Shutdown Poses Challenges for Contractors

Federal contractors continue to receive stop-work orders, forcing companies who had worked primarily with the federal government to let thousands of employees go, as the longest government shutdown in U.S. history drags on.

Early estimates find the shutdown is costing contractors an estimated $1.5 billion per week, as the employees join furloughed workers on the unemployment rolls.

Many impacted contractors, have had difficulty receiving payments on invoices submitted prior to the shut-down, and are left with no recourse as they are unable to reach contracting officers regarding unpaid invoices or pending acquisitions as those federal employees have been furloughed.

This puts contractors in a difficult position, as SAIC, a large defense and tech contractor, stated that they have not received payment on $50 million in work performed, while it continues to pay staffers that would otherwise be furloughed $10 million per week.

According to figures the Labor Department released earlier this week, more than 10,000 furloughed federal employees filed for unemployment benefits in the first week of January, nearly double the number that had sought those benefits the week before.

Having missed their first paycheck last week, furloughed federal employees have begun to examine their options for short-term work that does not violate rules and regulations against taking outside employment that still would still apply to federal employees.

If alternative arrangements must be made, the question of whether federal employees and government contractors will return to their original jobs when the government reopens. The longer the shutdown lasts, the more likely it is people will seek employment elsewhere -- as nearly 800,000 feds missed a paycheck last week.

However, for companies whose main customer is the federal government, contractors face challenges that threaten their businesses -- a workforce that is not constrained from seeking outside employment, limited lines of credit that make operations without income difficult, and uncertainty whether they will receive payments due as the shutdown continues without an end in sight.