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With Congress still negotiating appropriations and no final deal in hand, the possibility of a federal government shutdown is real. For contractors reliant on federal contracts, a shutdown can disrupt funding, performance, approvals, and cash flow. But with some planning and proactive steps, you can reduce risk and protect your operations. Below are five key measures every government contractor should consider doing before, during, and after a shutdown.
Review the funding status of each contract—whether it is fully funded, incrementally funded, or awaiting appropriations.
Identify clauses that may be triggered by a shutdown, such as stop-work or suspension provisions.
Determine which projects rely heavily on government facilities or personnel and may be disrupted even if funding exists.
Reach out proactively to your Contracting Officer to clarify expectations during a shutdown.
Request written guidance regarding whether your work is considered essential or should be paused.
Confirm reporting, compliance, and approval requirements if government staff become unavailable.
Estimate how long your current obligated funds will last and model different shutdown scenarios.
Build liquidity through reserves or credit to ensure payroll and vendor payments can be covered if government disbursements are delayed.
Reassign staff or shift focus to unaffected contracts and delay discretionary spending until there is more clarity.
Track additional costs that arise from the shutdown, including idle time, storage, and restart expenses.
Maintain detailed records of all communications with government officials, subcontractors, and suppliers.
Use separate accounting codes to capture shutdown-related costs, making it easier to seek adjustments later.
Ensure compliance with labor laws if you reduce hours or furlough employees.
Review benefit and insurance policies to determine how workforce changes could affect employees.
Familiarize yourself with your rights to seek adjustments or compensation for delays, costs, or schedule changes caused by the shutdown.
A government shutdown is disruptive but not always crippling if you are prepared. The key is being proactive: assess your contracts, protect your cash flow, communicate with the right people, document everything, and know your legal footing. The better prepared you are, the more agile you can be in responding when funding delays or performance halts hit.
