Mitigate Risk By Becoming A Contractor to Government? Think Twice

As our elected representatives shake their sabers at each other and pontificate about multi-trillion dollar spending cuts, a U.S. federal government shutdown will occur for the first time in 15 years if our politicians can't reach a budget agreement by Friday, April 8th. In our most dismissive of moods, some of us might say "fine, shut it down ... that's probably the best way to save tax dollars and further reveal the ineptitude of our legislators." But there's much more to a federal shutdown than meets the cynical eye.

This morning's WSJ reports that "U.S. businesses are bracing for layoffs and disruptions along their supply chains if the federal government shuts down ...[and] Businesses and lobbying groups in Washington say the uncertainty alone is causing problems." The Journal also points out small and midsized businesses that "rely on steady flows of revenue from federal contracts to provide a wide array of products and services such as information technology consulting, building construction and maintenance, or food service at national parks ... [are] especially hard hit."

There will be plenty of finger pointing, blaming and shaming to go around if our fearless leaders fail to reach a budget deal. But all of that nonsense pales in the light of irretrievable losses that are incurred by businesses -- many of which were "lured to federal contracting by set-aside programs and grants aimed at helping credit-starved businesses through the recession." To wit, according to the Journal, "Government shutdowns in 1995 and 1996 totaling 26 days stalled nearly one-quarter of $18 billion in Washington-area government contracts. Toxic-waste cleanups stopped at 609 'Superfund' sites, and 2,700 workers were laid off. All national parks closed, costing $14 million a day in lost admission fees and revenue to local contractors and vendors."

If a shutdown does happen, perhaps our representatives will sweat at least a small price for their inaction. With hot and humid weather just around the corner in our nations capital, Tom Soles, executive director of the Sheet Metal and Air Conditioning Contractors' National Association -- "whose members have worked on many of the biggest federal buildings and monuments in the capital" -- is quoted saying, "Everything would shut down -- there would be no access to the facilities our contractors are working on because you can't get in the door..."

- William Busch

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