The Government Shutdown & Federal Construction Contracts

shutdownDue to Congress’ inability and unwillingness to reach any sort of compromise to get a spending bill passed to fund federal agencies for the 2014 fiscal year a shutdown of the federal government began in earnest yesterday. At the heart of the impasse is the Affordable Care Act (ACA) or Obamacare which isn’t even directly tied to the proposed spending bill. Republicans in the House only want to support a spending bill that includes provisions to either delay or defund the ACA while Senate Democrats will only approve a spending bill it it’s free of any such provisions.

For those in the architecture, engineering and construction (AEC) industry with current federal contracts, a continued government shutdown could affect those companies. Contractors that have previously funded fixed-price contracts probably won’t be affected by the shutdown and most federal construction projects will continue without delay. However, there will be some exceptions. Construction projects taking place in existing federal facilities could be halted if those buildings are closed as a result of the shutdown. Also, it’s likely that contracting officers and contract administrators will be furloughed as nonessential workers making it impossible to get any change orders or contract modifications approved until a spending bill is approved and the government opens back up for business.

Contractors working on state and local highway projects that receive federal aid probably won’t be affected by the government shutdown. Funding for the Highway Trust Fund was previously approved by Congress through the end of FY 2014 so the Federal Highway Administration will continue to be able to reimburse state DOTs for current and upcoming projects.

Contractors with Multiple Award Construction Contract (MACC), Indefinite Delivery/Indefinite Quantity (IDIQ), Multiple Award Task Order Contract (MATOC), cost and material contracts and cost-type contracts for construction, engineering and architectural services will be the most affected by the government shutdown. All work on these types of contracts will most likely be suspended immediately and completely assuming they aren’t deemed as essential services. In addition all federal contracts that have not been awarded yet will remain that way. The individual agency awarding the contract should be contacted to determine how and when the contract will be awarded once the shutdown ends.

Current solicitations could also be affected by the government shutdown. Current due dates for bids and proposals could be delayed or postpones, solicitations for unfunded projects may be cancelled and site visits could be postponed or altered depending on availability of staff and locations. Each agency is working under their own contingency plans so it is important to contact the contracting officers or point of contact for each project as soon as possible to learn of any changes in current solicitations.

The contracting officer on currently awarded contracts should have already contacted all prime contractors to notify those companies as to whether funding will continue or not now that the shutdown is in effect. Companies should contact the contracting officers on all current contracts immediately to determine if construction work will continue or if a stop-work order is being issued. In the event that work is stopped due to the shutdown, contractors should document and record all costs incurred as a result of the shutdown in order to recover those costs once the shutdown is over. Additional costs and schedule delays caused by the shutdown should be recorded separately from normal operating expenses and provided to the contracting officer in writing.

Don’t fret, thanks to the 27th Amendment members of Congress will continue to receive a paycheck while they continue to play their epic game of silly buggers. I bet neither side would be using the ACA as a bargaining chip had their salaries been in jeopardy of being suspended as a result of missing the deadline to get a spending bill approved. Maybe Congress should be assessed a daily penalty for each day the shutdown continues the way some construction contracts assess daily penalties for each day construction continues past the determined completion date.

Even if Congress can agree on a continuing resolution for funding in the next couple of days and end the government shutdown an even bigger issue will be rearing its ugly head in a couple of weeks. The exhaustive measures put in place by the Treasury Department regarding the debt ceiling limit are set to expire on October 17th. If the Fed is forced to default on some of its bills it would cause an even bigger economic crisis that the current shutdown.

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