ADVERTISEMENT

Shutdown Threatens $200 Million a Day in Federal Contracts

Shutdown Puts $200 Million a Day in Federal Contracts at Risk

(Bloomberg) -- If recent history is any guide, federal contractors could be out more than $200 million a day in lost or delayed revenue from the partial government shutdown, based on data compiled by Bloomberg.

The companies run the gamut, from businesses that provide upgrades to flight communications and air traffic systems, to producers of anti-malarial and HIV medicines in Africa, to operators of government cafeterias.

Since Dec. 22, thirteen major federal departments and agencies have closed as Republicans and Democrats argue over whether Congress should provide President Donald Trump with money to build a wall along the U.S. border with Mexico. Those agencies have mostly stopped awarding new money for contracts.

In the fiscal year that ended Oct. 1, those agencies announced $89.3 billion in obligations to contractors, an average of $245 million each day, according to reports from federal databases. The Department of Homeland Security, NASA, and the State Department accounted for more than half those funds.

Shutdown Threatens $200 Million a Day in Federal Contracts

The data don’t reveal which companies aren’t getting paid. But using reports from federal databases, Bloomberg Government calculated the contractors that received the most money in obligations from those 13 agencies in the latest fiscal year. Near the top of that list are a number of publicly traded companies, including Boeing Co., General Dynamics Corp. and Leidos Holdings Inc.

“We are actively monitoring the situation and await direction from our government customers,” Erin Tindell, a spokeswoman for Leidos, said by email. “A relatively small portion of our business is impacted by the recent government shutdown.”

Shutdown Threatens $200 Million a Day in Federal Contracts

Some contractors will be able to avoid a drop in revenue, at least for now. Huntington Ingalls Industries Inc., a shipbuilder in Newport News, Virginia, was able to secure new obligations worth more than $930 million for two cutters from the U.S. Coast Guard on Dec. 21, the last day before the shutdown.

“Our cash flow has not been impacted,” Beci Brenton, a spokeswoman for Huntington, said by email.

Chemonics International Inc., a closely held Washington-based company that provides services for the U.S. Agency for International Development, asked the agency to move up its obligations in preparation for the shutdown, according to spokeswoman Jane Gotiangco.

“We can operate at full levels through at least February,” Gotiangco said by email. “However, we are concerned about our fellow implementers who are small businesses and will be more challenged by this shutdown.”

The California Institute of Technology and Boeing didn’t respond to requests for comment.

Jeff Davis, vice president for communications at General Dynamics Corp., said in an email Monday that the company is “watching the situation closely, but the impact thus far on our operations has been negligible.”

Even contractors that eventually get paid will see a delay in that revenue.

Hard Choices

Just like federal employees, some contractors will be exempted from the shutdown based on the nature of their work, in which case their employees will be paid. But for the rest, their workers will be furloughed, forcing contractors to make hard choices about whether to keep those workers on.

“Now you’ve got a group of employees who are on a time-and-material contract, or a cost-reimbursement contract, and they’re not working,” said Alan Chvotkin, executive vice president and counsel for the Professional Services Council, which represents federal contractors. “So now the company has to decide whether to pay those employees out of whatever revenue they might have available to them.”

“It’s a cash-flow issue,” Chvotkin said in a phone interview.

Whatever financial pain the shutdown inflicts on government contractors won’t be evenly spread across the country. In the fiscal 2018 year, thirteen congressional districts received more than $1 billion each in contract awards from the agencies affected. Of those, most are currently represented by Democrats.

©2019 Bloomberg L.P.