WHAT THE CONGRESSIONAL SHIFT TO “EMERGENCY SUPPLEMENTALS” MEANS FOR CONTRACTORS

While Congress still has significant work to do to pass final FY’24 appropriations, the body is shifting its attention this week to supplemental spending bills that will largely be focused on providing aid to Israel and Ukraine.  While those two countries could benefit from such help, there is concern that this new focus will further delay action on mainline spending bills.  This may not be the best news for contractors or their customers, except for those that may benefit from the projects funded by the supplemental bills, but it is the reality.  One question that frequently comes up is whether Congress may just punt all FY’24 spending and re-set for FY’25. That would create a serious negative impact on national security resulting in a shortage of funds for a variety of DOD and DHS programs.  So far, however, at least one Senator believes that there is “only” a 20% chance of a full-year CR.  It is increasingly likely, though, that Congress will delay significant further appropriations action until the sequential deadlines of January 19th and February 2nd draw closer.  This would leave little time for differences between House and Senate funding levels to be resolved.  The result could be another set of short-term CR’s or a CR for most civilian agencies, while others such as DOD, the VA, and DHS receive full-year appropriations.  Regardless of specific actions, however, delays create uncertainty which undeniably has a negative impact on the conduct of government business.  While incumbent contractors with full pipelines may be safe for now, the longer the uncertainty continues the worse off companies may be as federal agencies become increasingly wary of moving forward with projects of any meaningful size that require appropriated money.  It may well be January before any new action happens on this front.  Contractors and their customers should plan accordingly.