When the clock struck 12:00am on October 1, 2013, much of the U.S. federal government shut down. What this means is that many of those who work for and with the federal government are now left in limbo. According to the Wall Street Journal, 818,000 workers (out of a total of 2.9 million federal government employees) have or will experience furloughs.
For private companies that have contracts with the U.S. government, this is an especially worrisome time. Moody’s Bruce Herskovics tells USA Today that, on the most basic level, no one is sure which contracts will be honored and which ones will end up being delayed.
It is important for government contractors, and manufacturers, to fully understand the terms of this shutdown and how it is affecting government contracts, as well as how this will eventually influence the state of manufacturing. For example, will employees be exempted from the furlough if they are working with private companies on previously awarded contracts? Can contracts be renewed or signed if they require funds frozen from the shutdown? As seen in this Washington Post article, private government contractors are already experiencing direct impacts from the shutdown. Here are some of the major key points to know:
- Federal employees will be unable to oversee contractors. However, if supervision or support is not critical, some contractors will continue working. However, depending on the length of the shutdown, agencies can always reconsider their decisions.
- Signing or renewing contracts will be nearly impossible.
- Most payments on contracts previously awarded to private contractors will cease.
- If the shutdown drags on, there most likely will be layoffs in the private sector.
No one knows for sure how it will all play out, but it is clear that the longer the shutdown lasts, the more damage will be done across the board. We hope that any negative fallout from the shutdown can be avoided, so that private contractors and manufacturers can see future growth.