Last year at this time, we reported on the prospect of a partial government shutdown due to Congress’s failure to enact appropriations legislation to fund all aspects of the government for Fiscal Year (FY) 2021. In that case, the bill was passed and life continued. This year the stakes are higher. Though Congress started early, preparing separate appropriations bills for FY 2022 this summer, they still have not been passed. In addition, we are seeing bills for higher levels of spending than in the previous years, since the spending limits set in the Obama-era Budget Control Act of FY 2011 have now ended.

A lot is at stake in this appropriations cycle. The current reconciliation bill is for $3.5 Trillion. Proposed funding of new entitlements and programs is a big part of the current impasse. The House reconciliation bill is reported to include more than $2 Trillion in tax increases alone to pay for some of them. For government contractors, the major issue is funding for continuing programs and contracts, as well as newly starting programs and contracts. Without funding, there can be no new starts – meaning nothing that hasn’t already been funded is at risk. We can hope that both houses will pass continuing resolutions while they debate the bills, so that government and government contracts continue in the interim.

For those that have government contracts, the following steps would be well advised:

• Determine the current level of funding under your contract and develop plans for what to do if your contract is not fully funded, or at risk of running out of funds.
• Seek guidance from the contracting officer as to how to proceed on your contracts in the event of a government shutdown. You don’t want to wait. If the shutdown occurs, these same contracting personnel may be tied up on emergencies or out on leave themselves and not reachable.
• If you proceed to work even when your funding is exhausted, you are at risk of not being paid. If you get direction to continue, make sure it is from an authorized contracting officer or designee and put it in writing so you have a record of what you were directed to do.
• If you receive a stop work order, take steps to mitigate your costs and open up a separate tracking number to track the impacts so that you can seek appropriate recovery of your costs when the stop work order is lifted or converted into a termination for convenience.
• If you have questions, call counsel to find out what you need to do to take the right steps under your contracts and with regard to your workforce.

Of note, the reconciliation bill also includes provisions on the current Biden Administration push for full vaccination of government contractor employees and those in their supply chains to address the COVID-19 Pandemic. Specifically, it has been reported that on page 168 of the House’s 2,465-page reconciliation bill is a “tenfold increase in fines for employers that ‘willfully,’ ‘repeatedly,’ or even seriously violate a section of labor law that deals with hazards, death, or serious physical harm to their employees.”  Increased fines could run as high as $70,000 for “serious” infractions and $700,000 for “willful” or “repeated” violations. If enacted, this would represent a huge increase in OSHA fines.

Funding is at the heart of being able to continue to operate the government. We will be watching this process closely.