Shutdown News for Federal Contractors: Why a New Bill and a DoD Class Deviation Matter

Federal News Network’s recent interview with Terry Gerton and Stephanie Kostro offers two developments that, taken together, could reshape how contractors weather appropriations lapses: the reintroduction of the Fair Pay for Federal Contractors Act of 2025 and a Defense Pricing and Contracting Acquisition Policy (DPCAP) class deviation issued on October 1. Both measures respond to the structural inequities that surface during shutdowns and the operational paralysis that ensues when agencies cannot obligate current-year funds. Credit to Terry Gerton and Stephanie Kostro; their discussion provides essential context for understanding these moves. (Federal News Network)

The legislative proposal aims to guarantee back pay for contract workers after a shutdown ends, closing a gap long recognized since the 2018–2019 lapse when Congress ensured back pay for federal employees but left contractors to absorb losses. According to Kostro, the bill would cover a broad range of contractor personnel and cap weekly compensation at $1,442—a figure derived from 250% of the federal poverty level for a family of four—while also restoring paid leave used during the lapse. The bill would require the Office of Federal Procurement Policy to report on uptake and payouts, introducing a measure of accountability often absent from post-shutdown relief efforts. Political dynamics remain mixed, but notable support spans both industry and unions, reflecting a shared premise: shutdowns are not the fault of contractors or career civil servants, and retroactive relief mitigates collateral harm to the government’s supply base. (Federal News Network)

In parallel, the DPCAP class deviation addresses the perennial Anti-Deficiency Act barrier by authorizing contracting officers—under narrowly defined circumstances—to obligate funds for “accepted” (essential) activities in anticipation of appropriations. This is not carte blanche; rather, it aligns with four conditions reinforced by White House lapse-guidance FAQs issued October 3, including explicit statutory authority, emergency needs to protect life or property, constitutional functions, or obligations “necessarily implied” by other authorized activities. The deviation’s novelty lies in operationalizing these principles for the Department of Defense during the current lapse, enabling the award of task orders, options, or modifications vital to mission continuity. For contractors, the practical implication is not to self-initiate obligations but to surface the deviation to contracting officers—especially where FY25 funds are nearly exhausted—and request consideration within the defined exception pathways. (Federal News Network)

For federal contractors, these developments are significant on both risk and resilience fronts. The bill directly addresses human-capital fragility by reducing the personal financial shock workers face, which in turn stabilizes project teams and preserves institutional knowledge that is indispensable once work restarts. The DoD deviation, meanwhile, lowers the probability of costly stop-start dynamics on essential work, preserving schedule integrity and limiting cascading performance penalties. Together, they reduce the hidden costs that shutdowns impose on pricing, recruiting, and supply-chain reliability—costs that agencies ultimately pay via delays, recompetitions, and degraded readiness.

There are, however, practical caveats. The back-pay legislation is not law until enacted; contractors should avoid promising employees benefits that depend on final passage and appropriations. Moreover, compensation caps will require payroll system readiness to calculate retroactive amounts precisely and to account for leave restoration. On the operational side, the deviation’s application is contingent on contracting officer judgment and documentation linked to the authoritative exceptions; different buying activities may interpret “necessarily implied” obligations with varying degrees of caution. Documentation discipline—cross-referencing the deviation, the lapse FAQs, statement-of-essential-functions, and program risk memos—will be crucial to withstand post-hoc scrutiny. (Federal News Network)

In the near term, prudent contractors should brief program managers and counsel on both instruments, prepare templated communications for contracting officers summarizing applicability to their specific efforts, and model cash-flow scenarios under three states: full stop, partial continuation via prior-year funds, and essential continuation under the deviation. Those steps, while administrative, can materially improve continuity and employee retention during a prolonged lapse. Federal News Network’s coverage underscores a rare moment of convergence: policy, oversight, and acquisition pragmatism meeting at the same time to protect mission outcomes and the workforces that deliver them. (Federal News Network)

Disclaimer: This article summarizes publicly available reporting and commentary as of October 15, 2025. It does not constitute legal or financial advice. Readers should consult official sources, their contracting officers, and qualified counsel before taking action. (Federal News Network)