Government Shutdowns Don't Happen Only in the USA - What Shutdowns Mean to Small Private Businesses

As a freelance consultant with an established firm, I am invited frequently to propose, send letters of interest or complete requests for qualifications for government authorities keen to kickstart a medical tourism or other healthcare initiative. Most of them require lots of time and effort to go through the vetting process to be placed in line as a candidate, then more time to respond to RFPs, develop answers for the questions they pose, only to never hear from them again.

The real risk, however is "what if we win" the contract?

After the US Congress’ failure to pass a continuing resolution to fund the government Friday, the federal government will have to shutter most of its services. While headlines may be dominated by national parks and other closures, a federal shutdown affects employees and contractors like my firm most directly. Contractors for "non-excepted" services — basically wherever lives or the economy are not on the line — go home, frequently leaving small businesses like mine with a number of hard decisions to make.

What do we do with the people we recruited to produce the deliverable?

What do they do if they turned down work from others because the committed their availability to me and our firm?

When the government stops functioning, contracting decisions and certifications are also put on hold. But then the pile grows. This puts revenue for a small firm like mine at risk for delaying key revenue. Regulatory approvals, publications of final rules, policy decisions, and other communications will be delayed until well after the end of the shutdown, leaving businesses like mine in the lurch.

Shutdowns have ripple effects

As a shutdown continues, I count my lucky stars that we work only with administrative support staff as employees now and no longer have such a big head count of employees. If I did, and then had to resort to layoffs, it will trigger all sorts of labor and employment law obligations. Large number layoffs require compliance notifications under the WARN Act in the USA.

So far, the Trump Administration has not been good for my business. Some of the talent upon which I rely or associate work on H1B visas. They are not substitutable by untrained, inexperienced U.S. talent. Some are Muslim and are wonderful people, who have a different color of skin or pray using different words. They are people. They feel, bleed, sense hostility, they are offended and rightfully so when their homelands are referred to as "shithole" countries. When I travel to a place outside the USA, people waste time worrying "Is she like him?" "Does she secretly think like him and his base?" until they get to know me.

I am a gun owner, and a damn good shot, too. I also support legalization and decriminalization of marijuana. I am a "#MeToo" victim of abuse and cannot stomach the misogyny I've witnessed in the top levels of government in the USA and abroad. I openly objected to the violence we witnessed in our capital city as Americans and Turks were brutally attacked by the Turkish security officers last May. My outrage led to strangers on Linkedin calling me names and stating I was "a PKK sympathizer" by government officials who were members of LinkedIn who never met me and know nothing about me. Yes, PKK. The Kurdish people the Turks bombed this past weekend. You think for a minute, that I will ever willingly travel to Turkey for any reason after that? I can buy Raki and meat on sticks any time I want. I don't need to return to Turkey ever again in this lifetime.

Government shutdowns don't happen only in the USA

Government shutdowns have occurred on many past projects I've been involved with. Europe, Africa, South America, the Caribbean, and in the USA. I chose to balance our portfolio with government projects and private sector projects. and now that I see what is happening not just in the USA but in many other places, I am glad I haven't built upon a strategy that could be profoundly impacted by a reliance on government contracts that could financially cripple me.

This isn't my first U.S. government shutdown either. In 35+ years. I launched my first consulting firm in 1983. Three years after the first one day shutdown in 1980. and another in 1981(R-Reagan). In 1984 (R-Reagan) another, then in 1986 (R-Reagan), and again in 1990 (R-Bush Sr), then in 1995-96 (D-Clinton), and again in 2013 (D-Obama).

Shutdowns and the effect on the marketplace and the public and the private sector

The worst part about this is the uncertainty it creates for federal employees and the general public. It creates skittishness in the private sector when hospital executives decide to pend projects, and physicians and dentists decide to wait and see what comes next. It affects my clients in Mexico who are afraid about a wall being built and its potential impact and impediment to their ability to export medical and dental services to U.S. customers. Already we have had 4 consulting contracts from Mexico suspended in two days driven by uncertainty and political grandstanding.

Politics is hard enough. It isn't my cup of tea. But as a business owner who does business both inside and outside the USA, this past year has been an emotional and financial rollercoaster. I have a genuine love of honest, upstanding people of all colors, all religions, all education levels and socioeconomic statuses. All ethnicities, gastronomies, and languages -- I love languages. People who know me well, know that I try very hard to learn as many words in a new language as possible and that I make every effort to celebrate diversity and learn about new cultures I've not encountered before. This shutdown means that I will accept fewer government projects anywhere and travel on international development projects less frequently. I will seek fewer government contracts in my own country and outside the USA. I don't really need to pursue them. I don't have time for the drama that they entail.

While some may say that at my age (60) and with more than 35 years of experience in business, I am a seasoned veteran and can take it in stride. Well, yes, I can. But I choose not to do so. This pensiveness and uncertainty is the reason why I went into business for myself, rather than be an employee at the mercy of some other employer.

In my business I alone choose a client strategy and choose which assignments I want to engage in while using my 86400 seconds in a day. The combination of government shutdowns and suspensions of contracts and payments in many countries combined with the volatility of what is happening in the USA makes it tough for a small business like mine to work in the international marketplace. I don't need to purse more of it. Instead I am going to institute internal policies that fit my way of doing business and to hell with the rest. Let someone else do the drama and undertake the risk.

