NEW YORK – As the longest government shutdown in U.S. history teeters on the brink of resolution, small businesses that rely on federal contracts and funding are eagerly anticipating relief. For nearly two months, these businesses have been navigating reduced spending, contemplating layoffs, and seeking more stable work environments while grappling with the challenge of reaching closed government offices.
On Wednesday, House lawmakers are set to reconvene in Washington to vote on a compromise bill intended to provide government funding through January 30. Although the bill is expected to pass in the Republican-controlled chamber, a significant number of Democrats are anticipated to oppose it.
For small business owners with government contracts, the shutdown has led to delayed payments and the cancellation of some projects. If the government reopens, these entrepreneurs will face the daunting task of recovering lost time and financial resources.
Among those affected is Jackson Dalton, proprietor of Black Box Safety, a company specializing in personal protective equipment. Just a day before the shutdown began on October 1, Dalton secured a federal contract valued at $1.9 million for the supply of flashlights.
This contract, representing 6% of Black Box Safety’s annual revenue, required an initial expenditure of $1 million by the company based in El Cajon, California. However, Dalton found himself at a standstill, unable to proceed as the contracting office became unresponsive, leaving his emails and phone calls unanswered.
The contract, which would account for 6% of his annual revenue, required the company in El Cajon, California, to spend $1 million at the outset. Dalton said he was unable to because the contracting office did not return his emails or phone calls.
“It’s had a major impact on our cash flow, on our operations,” he said. “Our suppliers are freaking out because they’ve been anticipating this award for like a year. And so they’re trying to spin up and order raw materials to build the goods needed for this contract.”
The only government communication Dalton said he’s received during the shutdown was an emailed stop work order. The contact called for the work to be performed in 120 days.
Considering non-government projects
Eric Veal is owner and president of Interactive Knowledge in Charlotte, North Carolina, which creates digital interactive experiences for museums, educational organizations and cultural spaces with a staff of eight. About 60% of his work this year has come from contracts with the Smithsonian Institution. The Smithsonian is partly funded by the federal government and partly funded by private donors and other sources.
“Federal employees are not able to work at all, and invoices and projects are at a complete halt,” Veal said. Since the Institution isn’t completely funded by the government, some staff was still working during the shutdown, but it’s “just difficult to complete the work without a full staff.”
He cut down on expenses and was considering laying off some employees if the shutdown stretches past mid-November.
“Our cash flow is affected, and so we are having to make small-level changes in terms of expenditures,” he said. “What we have not had to do yet is consider any type of staffing changes or, you know, major changes, but we, we’ve got, we’ve a date on the calendar that we will start to consider doing those things. And that’s really Nov. 15th.”
The shutdown has made him think about focusing more on work in the private sector.
“We rely on these contracts for the bulk of our work,” Deal said. “So the shutdown is making us second-guess that decision, in terms of really hitching our wagon as heavily as we had to Smithsonian. … We are considering really lessening our reliance as a company on federal contracts.”
A distraction from policy issues
The shutdown has made it harder for small businesses to focus on other policy issues they advocate for in Congress. About 2,000 small business owners attending a summit on Oct. 29-30 summit in Washington, D.C., organized by Goldman Sachs 10,000 Small Businesses, met elected officials, policymakers and other speakers to discuss issues like artificial intelligence, accessing capital and employee retention.
Participant Joe Gelardi, whose company in Virginia Beach, Virginia, provides operational support, management and technology services to defense agencies and original equipment manufacturers like Lockheed Martin and General Dynamics, said the shutdown overshadowed what the businesses were trying to accomplish.
“All of us planned for many months to come here (Washington) because we’re trying to help be proactive advocates for the small business community, to help work with legislators in the House and the Senate, to craft policy that will help to make more firm conditions for growth for small businesses across all industries,” Gelardi, president and CEO of Vectrona, said. Instead, the conference ended up “being overshadowed by the fact that this shutdown is in place.”
Meanwhile, the shutdown has impacted his business, which provides technology and training for members of the military to operate complex equipment, he said. The government not operating has caused delays in processing new contracts, bids and proposals, and creates “a lot of uncertainty,” he said. Gelardi said he hasn’t been paid for some contracts, but his team has kept working.
“That is just one example of what’s happening all over the defense space. Companies are being asked to carry the load, and we do it in most cases because we don’t want to let our customer down, we don’t want to harm the relationship, we want them to be able to trust us,” he said. “But it’s really unfortunate that the federal government is transferring the burden of that and asking us to be the ones to carry that cost and find a way to fund the work and manage.”
Contracts canceled
Karen Jenkins, president, CEO and founder of management consulting firm KRJ Consulting, said the shutdown has affected her business based in Columbia, South Carolina, as much as the COVID-19 pandemic did. A contract she won last year that was supposed to have a renewable option this year was canceled, she said.
“There were other contracts that we were tracking that we were going to pursue this year and had a high probability of winning because we probably had the best past performance and rate and things of that nature, but they were pulled,” Jenkins said. “Hopefully and prayerfully, when the government does reopen and with all the furloughs, that they’re going to need some additional capacity. And we are just trying to hold on for dear life to see if we can maintain so that we can be that resource for the government when it reopens.”
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