The Impact of the Partial Government Shutdown on the Department of Homeland Security (DHS)

by Holland & Knight LLP
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No cabinet department stands more in the center of the federal shutdown drama than the Department of Homeland Security (DHS). Indeed, the issue at the shutdown's heart – President Trump's proposed border "Wall" – would be a DHS appropriation. And arguably the shutdown impact most immediately felt by the American public has been the rising tide of delays at airports, as Transportation Security Administration (TSA) screeners – forced to work without pay – have begun to stay home "sick" in growing numbers. On Monday, January 14, travelers at Hartsfield-Jackson Airport in Atlanta faced huge lines and travel delays, with six TSA security lanes closed – and Miami International Airport was forced to close one of its six terminals, because of the TSA staffing shortages.

DHS is front-and-center in this record shutdown. In what ways is DHS most impacted, and how does this impact the contracting community?

1. Who's Working and Who's Not?

For the most part, DHS is still up and running. Of the 245,000 DHS employees, over 210,000 have been deemed either "exempt" from the lapse in appropriations (because their jobs are funded by non-lapsed sources, such as fees or no-year appropriations) or "excepted" – meaning that, even though they are not being paid, these DHS employees must continue to work because they are performing jobs necessary for public safety, among other reasons.

Most DHS employees work for one of its eight operational agencies – U.S. Customs and Border Protection (CBP), U.S. Immigration and Customs Enforcement (ICE), U.S. Citizenship and Immigration Services (USCIS), the U.S. Coast Guard (USCG), the U.S. Secret Service (USSS), the Transportation Security Administration (TSA), the Federal Emergency Management Agency (FEMA), or the brand new Cybersecurity and Infrastructure Security Agency (CISA). All of these agencies are involved in public safety and other necessary operations to greater or lesser extents, so most of their employees are still working – and mostly not being paid.

So, for example, of the over 60,000 TSA employees, over 55,000 are still on the job – screening passengers and baggage at airports. Similarly, of the over 60,000 CBP employees, nearly 55,000 are still on the frontlines, either working as CBP Officers at official Ports of Entry, like Dulles Airport, or as Border Patrol Agents on the U.S.-Mexico or U.S.-Canada borders. ICE Special Agents are also still on the job, as are Secret Service agents protecting President Trump, Coast Guard officers guarding our seaports, FEMA employees preparing for disasters, or CISA employees staffing the National Cybersecurity and Communications Integration Center (NCCIC). Again, most are not getting paid.

Almost all USCIS employees are also still on the job, in large part because much of USCIS operations are supported by fees – and so many USCIS employees are "exempt" from the appropriations lapse. So, unlike their unpaid-but-still-working TSA or CBP colleagues, many USCIS employees are working and still getting paid. Of note, however, most immigration courts – part of the U.S. Department of Justice's Executive Office for Immigration Review (EOIR) – are not operating during the shutdown. So, the already-epic 800,000 case backlog of immigration cases will only grow, as CBP, ICE, and USCIS will continue to pile more immigration cases onto the docket while the courts aren't operating.

On the other hand, there are many DHS employees and functions that have been deemed "non-exempt" – and subject to work furloughs. As detailed in the DHS Procedures Relating to a Lapse in Appropriations (dated December 17, 2018) (the "DHS Advisory"), these now-shuttered functions include most policy and planning activities, research and development, administrative functions, auditing, training and development, regulatory, legislative, public affairs, and intergovernmental affairs functions, among others.

As a result, non-operational DHS entities like the Science & Technology Directorate (S&T) are barely operating with skeletal staffs. Of S&T's 454 full-time employees, only 23 are still on the job right now, and various S&T functions and conferences have been canceled – such as the 2019 S&T Cybersecurity and Innovation Showcase, which had been set for January 10, 2019. Similarly, of the over 1200 employees of the Federal Law Enforcement Training Center (FLETC), only 66 are currently working.

