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Government Shutdown FAQs for Federal Research Grantees and Contractors

Michael J. Vernick

Michael J. Vernick,

Washington, D.C.

William (Bill) F. Ferreira

William (Bill) F. Ferreira,

Washington, D.C.

07 October 2013
We offer below brief answers to some frequently asked questions that may arise for research institutions in connection with federally sponsored projects during the current government shutdown.  It is important to note that a shutdown will be fluid with guidance varying (and likely evolving over time) by agency, type of funding available to the award, type of funding instrument, and substance of the awardee’s work. 
Government Shutdown FAQs for Federal Research Grantees and Contractors

Q1: Do federal agencies continue administering discretionary grants and contracts during a government shutdown?

In general, no.  The routine operational and administrative activities that relate to discretionary grant and contract administration—such as such payment processing, oversight, inspection, or accounting—normally cannot continue during a government shutdown.  Federal agencies do not, however, completely shut down.  They will maintain some minimal level of service to carry out essential functions related to protection of life and property, national security, and the orderly shutdown of operations. 

Q2: Is scientific research an essential function related to the protection of life and property?

It depends on the type of research. We are aware of anecdotal evidence that during previous funding lapses some agencies continued the operation and administration of research involving, for example, patient care and treatment where continued care was a safety issue.  We are not, however, aware of formal guidance on this issue.  

Q3:  May I continue to perform under a previously awarded grant or contract?

Yes, generally an awardee may continue performance during a shutdown period if adequate funding already has been obligated to the award (i.e., where Fiscal Year 2013, or prior year,  appropriations fund the award).

Q4: How do I know whether adequate funding has been obligated to my award?

Typically the award instrument or a modification to it will offer information on whether the award is “fully funded” (i.e., federal funds already have been obligated to cover the full price of the award) or “incrementally funded” (i.e., funding is obligated in increments, through award modifications, as milestones or other deliverables are achieved).  Generally, many fixed price research contracts are fully funded whereas cost reimbursement contracts (including labor hour and time & material contracts) and grants could be incrementally funded.  Incrementally-funded awards are acutely affected by a government shutdown because such funds may deplete during the shutdown period.

As a practical matter, if an institution has received funding for a budget period through a notice of award or contract modification, it is likely that those funds will remain available during the period of a government shutdown. 

Q5: What if I need the sponsor’s routine prior approval to continue performance?

In the vast majority of situations, proceeding without required sponsor approval is inadvisable.  The awardee should not, for example, undertake activities that are expressly “restricted” by a notice of award without government approval.  There may be very limited circumstances when an awardee could proceed without approval but at its own financial and/or compliance risk.

Q6: Can the government stop work under my award?

Yes.  Unless continued performance is statutorily required, the agency must consider whether the awardee’s performance is (to use OMB’s phrase) a “sensible use of taxpayer funds”.  If the agency decides that continued performance would be “wasteful,” and thus should be suspended, the agency may instruct the awardee to suspend performance.

Q7:  What should I do if I receive a stop work order?

In the majority of situations, you should follow it.  Costs incurred after receipt of a stop work order would be at the financial risk of the awardee.  In limited instances, there may be reasons to proceed at risk.

Q8:  May I continue to submit proposals and grant applications during a shutdown?

It may be possible to submit grant applications.  The Grants.gov system is expected to be operational during a shutdown, and applications should be submitted by applicable deadlines that have not been extended, unless a particular agency has advised otherwise.  The Grants.gov system will accept and store applications only; the applications will not be processed or reviewed until the government resumes normal operation.  The Grants.gov Contact Center is expected to remain open to assist callers.  

Unless otherwise notified by the contracting officer, contract proposals should be submitted by applicable deadlines that have not been extended, but it is possible that no official will be available to accept the proposal. 

Q9:  Will the government’s other electronic administration systems continue to be available?

During a shutdown, most federal employees who perform administrative functions will not report to work.  Consequently, electronic administration systems such as NSF’s FastLane and NIH’s eRA Commons (through which routine items such as progress reports and no-cost extensions often are submitted) may not be accessible.  If possible, and unless otherwise advised by the sponsor, awardees should continue to transmit all submissions in a timely manner, while remaining conscious that a response may be delayed.   

Q10:  May I continue to draw down grant funds and submit contract invoices under my awards?

For grants, this may vary by agency. For example, where adequate funding already has been obligated to the grant and spending has not been restricted by the notice of award, NIH will continue processing grant drawdown requests through the Payment Management System, thereby allowing grantees who have already received awards to continue drawing funds.  NSF, however, has stated that it will not make payments during the shutdown period. 

For contracts, where adequate funding already has been obligated to the award, invoices can be submitted.  But there will be a disruption in the payment schedule due to the lack of personnel onsite to inspect work and process payments.   For late payments to contractors, the government may pay an interest penalty pursuant to the Prompt Payment Act.

Q11:  Will the government make new awards during a shutdown?

Only in very limited circumstances, such as to protect life or property, or for national security-related reasons.

Q12: What practical steps can we take in the event of a government shutdown?

  • Where possible, communicate with available contracting officer and the grant officer personnel in order to take direction on whether and to what extent performance should continue during the shutdown. Document all such communications.  Continue to communicate during and after the shutdown.
  • Track all costs incurred during the shutdown period, including costs related to the shutdown, but take steps to mitigate shutdown-related costs.
  • Recognize that in most instances it will not be advisable to proceed with any award activity that is contingent on the sponsor’s prior approval if such approval has not been granted.
  • Provide instructions to subcontractors on whether their performance should continue.
  • Prepare to manage cash flow disruptions.

The Office of Management and Budget (OMB) has provided overall guidance to federal agencies on how to proceed in the event of a shutdown.  In addition, individual agencies have issued agency-specific plans to achieve an orderly shutdown.  Examples of sponsor guidance are linked below.

Michael J. Vernick

Michael J. Vernick,

Washington, D.C.

William (Bill) F. Ferreira

William (Bill) F. Ferreira,

Washington, D.C.

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