Shutdown update: What’s the impact?

By admin  -  On 11 Apr, 2011 -  0 comments

By Nick Wakeman

EDITOR’S NOTE: This story was updated Saturday, April 9, after Congress and the White House reached a budget agreement.

Well, it looks like the government isn’t going to close after all. At least not this year.

I’m left wondering if this is similar to a near-miss accident on the highway where your shiver for a quarter mile or so and then forget or will this have a longer impact?

The most obvious observation is that this budget battle is just a prelude of coming fights. First, there is the need to raise the debt ceiling. That might be round two. But the bigger fight will be over the fiscal 2012 budget. The outcome of that one will set the tone and direction of government spending for years to come.

I can only imagine the rhetoric, posturing and political theater that we’ll have to live through, and who knows how deep into 2012 we’ll get before a budget is passed.

A second observation: What’s with the lack of communications between contractors and their customers and even within the government about shutdown plans?

Several of theexecutives I talked to about their preparations for the shutdown repeated the same theme: “We’re talking to our contracting officers but we’re not getting much information.” Most said it was because the contracting officers themselves didn’t know.

There were reports that the Office of Management and Budget told agencies not to share their shutdown plans.

Frankly, that makes no sense. People need to plan and prepare and late Friday afternoon, just hours before the shutdown deadline, is mighty late to be sharing your strategy. Can someone explain why?

From the contractor perspective, it had to be frustrating, particularly in an industry as people-oriented as IT.

I wonder about the cost of the shutdown, too. First, there are the financial aspects. One executive told me his company pulled together so-called tiger teams with people from operations, legal, financial, human resources, etc. to examine contracts and other work to see what would continue and what would not. There were no easy answers.

But those people aren’t cheap and instead of working on ways to win more business and operate more efficiently – something desperately needed in this environment – they were spending their time prepping for the shutdown.

Even if the government had shutdown, companies will see no return on the millions they spent to prepare. The best they could hope for is mitigating their loss.

So there is an opportunity cost that the industry incurred.

But let’s focus on the good news. There is a budget. There were significant cuts but some of the uncertainty has been lifted. Planning should be easier, at least through Sept. 30.

So as we look ahead, I have three related questions:

1. Will there be a made rush of business because the budget will unlock pent-up demand?
2. Will the 2011 cuts suck up so much time that moving forward on other work will slow down?
3. How long will it take to recover from the mental fatigue of six months of continuing resolutions?