Contractors face more pain from government shutdown

A government shutdown today will hurt contractors more than it did in 1995. Who will feel the deepest cuts?

If the government shuts down, the closings in the mid-1990s are not good indicators of what’s to come for government contractors.

Contractors would get hit harder today if agencies closed their doors than they were 15 years ago, said Alan Chvotkin, executive vice president and counsel for the Professional Services Council, an industry group.

Government spending on contracts has increased radically compared to the last shutdown, which stretched from Dec. 16, 1995, to Jan. 6, 1996.

And the government buys more services than products today. Contracting for services increased by 17 percent per year between 2000 and 2008, according to the Office of Management and Budget.

As a result, a shutdown would tear into service contractors’ pocketbooks. Services aren’t paid for when the contract is signed, Chvotkin said. They can be paid a number of different ways, from quarterly payments for their work to jobs done per day. Product sellers won't be hit in the same way. They will face changes in when and where they would make their deliveries, but the government likely will have already paid the companies for products.

1995 is no guidepost for what could come very quickly, he said. There have even been major reorganizations in 15 years, including the addition of the Homeland Security Department that is made up of a conglomeration of numerous agencies.

“A lot is the same -- but significantly different,” he said.

The Professional Services Council is hosting a conference on dealing with a possible shutdown. Chvotkin and two Clinton administration officials who served in the White House during the 1995 shutdowns will take part in a discussion Feb. 23 about the effect a government shutdown could have on the government contractor community.

“It’s a program we wish we didn’t have to have and give information that no one really needs,” he said. But “no one is going to be immune from the impact.”