Congress doesn't always pass a budget. When it doesn't, the federal government shuts down — and federal contractors get caught in the middle. Agencies go dark, COs stop responding, and the cash flow you depend on stops moving.
Government shutdowns have lasted anywhere from one day to 35 days. You can't predict how long one will run. What you can control is whether you're prepared when it happens. Contractors who prepare take a hit. Contractors who don't prepare take a much bigger hit — and sometimes don't recover.
I've seen shutdowns from inside the agency and from the contractor side. Here's what you actually need to know.
What Happens to Your Contract During a Shutdown
First, the frustrating reality: the FAR does not have a dedicated clause or procedure for government shutdowns. There's no "FAR 52.XXX — What to Do When Congress Can't Pass a Budget." Contract-by-contract analysis is required — which means your exposure depends entirely on the specific funding mechanisms and clauses in your contract.
That said, there are general patterns that apply to most federal contractors.
If Your Work Is Funded by Annual Appropriations
Most federal agency operating budgets — and most contractor task orders — are funded by annual discretionary appropriations. When those appropriations lapse (i.e., the shutdown begins), agencies legally cannot incur new obligations. That means:
- No new task orders can be issued
- No new work can be authorized
- No invoices can be processed
- No payments can be made
Your existing, already-obligated task orders may continue — but only for "essential" services that agencies are permitted to continue operating during a lapse. Whether your work qualifies is a fact-specific determination your CO will make. Don't assume. Ask.
If Your Work Is Funded by Multi-Year or No-Year Appropriations
Some contracts — particularly in defense and certain agency programs — are funded with multi-year or "no-year" money that doesn't expire with the annual budget cycle. If your task order is funded this way, a standard CR lapse may not affect your performance authority at all. Again: check your task order funding citation. Know what appropriation year your obligation comes from.
GSA Schedule Contracts Specifically
A shutdown doesn't terminate your GSA Schedule contract. The underlying MAS contract remains in place. What stops is the ability of agencies to issue new task orders or modifications that would obligate new funds.
If you have active, funded task orders against your Schedule, work may continue — but only if your CO confirms you have authority to proceed. Do not assume "the task order is still there" means "I can keep billing."
Stop-Work Orders: What They Mean and What to Do
During a shutdown, one of two things typically happens: either your CO issues a formal stop-work order, or you simply hear nothing and aren't sure whether to keep performing.
If you receive a stop-work order under FAR 52.242-15: Stop all work immediately. Preserve materials and work in progress. Document your costs as of the stop-work date. You have 90 days from a stop-work order to submit a written request for equitable adjustment if the stop-work causes you to incur additional costs. Don't miss that window.
If you hear nothing: Contact your CO in writing. Ask directly whether you have authority to continue performance under your task order during the lapse of appropriations. Get the answer in writing. Never continue performing without documented authorization — you could be working for free.
What to Do Before a Shutdown Starts
The contractors who handle shutdowns best are the ones who did their homework before the CR expired. Here's the checklist:
Identify which task orders are at risk. For each active task order, know: What appropriation year funds it? What's the remaining obligated balance? Does the task order include a stop-work clause? Is the work "essential" under your agency's contingency plan?
Build a 30-day cash reserve if you can. Shutdowns rarely last more than a month, but the payment backlog after a shutdown can add 30–60 days on top of that. If your operating expenses depend on government payments flowing on schedule, a shutdown will expose that vulnerability fast.
Talk to your CO before the shutdown. The days leading up to a potential CR expiration are the right time to have a proactive conversation. Ask your CO what their agency's contingency plan is, whether your contract is considered essential, and what they'll do regarding outstanding invoices. COs appreciate contractors who think ahead — and you'll have a paper trail showing you acted in good faith.
Get your invoices in. Any invoices for work already performed should be submitted before the shutdown begins. Invoice processing may stall once the agency goes dark, but submitted invoices will be processed when the government reopens. Invoices you haven't submitted yet have to wait.
Review your subcontract agreements. If you have subs, know what your obligations to them are if work stops. Can you issue stop-work orders to them? What costs are you on the hook for if you stop their work mid-performance? Get clear on this before you need to act on it.
During the Shutdown
Keep your documentation current. If you receive a stop-work order or suspension, the cost documentation you build during the shutdown period becomes the basis for your eventual equitable adjustment claim. Track every day of delay: employee time spent on standby, carrying costs on materials, costs to demobilize and remobilize.
Don't lay off your team prematurely. If you release critical staff during a shutdown and can't reassemble them quickly when work resumes, you've created a performance problem on top of the financial one. Factor retention costs into your equitable adjustment.
Don't let your SAM.gov registration lapse. The worst time to have your SAM.gov registration expire is during a shutdown. Your CO will be processing a backlog of actions when agencies reopen — and an expired SAM is an immediate obstacle to getting paid or receiving new task orders. Log in and check your expiration date today.
When the Government Reopens
Agencies will generally reauthorize work quickly after a shutdown ends — but the backlog of invoices, modifications, and new task orders will be significant. Get your invoices submitted immediately when you have confirmation that your funding authority has been restored.
If you incurred unplanned costs due to the stop-work or suspension — standby time, demobilization/remobilization, increased materials costs — you have the right to file a Request for Equitable Adjustment (REA). An REA is not a claim; it's a request to negotiate a fair adjustment to your contract price to account for the government-caused delay. File it promptly, document it thoroughly, and be specific about the causal link between the shutdown and each cost item.
The Honest Bottom Line
Shutdowns are part of the federal contracting landscape. They're annoying, disruptive, and sometimes costly — but they're survivable if you're prepared.
The contractors who suffer most are the ones who didn't read their contracts, didn't maintain their registrations, didn't build any cash cushion, and didn't communicate with their COs.
If you have a GSA Schedule and want to understand how a shutdown affects your specific contract situation, book a call. Thirty minutes now is a lot cheaper than scrambling when the CR expires.