Funding Shortfalls (Sequestration & Shutdown)

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With budget cuts in the headlines and an election just around the corner, contractors once again face the threat of reduced funding for their contracts. The sequestration process established in the Budget Control Act of 2011 will impose automatic across-the-board spending cuts of more than $100 billion per year for each of the next ten years, significantly impacting contract expenditures by the Department of Defense and other agencies. As agencies look for ways to pare down their spending, contractors may find themselves hearing that there is not enough money to go around. Fortunately, contractors can take comfort in the fact that a lack of funding does not normally excuse the government’s payment obligations.

Line in the Sand

The Supreme Court’s decision in Salazar v. Ramah Navajo Chapter, No. 11-551 (U.S. June 18, 2012) addresses this subject. The government sought to avoid its contractual promise to pay the full amount of “contract support costs” to Indian tribes that contracted with the Department of the Interior to provide federally-funded services such as education, health services, and law enforcement. The contracts with the tribes were authorized by the Indian Self-Determination and Education Assistance Act, which requires the Secretary of the Interior to pay the full amount of a tribe’s contract support costs (e.g. auditing costs, workers’ compensation insurance, and start-up costs) subject to the availability of appropriations. But if the contract support costs are not paid, the tribal contractors can pursue money damages under the Contract Disputes Act and obtain payment through the Judgment Fund, which does not have any fiscal year limitations and is not subject to Congressional appropriations.Continue Reading Contractors get paid even if appropriations are exhausted

Contributed by Ike Skelton and Russell Orban of Husch Blackwell’s Government Affairs Practice Group

The United States Department of Defense is the world’s biggest purchaser of goods and services, spending some $381 billion on contracts in FY 2011. But serious changes are on the way. The Iraq war is over and the Obama Administration is planning to withdraw from Afghanistan in the near future. Last summer’s hard-fought budget agreement requires $487 billion in cuts to the defense budget over the next 10 years. The President will soon recommend a defense budget that shaves $51 billion from its previous 2013 projections.Continue Reading The impact of mandatory budget cuts on contracting at DoD

Contributed by Kyle J. Gilster, Esq. of Husch Blackwell’s Governmental Affairs Practice Group

The government contracting community is concerned about the repercussions of the failure of the Joint Select Committee on Deficit Reduction (aka “the Super Committee”) to reach an agreement before the November 23rd deadline. In light of this failure, the question of the day is what happens now on deficit reduction and what impact this will have on government contractors.Continue Reading Automatic budget cuts under the Budget Control Act of 2011

Once again, the government stands on the precipice of a shutdown. As the clock counts down—the deadline for a budget or another continuing resolution is midnight on Friday, April 8, 2011—agencies have started preparing for the consequences. Contractors should be prepared as well.
Continue Reading The Contractor’s Guide to Surviving a Government Shutdown, Part II

Unless Congress takes action by March 4, 2011, most federal agencies will be required to cease operations, presenting significant challenges for contractors. Whether you’re optimistic or pessimistic about the prospects of a political solution that would avoid the looming government shutdown, preparing for it is a necessity. News reports on the issue are interesting, but they don’t do much in the way of developing a strategy for handling a shutdown. Here is a look at some of the key questions presented, with answers based on decisions that came out of the now infamous 1995 government shutdown.
Continue Reading Surviving a Government Shutdown