SMACNA Contractors: Be Prepared for a Potential Government Shutdown

There’s a growing consensus that a government shutdown may occur on or around December 20, 2024, and that if the shutdown occurs there may well be significant implications for public and private contracting businesses and the construction industry. Also harmed will be general business operations and the economy as well as public construction market stability. This impending government shutdown would mark the fourth in a decade, with Members of Congress from both sides of the aisle using a shutdown to advance their own policies. While the strategy that has consistently proven ineffective in the views of most experienced Members of Congress, and irrational, it’s Congress!

Government shutdowns have significant microeconomic repercussions, impacting sectors such as:

• clinical research,

• law enforcement,

• national parks,

• visa and passport processing,

• services for American veterans,

• federal contractors.

• contractors working on federally assisted projects.

A government shutdown now would mark the fourth shutdown in a decade and the sixth since 1995. In each case, the government was shuttered because a portion of the Congress (always on a partisan basis) refused to support legislation to keep the government open absent some change in spending or policy. In other words, a somewhat small group of policymakers leverage the “must-pass” legislation to keep the government open to secure their own priorities. While members of both parties have attempted to leverage shutdowns, no one has successfully used a shutdown to change policy in at least the last 25 years.

The last government shutdown, from December 2018 to January 2019, was 37 days in length, two-thirds longer than the previous record of 21 days in 1995/96. This time it is more difficult to predict the duration as we have a narrower majority margin and a far more fractured political environment within the House Republican majority, largely at odds on most every issue.

During a shutdown mandatory spending continues and, while discretionary spending halts, when the government reopens federal employees and agencies are made whole meaning total federal spending is unchanged.

• In a 2018 report, the non-partisan Congressional Research Service detailed some of the impacts of past government shutdowns. A quick review indicates contractors are impacted.

Importantly, federal contractors are too often the uncompensated victims of a shutdown unless their contracts have been forward funded and secured against a shutdown.

*Each contract varies in funding stream, so contractors need to check now and prepare for their specific circumstance.

Bottom line on what to do now: Contractors need to assess their contracts, business relationships with government and be ready for the coming weeks of uncertainty and possible contracting disruptions. In the current environment, as hard as it may be to avoid a shutdown, it would be even harder to get out of an extended shutdown.

• The Congressional Research Service detailed the impacts of government shutdowns.

*Questions? Contact - skolbe@smacna.org