Shutdown Lowdown: What Federal Contractors Can Do To Ease The Pain

As of this writing, our, ahem, “leaders” in Washington appear incapable of avoiding a shutdown of the federal government.  Barring a political breakthrough, at least a partial shutdown is likely, beginning tomorrow morning.  And depending on the duration of the stalemate, the consequences of a shutdown could be felt deeply and painfully throughout our economy, including the construction industry.

Should the federal government shut down, what should contractors do to mitigate the damage?

I commend to your reading this 2-page memo from AGC of America.  It not only provides a concise summary of how the federal government arrived at this precipice, it also includes a helpful list of actions contractors on federal projects can and should take to protect their interests.

To my mind, the most salient point made in AGC’s memo is the importance of carefully segregating the costs that might be incurred by a contractor in the event its project is suspended due to a shutdown.  As a general rule, claims for equitable adjustment arising from owner-caused delay are much easier to prove and recover upon when the damages claimed are both directly tied to the impact in question and readily quantifiable.  That general rule would most certainly apply to claims for equitable adjustment that might arise from a project suspension occasioned by a shutdown of the federal government.

If your project is suspended due to a shutdown of the federal government, consider creating a unique set of cost codes for the sole purpose of capturing the costs of the suspension.  That means if you are forced to demobilize equipment; weather-protect work-in-place; remobilize post-suspension; and/or perform additional clean-up, site grading and erosion control post-suspension, you should create a separate cost code for each of those activities (and any others related to project suspension).  You should also create a separate set of files for maintaining the invoices, labor/equipment timesheets and other cost-supporting documentation.

Let’s keep our fingers crossed for an 11th hour resolution to the impasse in DC.  Should the government shutdown, however, I will try my best to keep on top of news stories discussing the impact on the construction industry and pass them along.

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