When the federal government shuts down due to a lapse in funding, the ripple effects spread far beyond Washington. Government contractors often find themselves caught in a web of uncertainty, stalled projects, delayed payments, and anxious employees. The 2025 shutdown has already led to widespread furloughs and temporary program halts across multiple agencies - serving a stark reminder of the industry’s vulnerabilities.
That said, uncertainty doesn’t have to mean paralysis. While contractors can’t control the timing of the budget agreement, they can take practical, proactive steps to safeguard operations, protect their workforce, and position themselves for a strong recovery once the government reopens.
Below are a couple strategies contractors can employ to remain resilient and maintain control during the turbulence of a federal shutdown.
1. Know Your Exposure: Review and Segment Contracts
The first and most important step is understanding where your vulnerabilities lie. Not every federal contract is equally affected by a shutdown. Some contracts continue unhindered if they’re funded through multi-year or “no-year” appropriations, while others may grind to a halt if they depend on annual funding.
Review your contracts in detail. Examine clauses related to “availability of funds,” “stop-work,” “termination for convenience,” and “equitable adjustments.”
Categorize your contracts by funding type, such as multi-year, prior-year, or current appropriations. Identify which tasks depend on active federal oversight or approvals that might be unavailable.
Develop a heat map of high-risk projects so you can prioritize communications, contingency planning, and financial mitigation accordingly.
2. Preserve Your Rights Through Documentation and Communication
Documentation is your strongest ally and maintaining detailed records will help you recover costs or defend claims once the shutdown ends.
Track everything. Keep contemporaneous records of delays, idle labor, additional costs, and communication attempts with your contracting officers (COs).
Notify promptly. Many contracts require written notice of delays or impacts within a set timeframe. Missing these windows can forfeit your right to claim adjustments later.
Stay in contact with COs. Even if agency staff are furloughed, maintain open communication channels and send updates when possible. Demonstrating diligence and transparency builds trust and credibility.
Mitigate damages. Document reasonable steps taken to minimize losses, such as reassigning employees or pausing discretionary expenses. This proactive behavior strengthens your position in future claims.
Staying Steady Amid Uncertainty
A government shutdown is never easy, but it doesn’t have to spell disaster. Contractors that take proactive steps will not only weather the storm but often emerge stronger and more resilient.
As history shows, the federal government always reopens. The question is: will your business be ready to hit the ground running when it does?
