Government Shutdown Survival Guide for Business Owners: How to Protect Your Contracts and Cash Flow
The Looming Threat of a Government Shutdown
Government shutdowns aren’t just political drama—they have real consequences for businesses, especially those with federal contracts. As of Wednesday, March 12, 2025, the U.S. government faces a potential shutdown, with Senator Schumer stating that Senate Democrats will block the House's budget bill. This partisan standoff puts government contractors in a precarious position, impacting payments, procurements, and ongoing work.
For business owners, the key to surviving and thriving during a shutdown is preparation. This guide breaks down what to expect and how to mitigate risks based on historical data and expert insights.
What Happens in a Government Shutdown?
A government shutdown occurs when Congress fails to pass appropriations bills, triggering the Antideficiency Act (31 U.S.C. § 1341). Federal agencies are forced to suspend non-essential functions, furloughing employees and halting many operations. Essential services like national security and public safety continue, but most business dealings with the government slow to a crawl.
Past Shutdowns: A Costly Pattern
Shutdowns aren’t new, and history tells us they can last anywhere from a few days to over a month:
1995-1996 (26 days): Disrupted contract payments and government services.
2013 (16 days): Delayed procurement timelines, frustrating thousands of contractors.
2018-2019 (35 days): The longest shutdown in history, delaying over $11 billion in federal spending and impacting ~10,000 businesses.
How a Shutdown Impacts Government Contractors
1. Active Contracts: Will Your Work Continue?
Not all contracts are affected equally. The key factors determining whether work stops or continues include funding status and necessity:
Fully Funded Contracts: If your contract was funded before the shutdown, work may proceed. However, if government oversight is required and those officials are furloughed, expect delays (BDO: A Government Shutdown and How Government Contractors Can Respond).
Contracts Requiring Government Access: If your work depends on access to federal facilities or personnel, operations could be halted.
National Security & Emergency Services: Contracts deemed essential (e.g., defense, law enforcement) often continue (Holland & Knight: A Contractor’s Guide to the Impending Government Shutdown).
Tip: Confirm your contract’s funding and status with your Contracting Officer (CO) before a shutdown hits.
2. Procurement: What Happens to Bids & Awards?
No new contracts will be awarded.
Existing procurements—including Requests for Proposals (RFPs)—may be paused.
Agencies will prioritize essential functions, delaying new opportunities (Pillsbury: The Looming Government Shutdown—What Contractors Can Do to Prepare).
If you’re currently bidding on contracts, assume your timeline will be pushed back. If you're awaiting an award, brace for indefinite delays.
Tip: Keep monitoring procurement sites and be ready to act fast when funding resumes.
3. Invoicing & Payments: Cash Flow at Risk
Payment processing halts for non-essential contracts, meaning invoices sit in limbo until furloughed finance staff return.
Small businesses with limited cash reserves are especially vulnerable to these delays (NBC News: When the government shuts down, contractors and their employees pay a steep price).
Tip: Maintain a financial cushion or secure a line of credit to bridge cash flow gaps.
4. Employee Management: Should You Furlough Staff?
Federal employees usually receive back pay post-shutdown, but contractors do not.
Without payments coming in, businesses may be forced to furlough employees or delay salaries.
Tip: If possible, offer accrued paid time off or shift employees to other revenue-generating projects.
How to Prepare: Actionable Steps for Business Owners
1. Financial Planning
Maintain a cash buffer or secure a business line of credit.
Delay major expenses until after the shutdown threat has passed.
2. Communicate with Your Contracting Officer
Ask for written confirmation of your contract’s funding status.
Request guidance on alternative arrangements if oversight is needed.
3. Document Everything
Keep detailed records of work stoppages, costs, and correspondence.
Proper documentation may help with claims for reimbursement or contract extensions later.
4. Review Contract Clauses
Check for FAR 52.232-18 (Availability of Funds), which outlines funding limitations.
Determine if your contract includes provisions allowing for adjustments due to a shutdown
5. Monitor Agency Updates
Stay informed through government websites like GSA.gov, SAM.gov, and agency-specific procurement sites.
Sign up for alerts from the Federal Times and Committee for a Responsible Federal Budget for shutdown-related news.
Stay Proactive, Not Reactive
A government shutdown is disruptive, but businesses that prepare in advance will weather the storm better than those caught off guard. By securing cash flow, staying in contact with contracting officers, and tracking shutdown-related impacts, you can position your company to recover quickly once funding resumes.
Keep an eye on congressional negotiations and be ready to pivot as needed. The better your planning, the less painful the shutdown will be.
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