Many contractors could be adversely impacted by a shutdown of the federal government if Congress does not agree to a budget for fiscal year 2011 (FY 2011). However, the impact upon any specific contractor may depend upon a number of factors including the nature of the goods or services to be provided, the funding sources for a contract and the criticality of the work to be performed.

The Antideficiency Act, 31 U.S.C. 1341, prohibits federal officials from incurring obligations in the absence of an appropriation that provides funding expressly for the intended purpose. Therefore, federal agencies will not be able to award any new contracts that are funded from the FY 2011 appropriation. By the same token, agencies will not be able to make changes to existing contracts that increase the government's cost of performance and therefore require the obligation of FY 2011 funds.

If your contract is funded from a prior year's appropriation or from no-year or multi-year appropriations, contract performance would not necessarily need to be stopped. However, if the contract requires access to a government facility or requires technical direction from government officials, performance may be suspended because the agency closed its doors and furloughed its employees. By the same token, if the contract provides for the delivery of goods, delivery could be delayed by the furlough of an agency's employees since no one would be available to accept the goods.

The Office of Management and Budget has issued guidelines — "Agency Operations in the Absence of Appropriations" — should a government shutdown occur. Those guidelines authorize government agencies to continue work that provides for national security, provides for benefit payments to the public such as Social Security payments, or which involves the conduct of essential activities that protect life and property. A contractor may be authorized to continue performance of a contract that support these critical or essential activities. But, payment for completed work may be delayed if employees in an agency's accounting office have been furloughed.

Government contractors should communicate with contracting officers for clear direction as to whether contract performance will continue during a government shutdown. If you are required to stop work on a federal contract, you may be entitled to an equitable adjustment to the price or estimated cost of a contract. But, entitlement will depend upon a number of considerations including the contract type, whether the contract is for goods or services, and the nature of the costs incurred as a result of the stoppage of work.