Defense Department employees may be back at work after a 16-day government shutdown, but there’s still a backlog of inspections and purchasing-related paperwork to tackle, and the funding mechanism that reopened the government leaves DoD operating at curtailed spending levels.
“We have an opportunity to return to refocusing on our critical work, but it’s important to note that Congress did not remove the shadow of uncertainty that has been cast over this department and our government much of this year,” Defense Secretary Chuck Hagel said Thursday afternoon. He welcomed back the remaining 7,000 or so civilian employees who remained furloughed throughout the entire shutdown, but he said the bill that Congress passed and the president signed Wednesday night to end the shutdown only lasts three months, maintains the damaging sequestration cuts and prevents the department from starting new programs or increasing order sizes over last year.
“If this fiscal uncertainty continues, it will have an impact on our economy, our national security and America’s standing in the world,” he warned.(1).jpg)
DoD Comptroller Robert Hale said at the same press conference that the shutdown cost the department about $600 million in lost productivity during the first four days of the shutdown, when about 400,000 DoD civilian workers were furloughed. He said there were other costs too–interest payments from having to pay vendors late, added travel costs incurred when training was canceled and troops had to go home, only to return again at a later date–but Hale said, “I can’t quantify those.”
The Pay Our Military Act, which was signed into law on Sept. 30 but not actually implemented until lawyers finished sorting through the language on Oct. 5, “limited the disruption, but it was there,” Hale said.
Among the civilians still furloughed despite POMA, which DoD and the Department of Justice determined was not a blanket invitation to spend normally during the shutdown, were inspectors and auditors needed for contractors to deliver products to the department and receive final payment.
As a result, industry saw cash flow problems during the shutdown, Aerospace Industries Association officials said, and the continuing resolution has vendors concerned the issue will persist.
“My guess is that we will be able to catch up reasonably quickly for those kinds of delays, backlogs in vouchers we haven’t paid,” Hale said.
But Christian Marrone, AIA’s vice president for national security and acquisition policy, said Thursday afternoon that on the first day of the shutdown “everything started to grind to a standstill.” Mary Jane Mitchell, AIA’s assistant vice president for acquisition policy, said that without the inspectors and auditors, finished products could not be inspected and officially delivered to the military, meaning vendors could not get paid until the proper civilian employee came back from furlough to sign the paperwork.
Even if DoD can hurry and eliminate the backlog of work, the CR presents the same problem, Marrone said. Companies working on programs expecting a rate increase in fiscal year 2014 have already poured money into expanding their production lines and hiring new workers, only to find out that they cannot leverage those additions for at least three months, if not longer. So they are stuck with a lot of raw material they cannot work with yet, and a lot of people not needed for the lower manufacturing rates.
Some larger companies may be able to take the financial hit, but “the smaller you are…you have to decide what to do at that point, how long you can hold,” Marrone said.
Hale said options are limited under the CR for easing this pressure on industry.
“Generally we aren’t allowed to reprogram when we’re under a continuing resolution, so for a while we have to kind of hold our breath and try to look to the future and be as conservative as we can” in spending levels, he said. He added that the department hadn’t issued formal guidance to the services, but he expects they’ll be spending at slightly lower than the levels dictated in the CR in anticipation of another round of sequestration cuts coming in January.