Contractors tally shutdown costs
Washington, May 6, 2019
Even though the six-week partial government shutdown ended in February, its impact is still being felt, contractors told a congressional panel on May 6.
Several federal contractors at a field hearing convened by the House Oversight and Reform Committee's Subcommittee on Government Operations testified their operations and employees faced extreme difficulties during the 35-day partial federal shutdown.
Vendors told panel Chairman Rep. Gerry Connolly (D-Va.) that contractor employees should get back pay, just as federal employees did. They also backed legislative solutions to minimize or eliminate the use of shutdowns as a negotiating tool.
Connolly is was a lead signatory of a March letter to House appropriators seeking support for legislation to award back pay to furloughed government contractors.
Connolly, whose Northern Virginia district is home to a significant number of federal workers and government contractors, said although 400,000 federal employees were affected by the shutdown last December and January, 800,000 workers from 10,000 companies felt the shock deeply too.
David Berteau, president and CEO of the Professional Services Council, described cascading problems related to the shutdown. Not only did companies not get paid for work during the shutdown, the invoices for work they performed before the shutdown began went unpaid. Payment on invoices sent to federal agencies in the fall of 2018 were substantially delayed.
Leidos CEO Roger Krone told the panel that during the shutdown, "work on 22 important projects came to a halt," idling 893 people with limited or no work.
Krone estimated his company lost $400,000 per day in revenue during the 35 days the government was in partial closure. The event also resulted in delayed payments of $18 million, he said.
Leidos implemented an employee assistance program that gave out $2,500 grants to employees who said they were in "extreme financial hardship." The company got 50 requests during the month-long closure.
Small and medium-sized contractors are just now getting their heads back above water.
"Six of out seven programs were halted," said Alba Alemán CEO of Citizant, a small business IT contractor, as she described the company's issue for the committee. She said Citizant lost $430,000 in revenue directly from the shutdown. However, she said the event has had a lasting impact, as unpaid federal invoices piled up into March, as the federal government got back up to speed.
That delay, she said, forced the company $4 million into debt and "maxed out" its borrowing capacity. "We struggled to meet our $750,000 payroll every two weeks for months after the shutdown ended."
Aleman and Krone also told Connolly that recruiting high-tech workers is extremely difficult given the tightening labor market, especially with fewer government-centered businesses moving into the Washington, D.C., area. Connolly noted that will only get harder when Amazon opens its corporate headquarters in Arlington and begins looking for workers.