Today, I will re-examine and reflect on my current business policy on government contracts with any government. A shutdown affects incrementally funded contracts more than fully funded contracts. I am considering discontinuing the extension of credit to governments. Though exceptions may apply, the funding for incrementally funded contracts may lapse in the event of a shutdown, which could cause the payment for the work (but perhaps not the deadline for our outputs) to come to a halt. The answer, however, does not lie with fully-funded contracts, as they too may be impacted by furloughed employees who process invoices, facility closures or other unexpected costs.

On fully-funded contracts, I may add a provision for unexpected cost overruns that are "caused by" delayed payments and treat them as a "damage" and build in a provision to liquidate the damages without going through the expense of dispute resolution or litigation. You suspend the government and don't pay me timely, or cause a cost overrun because of the shutdown? Defacto causality.

Does a client's private sector project involve conducting research from data or assets that are only available through public sources? I may put a provision into the contract that holds me harmless and has the client indemnify me if we are in a hotel in or near a government center to do the research and the government facilities close during a shutdown and furloughed employees or limited hours affect access to the government facilities (or the website or resource centers) we need to access in person or by phone or email. I learned that the hard way as an expert witness in Philadelphia holed up in the Marriott Hotel for 10 days while the attorney entertained the court with histrionics and frequent sidebars, dragging out the time I sat in the hotel, only to get stiffed on the bill by the defense attorney who hired me and required me to remain in that particular hotel for ten days like Rapunzel stuck in the tower and not allowed out while the hotel bill accumulated by several hundred dollars a day.

In big businesses, the kind that donate to the Trump campaign and lobbies, contractors seek written guidance from their contracting officers before a shutdown about contract performance during a shutdown. In small business, people like me are the contracting officer and the contractor all in one. I have to decide who gets paid, who doesn't, if we'll remain open, if we close and whether contract performance should continue. If we can't cover the bills, I alone have to take out a loan to tide us over.

In big businesses, if the contracting officer informs contractors that contract performance should not continue during the shutdown, contractors often insist on a written stop-work order to protect their interests. For us little guys, if we didn't provide for such a stop work order to be provided to us, we don't get to demand it after the fact. I am going to add a checklist item in my internal contracting process that states that I will require a stop-work order for contracts that remain funded, but cannot be continued during the shutdown due to furloughed employees or closed government facilities or other hurdles outside my influence and control.

I am also going to add a checklist item that Finally, contractors contemporaneously requires that the client inform inform me within a specified advance notice time frame, in writing, of any "risk" of expected delays so that I can calculate our response and/or added expenses we may incur to mitigate and get authorization to bill for those future expenses or delays, as may be applicable.

I am also going to add a new paragraph to my independent contractor agreements that states that the contractor understands and agrees that I am to be held harmless in the event that a government shutdown interrupts our work or collaboration on a project. And that if I cannot reassign them to another project, we don't get paid. Not me. Not them.

I am going to buffer with more cash when I agree to accept a government paid contract in the event payment delays are extended and put an acceleration clause in my contract once notified of the risk of an impending shutdown. They can open an escrow or deposit account and place adequate estimated funds in it before the shutdown upon which I can draw down tranche payments timely until the shutdown is lifted. For those who won't do this, I will require more fully-funded contracts and larger retainers. If they won't agree to either, they can go find someone else to help them. I won't capitulate. I don't want to. I don't have to. I don't need government contracts to survive.

I vow to also do a better job of documenting. We do a fair job at it now, but going forward, with debt on my books from 9 countries outside the USA that I will likely never see, I vow to leave myself less exposed to additional expenses caused by payment delays. These can occur through extra material and vendor costs, costs associated with ramping up or winding down contracts, unabsorbed overhead, delays from furloughed employees and contractors, or intervening contractual actions. I will be meticulous and budget for an accounting technician for each government contract that will be responsible to document these expenses as they occur and memorialize all correspondence with agencies, contracting officers, employees and subcontractors in writing. That's a legitimate project cost that I have not been too particular about in the past. Not anymore. That technician will also be responsible to record any unavoidable costs or actions taken to mitigate costs during the shutdown in order to validate subsequent requests for equitable adjustment that contractors may submit once the shutdown ends and to follow it through to ensure we've been paid and made whole.

The Trump Administration has yet to prove it is good for me and my business. Experience has taught me a tough lesson that government shutdowns, in any country where I do business presents a number of serious financial and operational challenges for a small boutique consulting firm. We get stuck either with a lack of incremental funding, or the inability to enter into new contracts or contract modifications, or accessing closed government facilities and furloughed government employees; by delayed payments; increased incremental indirect costs; and potential unexercised and deferred contract options.

Though I have hope for an end to the congressional stalemate, and it matters not who is to blame and why, now is the time to prepare for those challenges and mitigate them where possible.

About Maria Todd

Maria Todd is a globally-renowned health industry entrepreneur and healthcare business strategist who consults to healthcare & health tourism businesses. She solves complex operations, marketing and payment challenges in healthcare business administration. 

Maria brings over 35 years of expertise in six complicated areas of healthcare business administration and strategy, namely: Managed Care Contract Analysis & Negotiation, Health Tourism Business Development, Concierge Medical Practice Consulting, Integrated Physician Group Consulting, Physician Employment Contracting and Negotiation, and Healthcare Marketing and Branding.

She is the author of 18 internationally published healthcare business administration professional books and has delivered more than 3000 keynote presentations, Master Classes, webinars, seminars and client onsite workshops in over 100 countries since 1989.

Find and follow Maria's posts online using #AskMariaTodd.

Get in touch with Maria Todd for help with your narrow network response and contract negotiation strategies. Call +1.800.727.4160, today.