In Shutdown, Government Contracts Lawyers Confront Challenges

Government contract lawyers in Washington were counseling clients in the days before the government shutdown Monday at midnight. The chief concern for clients and attorneys: the longer the shutdown goes, the more complicated the legal issues will become. "The shutdown is only going to cause more thorny legal issues between government contractors and the government," said Robert Nichols, co-chairman of Covington & Burling's government contracts practice. Issues including unintended costs, work stoppage and general delays can prove increasingly troublesome if the shutdown drags on. Practitioners said that contractors should take different approaches to the shutdown depending on specific agreements with the government. "If you are a large manufacturer of goods and you have long term contracts that are fully funded, a short-to-middle term shutdown is not harmful," said Matthew Hews, government contracts counsel to Wilmer Cutler Pickering Hale and Dorr. "If you are a services contractor who needs to gets into government buildings, it is going to be more difficult." Part of the problem could arise from the lack of contact that lawyers and their clients will have with government officials. Hundreds of thousands of federal employees are furloughed. "If the government is shut down and can't give you guidance, you are at risk," said Angela Styles, co-chairwoman of Crowell & Moring's government contracts practice. A construction contractor, for example, Styles said, may not know how many supplies it should order or if the funding for it will be available once the order is places. Additionally, the closure of the Government Accountability Office has temporarily eliminated a venue for the filing of bid protests. That could hamstring contractors who are seeking to challenge an award. The other venue, the U.S. Court of Federal Claims in Washington, poses additional hurdles and a potentially longer time frame for the resolution of protests. For attorneys in government contracts practices, the shutdown means an immediate slowdown of work. But lawyers expect that the shutdown could lead to a flurry of challenges over reimbursement claims once the full government is operational again. When the shutdown ends, contractors will likely ask the government to cover expenses such as labor and other unforeseen costs incurred during the shutdown. Attorneys are advising their clients to keep close track of their expenses. "As is the case with any contractual issue, to the extent it drags on, it is going to result in more work for lawyers," Hews said. Some contractors, Nichols, said, could be paid automatically for idle labor costs. Others, on the flip side, he said, could be required to go through a claims process. Still, Nichols cautioned, other contractors might not be reimbursed for costs incurred during the shutdown. Nichols likened the government shutdown to the 2010 Snowmageddon storm that blanketed the Washington region in more than two feet of snow. "Everyone is watching the snow come down," Nichols said. "Once it's over, then we will determine how to dig out."

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