When NASA set an Oct. 18 submit deadline for its new enterprise IT contract, Marc Fertik, vice president of Ace Technology Partners, said he knew that date set wouldn't be realistic and figured it would get delayed a week or two, just because of how government contracts usually work.
But then the government shutdown happened on Oct. 1. Now the contract date is set as "TBD," with no indication on when that decision would be made. Fertik said he is guessing it will happen sometime in November, but he can't be sure. And there isn't really any way to find out -- the contract's website says that NASA "will be unable to respond to any individual emails or phone calls until the furlough has ended."
The 50 contractors involved with the NASA contract all will have their deadlines pushed back, he said, which means the May 1 start date will also probably be pushed back.
"That impacts everybody," he said. "There's a constant ripple and constant delay."
It's not just NASA, either.
Kathy Lacina, vice president of sales for Ace Computers, which does around 65 percent of its business with the federal government, said that even though they are ready to deliver their orders, there is no one in the government to receive the shipments. She said the only word she has heard from the government is to "sit tight" until the shutdown is resolved.
Lacina said her company is also in the process of bidding for a contract with the U.S. Air Force, but the estimated award date has come and gone with no word on the decision.
"We're hearing that they've resolved it, but we haven't actually heard from the Air Force," Lacina said. "You can only imagine the strain that [has] put us under."
This is a big issue for companies across the board, said Trey Hodgkins, senior vice president of the global public sector at TechAmerica, an industry trade organization. Even high-profile contracts, such as the $10 billion Department of the Interior cloud project, are being put on hold for the foreseeable future.
"Clearly the government is not operating as a customer right now -- that’s a significant issue for a lot of companies," Hodgkins said.
NEXT: Lost Contracts Put Investments, Workers In Limbo
One solution provider, who wished to remain anonymous, told CRN that the government is still awarding some contracts, but the public hasn't been hearing about the awards.
It's bigger than just the contracts, though, Hodgkins said. The shutdown turned the entire investment strategy for many companies he has talked to on its head. The bigger contracts can take years and cost millions of dollars to put together a portfolio contract proposal for the government. That means that companies currently looking for new contracts have to basically put all of the investments made for future business on hold.
"When we put that process on hiatus, it means [they've] made an investment and it's not going anywhere," Hodgkins said.
Neil Cohen, director of business development for the CoBRA division of Defense Group, said that even if your company expects to win a proposal, work cannot be ramped up to prepare for it until official word comes in, which isn't happening during the shutdown.
"Businesses big and small invest a lot of money in proposal response -- both in opportunity costs, meaning you’ve had to forgo focusing on some projects so you could spend your time and effort on a proposal response -- as well as the financial cost of putting together a large proposal and then to have all those proposals after you put all the money and effort, to be delayed indefinitely. You don't know if you're lost or you're just in limbo," Cohen said.
This delay also puts potential workers into limbo, Cohen said. Ace Technology Partners' Fertik said his company was planning on hiring three to five new workers for new contracts, but will have to hold off until they hear word on if they have secured them or not.
"It definitely impacts jobs because if you were going to hire, you can't hire. So it affects job growth," Fertik said. "These types of things have an impact downstream."
For current employees, stop work orders have gone out, Cohen said, and companies, especially small businesses, can't always cover those employee costs in the overhead in the meantime.
"Those people would be secondary furloughed. They're not government workers, but they are company workers who are being furloughed," Cohen said.
NEXT: What's Next For Government VARs?
Although Hodgkins said that President Barack Obama has made some comments that "point us in the right direction," overall it looks like the shutdown will stick around for a while. The short-term effects are already being felt, as executives demonstrated with their contract conundrum. Other issues facing companies now, Hodgkins said, are cash-flow problems as contract revenue remains out of reach, and employee payment. However, solution providers with federal contracts said that they are already preparing for the long-term effects of the shutdown.
"It takes time to get everything put back in place, so there's going to be additional delay by default. It's a big enough machine that you can't just flip a switch and turn it on," Ace Computers' Lacina said.
The quarterly and long-term effects could be much worse, Hodgkins said, as companies lose returns on capital investments, see overall reduced earnings in the public sector, and the workforce has to be let go because of budgetary constraints.
"It's frustrating when you feel like you're in business to support the federal government and the federal government turns its back on you, on your industry," the CoBRA division of Defense Group's Cohen said. "You feel like you're caught in a situation you don’t have control over, where there are two warring parties and the only one being punished are the people who are here to help. Those are the only ones who seem to suffer from the warring factions and the toxic environment. The ones who are causing in both parties the issues, don’t seem to really suffer or care about the suffering that they're causing."
Cohen said that his company has been preparing for this moment for a long time and has been working to diversify its portfolio to include more commercial and state and international governments, which he said are much more stable.
"When you have low expectations, you're not surprised. We have very low expectations [for the federal government] as to what was going to happen at the end of the year, at the beginning of the year, based on the political climate. We had no expectations and we were not disappointed," Cohen said.
Other solution providers have followed suit and are looking to get out of the public sector altogether. Others told CRN that if they could stick through this situation, it would be a moment to separate themselves from the competition that couldn't thrive as well in the federal market.
"I think it's just the way it is," Fertik said. "So we'll see what happens."
PUBLISHED OCT. 10, 2013