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Contractors, customers both hurt by short-term budget extensions

Contractors, customers both hurt by short-term budget extensions

For nearly six months, the federal government has operated under temporary funding measures, leaving many agencies and contractors in limbo, unable to plan or execute new initiatives.

Congress passed the latest in a string of continuing resolutions this week, and President Barack Obama signed it today. The newest temporary funding measure gives lawmakers until April 8 to reach an agreement on 2011 appropriations or again face a government shutdown. But operating on a string of stop-gap measures, with no solid ground for planning or spending authorizations, is untenable, according to many experts.

John Palguta, vice president of policy at the Partnership for Public Service, described funding as a “huge part of the planning process” and said that continuing resolutions make it hard for agencies to gather important data.

“Long-range planning is very difficult under a series of continuing resolutions because there is so much you don’t know,” Palguta said.

 

Media reports have indicated that many in the government feel they have been operating in chaos and confusion. “Officials at various agencies have frozen hiring, canceled projects, delayed contracts, reduced grants and curtailed training, travel and upgrades in information technology,” wrote Robert Pear in the New York Times.

Pear cited examples of disruptions at the Social Security Administration, the Securities and Exchange Commission and the Defense Department. Short-term budget extensions can also interrupt the execution of government contracts.

Elizabeth M. Robinson, the chief financial officer at NASA, said: ‘Most agencies have pushed the renewal of major contracts into the winter and spring. Uncertainty has slowed down our spending. That uncertainty takes a toll,’” Pear wrote.

 

Government IT projects could suffer because of ongoing budget constraints. When the budget cycle starts getting disrupted, it creates a lot of issues with resource allocation, said Gary Labovich, a senior vice president at Booz Allen Hamilton.

Labovich said that assigning staff becomes a challenge for vendors if IT projects are stopped or slowed down. “We have to move key people on to other work,” he said. “We don’t have the luxury of keeping people on the side until the government figures out” its budget.

From the government perspective, budget interruptions can lead to inconsistency in personnel and result in derailed IT projects, Labovich added.

Overall, the effect of the budget dispute on government operations varies by agency.

Palguta said that while some agencies have been asked to take on more responsibilities, they have not received an increase in funding. The six continuing resolutions that have been enacted so far fund agencies at 2010 levels.

Agencies “can’t continue to do the same work or do more work with the same or fewer resources,” Palguta said, adding that, at some point, agencies might have to reduce the types of services they offer.

The strain on agencies has also, unsurprisingly, hindered federal managers and their employees’ abilities to do their jobs, according to sources. This type of environment – with the possibility of a shutdown looming in the background – reduces productivity due to lower employee engagement, Palguta said.

“The continued reliance on temporary funding measures and the creation of a crisis atmosphere with repeated threats of a shutdown is not a responsible or a smart way to govern,” wrote Max Stier, president and CEO of the partnership, in Politico.

Despite signing the latest CR, Obama has signaled that he is unwilling to continue the trend of short-term measures. At a news briefing earlier this month, he said it is “irresponsible” to keep running the government based on two-week extensions.

Now it’s up to Congress to come up with a solution that will ensure the government remains fully functional for the remainder of 2011.

 

John Clancey Don Rhea

 

 

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March 30, 2011 Posted by | engineering services, SDB, SDVOSB, Small Business Administration 8(a), small business contractor | , , , , | Leave a comment

Government shutdown threatens small businesses

Reliance on contracts, fewer reserves put firms at risk

 

A potential government shutdown has been delayed until mid-March, but that doesn’t mean that government contractors — particularly small businesses — have stopped preparing for the possibility that their biggest customer will close up shop.

While most government contractors will be affected in some way by a government shutdown, it’s thought that small businesses will feel the greatest impact because many rely on the government for all of their annual revenue and have less cash flow and fewer resources.

Several small-business contractors that generate the majority of their revenue from government work are coming up with plans for how to deal with the potential loss of revenue, as well as what to do with scores of employees who can’t do the work they were hired for.

“How do we recover the loss of revenue?” asked Tony Jimenez, president and CEO of MicroTech, a company based in Vienna, Va., that generates 80 percent of its revenue from government contracts. “It’s a constant situation of Democrats and Republicans trying to teach each other a lesson, and government contractors are suffering.”

Small businesses have little to go on in terms of knowing whether and for how long the government will stop working. But they do know that nonessential contracts will stop and the work they do that requires supervision by a government employee will also stop if that government employee has been furloughed.

Ideally, many say they’d like to keep employees on the payroll but can’t do it if the funds aren’t there. So, do the contractor’s employees get furloughed? Are they forced to take their paid vacation time? Are there other projects for them to work on?

One of the biggest fears small businesses face is that good employees, forced to take vacations or get furloughed, might decide to leave.

“If we lose employees, then it’s very hard to bring them back and go through the security clearance process again,” said Jay Challa, chairman and CEO of Ace Info Solutions Inc., based in Reston, Va.

Challa said his firm, which has about 20 government projects active right now, will consider letting employees continue working at government sites that don’t require a government supervisor.

Another option is to allow the employees to take on nongovernment work, such as research projects and proposal writing. Challa said the company will also use the time to make sure employees are caught up on certifications. These measures will allow employees to still be paid and not have to use up any vacation time.

“We will have to use overhead dollars for those tasks,” Challa said. “But we just have to make sure we give the employees enough opportunities to continue.”

If employees aren’t able to work on other company projects, they will be asked to take paid time off, Challa said.

List Innovative Solutions, an IT provider to the federal government based in Herndon, Va., gets all of its revenue from government contracts. So the small firm is seeking legal advice to better understand the human resources laws and how it can deal with its hourly and salaried employees.

The company’s preference is for employees to take their paid vacation time rather than leave without pay. But a furlough is not completely out of the question for List and other small businesses.

“A small business can’t carry a whole lot of it,” said Katie Sleep, president and CEO of List. “We’re trying to keep going and trying not to go into panic mode because it could be in vain. I hope they can work it out to get us through the budget year.”

Aronson LLC, an accounting and consulting firm in Rockville, Md., says the impending government shutdown has been one of its most active blog topics on the firm’s website. Aronson has also been busy consulting with clients on how to handle a government shutdown.

“Treat it as a project,” said Thomas Marcinko, principal consultant with Aronson. “Assign somebody to be in charge or responsible for preparing your firm for a shutdown.”

His other advice includes looking at each contract and evaluating how each one will be affected, as well as telling small businesses to alert their banks about late payments from their clients, document any costs related to the shutdown and communicate with all the people who are affected, including suppliers.

“The shutdown is very complicated and impacts different contracts differently,” Marcinko said. “Handling it well will help a great deal. Not handling it well is close to fatal.”


John Clancey Don Rhea

 

March 21, 2011 Posted by | 8(a), sba, SDB, SDVOSB, Small Business Administration, small business contractor | , , , , , | Leave a comment