Happy New Year?

First toast: EMPLOYEES

Once again, Congress gave itself a mulligan, passing a Continuing Resolution (C.R.) on Saturday. This stops the federal government from shutting down. I lived this situation for 25 years as a federal contractor in Washington DC. The fear, dread, and reality of Congress being incapable of passing a budget has consequences beyond keeping the government open, then a C.R. is passed and everyone keeps going on. While the C.R. keeps the government open, it still has adverse impacts for business. And there are several impacts that businesses must make tough decisions about.

What were the big items during the threatened shutdown that savvy federal contractors need to be proactive? The C.R. keeps operations going for 45 days. Then hopefully there will be a budget. All signs are that Congress usually comes to terms. But this is a very shaky situation this time around.

We heard about federal workers not being paid, but each shut down, back pay is granted to federal workers, so they are made whole. Benefits, PTO, etc. continue to accrue so it is an inconvenience, not a loss. But what about the contractors? No. No such ability to collect pay for contracted employees working on-site at the government. Once the hours are lost, they are lost. Many contracts limit daily chargeable hours to eight, so there is no way to recoup lost time. As an employer, I faced this problem: If the on-site personnel are not working on the contract, what do I do with them and do I continue to pay them during the shutdown?

Neither were easy answers. At first, I just had the employees come into our offices and I had work for them to do. Research, proposals, general administration all needed to get done. The problem was that it was a learning curve for people who never did this before and much more expensive internally than normal. But it was a decision and goodwill toward these employees.

This worked well for the first week, but as shutdowns stretched to two, then three, then more weeks, the toll became significant. I was still paying salary and benefits, but no income was being generated by these personnel and no new work was coming in. I had to make a decision (again).

After speaking with friends and colleagues who owned comparable GovCon businesses around DC, the consensus was to pay for the first week, then after that, give the employees the choice of taking PTO or not being paid. The one week was usually how long shutdowns lasted, so it was usually not an issue, until it was. It was fair to all sides, but the longer the shutdown lasted, the more difficult it became.

The problem of having fairly well compensated professionals doing work "below their paygrade" wiped out profits. The contracts we had that did not require on-site work continued, but no new work was coming in. I overstaffed and identified discreet tasks to reallocate. But at what price is loyalty? I was fortunate to be able to take the financial hit. As a business owner, there is never a good choice, but I lead with what I thought was best for all. The government re-opened. Staff went back to work at the government sites, and as the business owner, I retained established personnel. Now I had to figure out how to cover the negative financial impact myself.

Once I was told I could not be paid for their time and hours could not be added to the workday, I refocused and got hustling to sell more work, much like every other firm out there. Pure determination to bring in revenue and implement greater efficiencies to increase profits were my marching orders. Eventually, the year ended, the shutdown became ancient history, and my firm was profitable, but that was only because I knew what to do and made the decision to do it. There were plans in place and processes to follow because I had survived many shutdowns before.

The realities of GovCon are difficult to understand if you are not living it. A small business can get blindsided by actions out of their control and must know the intricacies of the contracts they sign and the impact when/if the government shuts down or defunds. If you are in the middle of this mess, lets talk. Schedule a call at https://calendly.com/libby-coaching or email me at [email protected]. Good luck. Fingers crossed that this year will not be a long shutdown.