Navigating a Federal Government Shutdown: What Contractors Should Do Now
A federal funding lapse is disruptive, but it is also predictable—and therefore manageable—if contractors treat it as a legal and operational planning problem rather than a headline. Two guideposts matter most. First, agency “lapse plans” required by OMB Circular A-11 govern what work continues and what stops. For contractors, that translates to an immediate need to confirm, in writing, which contract activities are “excepted,” which are suspended, and what access to facilities, systems, and government personnel will look like during a lapse. Absent clear written direction from the contracting officer, assume the Antideficiency Act bars new obligations and do not self-authorize performance.
Second, use the latest OMB communications as contemporaneous context for shutdown posture. Recent OMB messaging has heightened expectations that agencies will refresh and follow their lapse plans, conduct pre-lapse coordination, and manage workforce availability conservatively during appropriations gaps. While that direction is aimed at federal managers, it has direct consequences for industry: contractors should anticipate slower government response times, narrower “excepted” footprints, and a premium on contemporaneous documentation of government direction and access limitations. The practical implication is to increase the cadence and specificity of written exchanges with contracting officers before and during any lapse.
With those pillars in view, execution pivots to disciplined contract management. Begin with a clause-by-clause assessment of each active award: funding status, period of performance, stop-work or suspension clauses, government-furnished property, security and cyber obligations, and invoicing mechanics. Where prior-year or no-year funds are properly obligated, performance may continue; where they are not, seek written confirmation before taking any step that would risk an unauthorized commitment. Use the same correspondence to clarify physical and digital access, deliverable schedules, and whether interim reporting is expected while government personnel are furloughed or otherwise unavailable. As industry practice underscores, written communications with the contracting officer, rigorous record-keeping, and proactive planning for resumption once appropriations return are essential.
Financial readiness is equally important. Model delayed payments and the accrual of carrying costs; consider drawing on existing lines of credit, deferring non-essential expenditures, and, where allowed, revisiting payment terms with key suppliers. Communicate transparently with employees about status, benefits, and anticipated timelines; if any workforce actions are contemplated, coordinate legal review to ensure compliance with applicable labor and notice requirements. Keep timekeeping precise: segregate “excepted” effort from paused work, and track shutdown-related costs in a manner that will support potential requests for equitable adjustment where appropriate. Continuity planning, alternate revenue strategies, and readiness to restart quickly once funds flow are critical differentiators.
Finally, remember that shutdowns do not suspend all obligations. Inherently governmental functions remain off-limits to contractors at all times, and security, safety, and property-protection requirements persist—sometimes with tighter staffing. Contractors supporting national security or public safety missions should expect the government to minimize personnel while consolidating excepted activities and should calibrate staffing and subcontractor oversight accordingly. When in doubt, ask for written guidance before proceeding, and retain those communications as part of a well-organized shutdown file.
The through-line is simple: align performance to the agency’s written lapse plan, obtain and preserve contracting-officer direction, protect people and property, manage cash conservatively, and prepare to restart the moment appropriations resume. By operationalizing those steps—and tracking each decision as it’s made—contractors can convert shutdown turbulence into a controlled, auditable pause and a faster return to business when the lights come back on.
Disclaimer: This post is for educational purposes only and does not constitute legal advice. It summarizes public guidance and industry commentary as of September 26, 2025, and may not reflect subsequent developments. Contractors should consult qualified counsel regarding specific facts, contracts, and jurisdictions.