Government Shutdown Risk: Be Prepared

By Irene Butler

As of the time of publication of this article (the morning of Friday, September 26, 2025), the US Congress and the White House have not reached a funding agreement for the new fiscal year that begins Wednesday, October 1, 2025. At this point, a shutdown appears increasingly likely.

Politico reports that that the Office of Management and Budget (OMB) has issued a memo that warns of the possible government employee terminations through a reduction in force (RIF), distinct from short-term furloughs, if a shutdown occurs.

While contractors are not directly subject to RIFs, a shutdown could still affect you through:

• Contract suspensions or delays if the funding source lapses
• Work stoppages if federal oversight or access to government facilities is required
• Delayed payments or invoice processing

A government shutdown could disrupt not only federal contracts but also state, local, or private-sector work funded by federal grants or payments, including subcontractor work ultimately paid with federal funds. Please plan accordingly.

 As of now, OMB has not issued separate, formal guidance for contractors. However, contractors should:

• Review federal contracts for funding clauses and stop-work provisions
• Coordinate with your COs (contracting officers) to confirm funding status and to determine which programs will continue during a shutdown (this should be done before October 1 because your CO may not be working or available during the shutdown)
• Prepare contingency plans for employee reassignments, cash flow disruptions, and performance delays
• Review Federal Acquisition Regulation (FAR) clauses in your contracts related to funding lapses (e.g., FAR 52.232-18, Availability of Funds)
• Document all communications and potential impacts for future claims or adjustments
• Avoid incurring costs on unfunded work unless explicitly authorized

Read more about a potential government shutdown.