DESPITE PERCEPTION, A DEFAULT IS NOT THE SAME AS A SHUTDOWN

Federal contractors are increasingly uneasy about a potential default on the federal debt if no deal is reached on increasing the debt ceiling.  One major reason why is that, while a default is not the same thing as a partial government shutdown due to a lack of appropriations, some federal agencies may treat it like one anyway.  Agencies are apparently already having discussions over essential and non-essential workers, just as they would if a lack of appropriations caused a shutdown.  Another difference is that appropriations do exist, meaning that they do have to be spent, or at least firmly committed, during the current fiscal year.  How this jibes with a lack of actual funds is unclear as the US has never previously defaulted on its debt.  Both contractors and their customers badly need guidance from the Office of Management and Budget.  OMB, so far, though, appears to be fixated more on the political message of casting blame over who would be responsible for any default.  That has to change.  Agencies will be forced to make up policies as they go along and, without centralized guidance, that will inevitably mean a host of differing interpretations and practices.  Contractors should be asking critical questions of their government customers now to ensure that all are prepared for any possible outcome.  Will work continue on this project?  Will the building be locked?  What is the order of priority for paying bills?  If we are asked to do work without being paid (technically not allowed), will we be paid?  No one will know whether the government may actually face a debt default until the day it actually happens.  The clock is ticking, though, and contractors should be prepared for whatever eventuality occurs.