Default v. Shutdown: What's the Difference?

If the U.S. debt ceiling is not raised, and choices are made about who gets paid and who doesn’t, contractors could feel the pinch long before government officials do, according to a briefing Monday by Todd Harrison of the Center for Strategic and Budgetary Assessments.

Unlike a government shutdown from lack of appropriations, like the one threatened earlier this year, a so-called default does not impact the budget authority for contracting officers and other programmers to continue their normal work, Harrison told reporters at CSBA. It’s just that when the bill comes due, there may be no money to pay it – meaning contractors may not get revenue they were expecting.

Harrison’s comments come as a growing list of observers and analysts are warning federal contractors that they may bear the brunt of any default. While it’s hard to imagine that all contractors for the Pentagon, CIA, NASA, FAA and any other federal agency will be equally affected, I suspect those that provide outsourced professional services could see more pain than others. Indeed, the Professional Services Council, a trade association for federal services providers, hosted a teleconference today to address such worries.

Said PSC, “Failure to reach an agreement carries broad consequences across government and many PSC member companies have properly expressed concern about what it might mean for federal programs, their current contracts, ongoing competitions, and payments due.”

Tags: os99, ar99, default, debt, shutdown