OUR PREDICTIONS ON A SHUT DOWN AND FY’25 APPROPRIATIONS

Although it will be close, the federal government will likely not shut down for any significant amount of time at the start of the new fiscal year.  The most contractors and their customers could expect is a short 24-48 shutdown, most likely including at least one weekend day.  That’s Allen Federal’s prediction as of right now.  Never mind side shows on voting security and tangential issues the Senate and White House would like to add, the Continuing Resolution should be mostly “clean” and will likely last into mid-December.  That is not to say that final FY’25 appropriations actions will be conducted this year.  Regardless of the election outcome, it seems increasingly likely that appropriations measures will pass in a timeframe similar to that for FY’24, i.e. sometime in late winter or early spring.  Such delays definitely reduce acquisition spending and have related impacts on everything from military pay to airport security.  Bloomberg Government recently estimated that this year’s appropriations delays were at least partially responsible for an 8% drop in DOD acquisitions for FY’24.  Delayed spending actions have some definite implications for a host of government missions, not the least of which is national security (See below).   One small upside, however, is that contractors can look forward to the separation of a debt ceiling vote from appropriations bills.  Most financial institutions now believe that Congressional action on the debt ceiling will not be required until June or July.  That, at least, is a positive.  Contractors will have to closely watch the outcome of the November elections to get a first idea of whether and how a new Congress and president will finish the appropriations work done this year.  While substantial new shifts may not be likely it is quite possible that some oxen previously viewed as safe could be gored.