Federal Shutdown Impact on Contracting and Payments

🚨 GovCon Gridlock Alert! As of mid-October, the federal government is fully shut down due to Congress’s failure to enact any FY2026 funding or continuing resolution (CR). For small businesses chasing 8a contracts, working under a GSA Schedule, or managing BPAs, the procurement pipeline has officially ground to a halt.

In this urgent episode, we break down what this funding crisis means for your federal contracting business:

What’s Frozen (And Why):

• Awards and Options: Under the Antideficiency Act, no new awards, task orders, or option-year exercises are happening unless they were pre-funded. Roughly 620,000 federal employees have been furloughed, causing most civilian contract shops to close or run severely understaffed.
• Payments: Invoice processing is stalled. Even for completed work, there may be no government personnel available to certify and process invoices, severely straining contractor cash flow. Expect payment delays, as historical shutdowns show recovery can take 3–5 days for every day the government is closed.

Who Is Most Exposed:Small contractors holding 8a certifications, Women-Owned Small Business (WOSB) firms, SDVOSB firms, and SBIR/grant applicants are most vulnerable to indefinite delays and slipping Q1 FY2026 awards.

Your Proactive Checklist:We provide the essential steps you must take right now to protect your business and position for the eventual recovery:

• Forecasting: Push all expected Q1 contract awards out 30–60 days and model multiple shutdown scenarios.
• Cash Flow: Accelerate all invoice submissions immediately to get in line for payment once funding resumes. Secure short-term liquidity options, like lines of credit or invoice factoring, to mitigate the risk of missed payroll.
• Documentation: Maintain detailed records of all costs and delays tied to the shutdown, which is essential for submitting equitable adjustment requests later under clauses like FAR 52.242-14 and FAR 52.242-15.

Don’t panic—pivot. Learn how to move staff to unaffected work, invest in internal tasks like updating your federal contracting certifications, and stay ready so you can move faster when agencies play catch-up.