There are some exceptions. Some more administrative functions – like FEMA's National Flood Insurance Program (NFIP) – are still operating, in large part because mortgage lenders and realtors pushed back hard, saying that mortgages in flood-prone areas could not be underwritten without FEMA NFIP officers still able to sell or renew flood insurance policies.

But for the most part, the administrative non-operational functions of DHS are not functioning (or functioning with skeletal staffs), while the frontline operators like Border Patrol Agents or TSA screeners are still on the line, albeit working without pay.

2. Impact on Contracting

As a result of the shutdown, DHS is not inking any new federal contracts (if the funding source is a lapsed appropriation, as opposed to some other source of funds), unless the contracts are "required to support those functions defined as excepted for DHS, such as safeguarding human life or protecting property." DHS has taken a similar approach with regard to grant funding, as it is not signing any new grants or other forms of financial assistance (such as to local governments), unless they are necessary for safeguarding public safety.

With regard to existing DHS contracts, it is a bit more complex. According to the DHS Advisory, "[r]outine ongoing activities related to contract administration are not authorized to continue…. In other words, during a federal funding hiatus the performance by contracting officers, contracting officer technical representatives and contract administration personnel of routine oversight, inspection, accounting, administration, payment processing and other contracting activity would not continue, when there has been a lapse in the appropriation that funds these activities." DHS Advisory at p.16. If a contract requires direct DHS oversight or administration, such as one involving a series of short task orders, it is likely being directly impacted by the shutdown.

On the other hand, if a contract does not require ongoing DHS contract administration – such as a firm, fixed-price contract that is fully funded at the time of the award – it may not be impacted by the shutdown, at least for now. "Instead, the contractor continues to perform work in accordance with the contract." DHS Advisory at p.16. However, payments may be delayed, given that most back-office functions – including payment mechanisms – are offline.   In addition, if the shutdown continues on much longer, DHS may re-evaluate such contracts. As noted in the Advisory, "[d]epending on the duration of a funding lapse, the absence of available federal employee oversight may lead DHS to reconsider whether the contract activity should continue to be performed." In some cases, DHS may "instruct the contractor to suspend performance." DHS Advisory at p.16. Additionally, DHS may suspend ongoing contracting activity if "continued performance would be wasteful due the impact that the funding lapse is having on other agency activities." (The DHS Advisory gives the example of a contractor performing regular trash collection every day in a federal office that is closed due to the shutdown.)

So, bottom line – as a general rule, DHS is not inking new contracts. And, unless an existing DHS contract is firm fixed-price, already funded, and not requiring DHS employee supervision, it is likely to be suspended as well, pending the end of the shutdown.

One additional special note for federal contractors: While most of USCIS is fee-funded and, thus, still operating, one piece is not – the E-Verify electronic employment eligibility verification service. The E-Verify website (www.e-verify.gov) is not being actively managed during the shutdown. So, while federal contractors are required to utilize E-Verify, the system is currently down, and employers are not able to access their accounts. DHS instructs contractors to work with their contracting officers (who may or may not be furloughed themselves!) to extend E-Verify related deadlines, but the key priority is to retain and keep close track of all Form I-9s for new hires during the shutdown, for contractors will need to update their E-Verify accounts once the shutdown ends and the E-Verify site is back up and running.  

In sum, this latest partial federal shutdown is already one for the record books – the longest government shutdown in U.S. history. And the impasse appears nowhere near resolution, with President Trump saying that the shutdown could be with us for "months or even years." DHS is right in the center of it, with most of its operational employees continuing to work to secure the American people – but not getting paid. As we have already seen with the "blue flu" staffing shortages at various airports, this situation may not be sustainable for very long, as already-underpaid DHS employees face decisions to make for their families. In the meantime, the shutdown's impact on the DHS contracting community will continue to bite, as new contracts don't get inked and many existing contracts lie fallow, with no end in sight.

Editors' Note: On Wednesday, Jan. 16, 2019, Holland & Knight's government contracts team is hosting a complimentary webinar about the partial government shutdown. The webinar will examine the current political situation, provide a contractor's action plan and discuss how employee-related issues should be resolved.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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