WT Business Beat

By Nick Wakeman

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Nick Wakeman

Contractors relish return, but fret about future shutdowns

Obviously, contractors are happy that the government shutdown is over, but it might still take a little bit of time to assess the financial damage that has been done to their businesses.

“We’ll have a damage assessment in another week, but most of our impacted contracts went 10 working days without service,” one executive told me. “We’ll need a few weeks to get back to where we were, but the shutdown will certainly affect profitability for the year.”

Lost revenue is a big issue for all the companies I spoke with, even if the number of employees is relatively small. One executive told me he only had two employees furloughed, “but that still costs us slightly more than $100,000 in lost revenue.”

The shutdown is long enough that many companies won’t make their planned revenue numbers for 2013, which were already in jeopardy because of sequestration.

For many, bonuses and other financial incentives for employees are probably nixed for this year.

Nearly everyone expects everything to be back up and running normally by Monday, but the next few days might be rough.

“We need the various agency contracting officers to rescind the stop work orders,” an executive said. “While I am hopeful we will be back to work no later than Monday, the financial drain continues.”

Some companies ran into a double-jeopardy of sorts because they had a contract term end with the end of the fiscal year, but contracting officers weren’t available to sign the next option.

Things like that will take a few days to work out.

In addition to lost revenue and profits, companies also expended a lot of management resources focused on planning for furloughs and what-if scenarios and responding to employee questions and concerns.

Some companies praised their government customers for how quickly they bounced back from the shutdown.

One exec said that a contracting officer at the Environmental Protection Agency started making calls Wednesday afternoon when the resolution to the shutdown seemed assured. The contracting officer was still making calls at 10:30 Wednesday to coordinate the return of contractors.

“She was really proactive,” the exec said.

As contractors recover over the weeks ahead, the possibility of another shutdown looms. The continuing resolution runs through Jan. 15, so Congress will need to pass another spending measure before then.

Several executives expressed hope that Congress has learned a lesson and won’t risk a shutdown.

“My rational self believes that the stupid political strategy the Republicans tried this time won’t be repeated,” an executive said. “That said, the hard-core Tea Party types seem unrepentant, and I worry that we could be dealing with more of the same come January.”

If that happens, the ability to help employees weather another shutdown will be severely limited, another executive said.

Revenue projections will also need to be reworked downward.

What contractors want more than anything else is visibility. “It is difficult to run a business when our outlook is capped at 90 or 120 days,” another executive said. “It’s very difficult to plan, invest or think strategically when we are doing business in this sort of environment.”

Some companies also will be doing some interesting analysis post-shutdown.

One executive told me that his company will be looking at which agencies were shut down and which ones were largely unaffected.

“We are more likely to pursue opportunities with those that are less of a risk,” he said.

For his company, that could mean more defense work and less civilian work.

I wonder if the shutdown will be a watershed for the market, where we talk about how things were pre and post shutdown. I guess it’ll depend on the next few months.

Posted by Nick Wakeman on Oct 17, 2013 at 9:50 AM

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