October 02, 2013

Dismas Locaria discusses government shutdown’s effect on contractors and nonprofits

3 min

The main takeaway is “it's going to take time to unwind this shutdown even when the government gets started, to get back to usual”

Venable partner Dismas Locaria about the impact of the government shutdown on government contractors and nonprofits with Law360 and Association TRENDS. Under the shutdown, the vast majority of federal employees deemed nonessential have been put on immediate unpaid leave and most nonessential government services have stopped. The first shutdown in 17 years came as result of Congress’ inability to agree on new appropriations and a disagreement over a one year delay in President Obama’s 2009 healthcare law.

Speaking with Law360 in an October 1, 2013 article Locaria talked about the costs facing contractors brought on by contingency planning and contracting delays, adjustments and cancelations. “Some things just don’t stop on a dime. There could be a wind-down period where the government isn’t really getting value, but the contractor will still need to be paid,” Locaria said. “At the end of the day, the government could get a lot less value for the contracts that it has to terminate or stop.” Locaria predicted that the current shutdown would be harder on contractor than previous appropriations fights because of recent budget cuts and increased scrutiny on contractors. “There's a heavy dose of skepticism between the federal government and contractors these days,” Locaria said. “There could be plenty of cases where a 'stop work' order is not issued, but where a contractor reports in and can't get to work. Those are areas where it could get particularly litigious.”

While some believe the shutdown could last weeks, Locaria warned that even a short shutdown will have long-lasting implications. “Everything is going to be impacted in terms of timing. Things are going to take a good bit of time to get done during a shutdown, because you're going to have whole groups of employees who are out of work,” Locaria said. “Even if this is only for a couple of days or a week or two, you're going to feel the impact of this for a lot longer than that.”

Days before the shutdown became official, Association TRENDS quoted Locaria in a September 26 article on how the shutdown could impact nonprofits and associations. He pointed to a two-pronged challenge including performance and contract considerations. On the contract side, Locaria explained that one of the chief concerns is if your staff members work remotely at a government installation, will they be able to get in to the building? Whether they're even allowed to work is another question, he said, adding that each agency defines essential and nonessential workers differently. But in general, contracts that already have money obligated to them will continue, said Locaria. The main takeaway, according to Locaria, is “it's going to take time to unwind this shutdown even when the government gets started, to get back to usual.”

Association TRENDS also cited the September 2013 edition of Venable's Federal Grant & Contract News for Nonprofits written by Locaria, Melanie Jones Totman, Elizabeth Buehler and Jeff Tenenbaum that provides more information on how the shutdown will affect nonprofits.