support from 48 House members to include a provision in the next continuing resolution to pay contractors back pay after a shutdown. “The disparity is wrong, especially since many contractors work embedded with agency people side by side doing the same work,” and because a shutdown is “something they did nothing to cause,” he said.

“We have an opportunity to be fairly comprehensive and systematic in what has to be addressed,” Connolly added. “With thousands of contracts, we don’t have a standard process.”

The solutions Connolly and four other Democrats elicited included the familiar demand for the same guaranteed back pay (H.R. 824) that federal employees in most cases enjoy, making agency contracting officers and supervisors essential employees during shutdowns, requiring automatic payment of invoices, raising federal spending caps, tax changes to allow employees to donate paid leave and clarifying the process for applying for unemployment insurance with states.

Del. Eleanor Holmes Norton, D-D.C., pressed her long-standing bill (H.R. 339) to include low-wage contractors such as custodians, food service workers and security guards in the back-pay provision, to make “all contractors as whole as possible,” she said. Norton acknowledged, however, that passage “in this Congress” is not likely.

The difference between federal employees and contractors during shutdowns is that “contractors are required to continue on the contract—that’s what a contract is,” said David Berteau, president and CEO of the Professional Services Council. Not being able to reach an agency contracting or program officer “leads to confusion, conflicting guidance and missed opportunities,” he said. There is lost productivity and there are financial challenges as companies exhaust their lines of credit, which forces executives into a long-term strategic dilemma of whether or not to lay people off. Having contractors work for no pay “also impacts recruitment,” Berteau said. “Our members have had recruits cancel interviews during the shutdown—why bother?” 

Roger Krone, chairman and CEO of the Fortune 500 company Leidos, said the last shutdown cost his firm $14 million or $400,000 per day, because delays caused 22 programs to come to a halt. About 893 colleagues “had no work to perform,” he said, detailing how many were “redeployed” to 1,200 open positions on contracts that were funded, or allowed to use advance paid time-off. “And we offered hardship assistance through a relief foundation we have set up to assist employees in time of crisis,” which was used by 50 employees, he said.  “That’s a lot of vacations cancelled, birthday parties missed, and use of holidays to get one more paid day,” Krone said. Among the solutions, he added, should be a provision not to hold contractors or agency employees liable for “poor performance ratings” during a shutdown.

That was echoed by Michael Niggel, CEO of Advanced Concepts and Technologies International, who reported $500,000 in lost sales during the recent shutdown, delayed cash flow of $1 million and two requests for equitable adjustments stuck in legal limbo. “The good news,” he said, is that “our No. 1 goal is employee satisfaction, so we made a strategic decision” to bring all the idled employees to headquarters for “training and team building, which built employees' satisfaction and corporate loyalty.”

Other contractors warned that security clearances are jeopardized by shutdowns. “The No. 1 security clearance problem is financial hardship,” said Rep. Don Beyer, D-Va. But security clearance issues are one reason contractors are limited in their flexibility in moving employees from idled contracts to fully funded ones—especially if the agency employee needed to approve the move is furloughed, witnesses noted.

Members of the International Association of Machinists and Aerospace Workers lost 8 percent of their annual income, and did not get paid until March after the shutdown ended Jan. 25, said Edward Grabowski, president of the union’s District 166 in Cape Canaveral, Fla.. “Government may shut down, but life’s challenges go on,” he said, citing the need to pay health insurance co-pays, deductibles and prescription drug fees. Applying for unemployment insurance, he said, became very confusing.

Alba Aleman, CEO of Citizant Inc., said her firm ended up with extended debt of $4 million, but offered to work for free at the Internal Revenue Service as it struggled to “validate the integrity” of new systems to implement the new tax law with massive numbers of staff on furlough. Shutdowns have “become weapons of negotiations,” she said. “Please put an end to this abuse of power and trust.”

Jaime Contreras, vice president of 32BJ of the Service Employees International Union, detailed how his low-wage members “already struggling to make ends meet” dealt with hardships such as care for a handicapped child and a dangerous case of asthma. One member getting no paycheck had her car repossessed, he said, and then couldn’t return to work.

Expressing puzzlement at being included as a witness was Wesley Ford, president of the TKI Coffee Inc.‘s coffee café one block from the White House. “90% of our customers are federal employees or tourists,” he said, citing his proximity to the Office of Personnel Management and the State and Interior departments.

Ford’s employees, who make $16 an hour, include three ex-offenders, but the shutdown forced him to lay off 40 percent of his staff. “There’s tremendous downward pressure because of the instability of government,” Ford said, calling the past 18 months “the most challenging business environment" he ever encountered.

Ford mused about whether the government during a shutdown should help him pay his $6,800 monthly rent. “I don’t want customers to break the habit of coming” to his shop, he told the lawmakers. “Will you commit to finding a middle ground so the government won’t close again in September?”

CORRECTION: A previous version of this story misstated the cost of the shutdown to Leidos. It was $14 million, or $400,000 per day.