Shutdown roils the GovCon labor market

The ongoing partial government shutdown continues to have ripple effects on the contractor community and is taking a toll on today's workforce and is damaging the ability to build tomorrow's workforce.

First there is the challenge of today. In a call with reporters Thursday, Professional Services Council CEO David Berteau said “tens of thousands” of contractor employees have lost their jobs and will likely file for unemployment insurance because of the shutdown, which is entering a record week number five and with no clear end in sight.

Hundreds of thousands of contractors and federal employees are still on the job and working without pay. Bloomberg Government estimated nearly $200 million in federal contract obligations are held up per working day because of the shutdown, which adds up to almost $1.5 billion per week.

Large and upper middle-tier contractors have more flexibility to move their employees to different work at open agencies, have them do internal projects or use leave until the shutdown ends. Lower mid-tier and small businesses have entirely different and existential questions to ask themselves, as a pair of GovCon CEOs have told me this week.

Either way, Berteau indicated the entire federal ecosystem is in new territory given two pay periods have lapsed and stop-work orders from agencies to contractors of all sizes keep piling up. 

“How do you retain employees when you’re not generating revenue to pay them, and you don’t have money to pay them?,” Berteau said.

This shutdown is the third in five years but its prolonged nature comes at especially bad timing for contractors and agencies, he added, given that January is when they typically visit colleges to recruit interns still in school and graduates ready to enter the workforce.

“Both for companies and for the government itself .... [the current environment] is a very difficult circumstance in which to recruit," Berteau said. "The long-term impact of losing a whole generation of workers, of future workers, will be felt for years to come.”

GovCon’s industry-wide headwind of recruiting and retaining talent and especially those with technology skills loomed large even without a shutdown. There was already the security clearance backlog, competition for technical talent from commercial companies and negative perceptions of the government market in some corners.

Lisa Mundt, co-founder of market intelligence firm The Pulse of GovCon, said many “young people were wary of the government sector long before the implications of the shutdown on their paychecks.”

Considering the backdrop of retirements out of both federal and contractor workforces, she said “it’s the younger generation that will be more indicative of government sector workforce problems.”

Companies in the government market are all trying to reverse the trend through all kinds of avenues including strong advocacy for reducing the clearance backlog, new outreach and marketing techniques, and investments in scholarship programs and other education initiatives.

But there is industry concern that this current shutdown might undo some of that work and drive potential future workers away.

Wes Hallman, senior vice president of policy for the National Defense Industrial Association, said his pitch  to anyone considering a career in the government market has three main pillars: job stability, steady post-career benefits and the overall mission. This shutdown works against those, particularly job stability, he told me.

“As you do your research as a job seeker and you’re getting multiple offers and see this company has had to suspend their contracts or other work, are you going to want to take that chance? It’s a disincentive,” Hallman said. “Will it be all encompassing? I don’t think that will be the case, but it will get harder.”

“You’re going to look for something a little bit more stable, that’s going to affect decision making.”

Given the combination of furloughed and laid off federal contractors and civilians, it is inevitable that some of them will be looking for a new job entirely and not wait for the shutdown to end.

Other analysts and executives I spoke with indicated that the shutdown comes with both promise and some peril for the federal contracting market with respect to the talent issue. One main calling card of working in a market with a reliable bill-payer in the federal government looks riskier now but companies in the sector can use it to their advantage.

Joey Cresta, public sector IT analyst at market intelligence firm Technology Business Research, said that whereas government work is generally viewed as attractive for low-risk averse individuals, their confidence in that stability idea could go down if a polarized and nonfunctional form of governing becomes more normal.

“The incredible complexity and scale of government operations, especially from an IT perspective, equips government workers with some valuable skills that can be brought to bear in the private sector,” Cresta told me.

But at the same time “agencies may have to lean even more heavily on outsourcing work to contractors” if recruiting civilian employees becomes harder, Cresta added.

“It’s often said that the people who work for government contractors, just like those who work in government, are in part looking for opportunities to find meaning in the work they are doing. Contractors carefully have to message the purpose and impact of their work, which can be a powerful recruiting tool,” he said.

Scott McIntyre, CEO of Guidehouse (formerly the PwC U.S. public sector business), broke down the talent implications of the current shutdown in two ways to me.

From a tactical perspective, he does not expect companies such as the one he leads to change their recruiting and retention approach uch given the long-cycled nature of running a business in the government market.

But strategically, he sees it as a different conversation altogether.

“When it comes to the talent acquisition future, those businesses that have treated their people well and have prioritized people over their economies, those are the businesses that will emerge as the better places to work,” McIntyre said.

The reverse will take hold “if a business is going to treat their people poorly (and) treat them like expenses,” he added.

For their part, Guidehouse is shifting many of its staffers on halted government contracts to training and development work, which “we need to do all that stuff throughout the year” regardless, McIntyre said.

There is one other thing he said firms should do, especially considering the catch-up work for when the shutdown ends.

“For companies like ours, let’s start with paying attention to and having real empathy for clients in federal government," McIntrye said. "Let’s not lose sight of that.”