Why some contractors worry more about this shutdown

Collectively and mostly through the major trade associations representing them, government contractors have across-the-board called on the White House and Congress to reach a deal that ends the ongoing partial government shutdown now in week number four.

But one CEO of a small business contractor has decided her latest LinkedIn article on the now-record-longest shutdown is a departure from her earlier articles focused on advice and encouragement for business owners on how to navigate the current environment.

In “An Open Letter to President Trump” Monday, Citizant CEO Alba Alemán highlighted the decisions many companies like her's have to make when their government customers close down and either tell their contracting partners to either stop work entirely or not pay for ongoing work that must be done.

“I’ve been fretting since last Thursday (Jan. 3),” Aleman told me Monday morning. “When the Senate went home… I knew we were going to go in for a much longer period of time.”

Aleman said that regarding the article directed to Trump, she was initially at a loss for words on what to say to her community of business owners like herself and contractor employees whose work and pay has been disrupted because of the shutdown.

“How many more times can I tell them you have to be aggressive on cash flow but you also have to be compassionate and protect your workforce,” she said. “There’s only so many ways I can say that and it’s not going to solve their immediate problem.”

In the case of 180-employee Citizant, Aleman has made the same decision she made during the 16-day full government shutdown in 2013 to keep all employees on the payroll. That includes the 32 employees supporting the Homeland Security and Justice departments, both of which are affected by the shutdown.

Many small business owners have been able to do the same by “getting super-creative” with either their company’s or even their own personal finances, she said. But some have already had to let staffers go and others will not be able to make it through a shutdown that has already taken out so much of their planned revenue and cash flow for the year.

“I gave up the notion of profitability in January a week ago, and by this weekend I gave up the notion of profitability this quarter,” Aleman said. “That’s a choice a business owner can make. I believe that my profit is to serve more people so if I use profit to keep people on the payroll, that’s my choice, that’s my decision.

“It’s a hard one to make but it’s my decision. It will impact other things that we had planned to do that also serves our employees in the future, but I have a crisis I’m dealing with now and I’m going to prioritize keeping people on the payroll.”

Cash flow disruptions can manifest themselves in one of two ways for government contractors and particularly those focused on services during a shutdown. The stop-work order from agencies halts those services and takes away a company’s ability to derive revenue from that.

Or the contractor can continue to perform work if it is mission-critical or still being funded, but the federal employees responsible for processing invoices are furloughed and hence there is no payment for that work.

The current dynamics all add up to a situation where “morale is horribly low in our industry right now,” Aleman said, especially considering how fresh the 2013 shutdown still is in the minds of the contracting community.

Aleman cautions that if the rhetoric becomes reality and the shutdown lasts for months, it will be a “different story for all of us.” The end of the shutdown also foreshadows another problem for programs who have seen contractor employees let go, she says.

“When those contracts restart, that workforce and for the majority of what we do which is cleared work, you can’t refill those positions right away,” Aleman said. “You’re months away from restaffing so you’re operating in a hindered capacity for months after the shutdown.”