B2B Payments

Shutdown Halts Payments To Government Contractors

The record-breaking government shutdown is at the center of debate, largely for its impact on unpaid government workers. However, reports in Bloomberg point to another community struggling to get paid as a result: government contractors.

More than 1 million government suppliers are reportedly forced to wait on payment from the U.S. government, according to Bloomberg on Thursday (Jan. 17). While President Donald Trump authorized federal government workers to receive back pay when the shutdown is over, employees of vendors with government contracts are not guaranteed the same safety net.

Reports said the impact on government vendors is large enough to make a measurable impact on the national economy. According to the Council of Economic Advisers, the shutdown will reduce U.S. economic output by about 0.13 percent every week. The Council’s chairman, Kevin Hassett, told Bloomberg that this impact is greater than previously expected for government contractors.

“We’ve been watching the actual effects, and noticing that the impact that we see on government contractors is bigger than the sort of staff rule-of-thumb anticipated,” he said earlier this week.

The government suppliers include cooks, custodians and consulting firms, with Bloomberg calculating that up to $200 million could be lost by these contractors every day of the shutdown in the form of delayed government payments.

Science Applications International Corporation said earlier this month that it is losing $10 million in revenue every week as a result of the shutdown, with the government delaying as much as $50 million in payments to the company. Consulting firm Grant Thornton said about 20 percent of its public sector practice workers have received stop-work orders.

“Many of our peer organizations don’t have the ability to absorb this kind of thing, and, at some point, we won’t either,” said Grant Thornton Principal Robert Shea in an interview with the publication.

Reports also noted that the shutdown could be especially damaging to small and medium-sized government vendors. Telecommunications firm MetTel, with about 500 employees, secured a contract with the government, but is now left in limbo, according to the company’s Senior Vice President Diana Gowen.

“We spent lots of money on bidding proposals and getting our back-office systems approved,” Gowen told Bloomberg. “All of that is, as you can imagine, an expensive endeavor with, at this point in time, no return on the investment. As a small business, it is a little painful.”

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