Federal Shutdown Puts Pressure on Montgomery County Contractors

Federal Shutdown Puts Pressure on Montgomery County Contractors

Business group warns of ‘serious negative impact’

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With the likelihood that the one quarter of the federal government could remain closed into the new year, worries are mounting that prolonged unemployment could negatively impact Montgomery County.

The shutdown, entering its sixth day, began at midnight Friday after President Trump said he would not sign any spending measures put forward by Congress unless they contained the $5 billion he wants for construction of a wall along the U.S.-Mexico border.

Gigi Godwin, the president and CEO of the Montgomery County Chamber of Commerce, believes the shutdown could have a “serious negative impact” on small businesses that contract with the government.

“Not only Montgomery County but the entire Washington, D.C. regional economy could be adversely affected by a permanent loss in revenue. And, that loss could impact our local governments, too,” Godwin said in an email.

The county business group’s executive vice president, Barbara Ashe, pointed to statistics from Bloomberg Government that show there are 3,500 small businesses in the county that do business with the federal government, generating $3.4 billion in revenue. Additionally, federal contract spending has exceeded $7 billion a year since 2013.

“Most of what they [small businesses] sell are services and requires that they perform it on the customers’ site. If the federal office is not open, they cannot perform the work, and therefore, cannot bill the government,” Ashe wrote in an email. “Those are lost hours/revenue that will never be regained. Federal employees have been made whole following shutdowns, however, contractors are not.”

Ashe added that during a 2013 shutdown, profit margins were around 4 percent for service-related contractors, which wiped out their profits during the year.

“In addition, in a tight labor market, government contractors will want to hang onto their employees and will continue to provide them a paycheck even though they will never be able to recoup that cost. The impacts will be felt throughout our region, restaurants, retail, housing, entertainment…remember, our largest industry in this region just got shut down,” she wrote.

During a 16-day shutdown in October, 2013, the county was losing $760,000 per day in income tax revenue, according to one estimate.

There are more than 120,000 federal workers in Maryland, according to the Office of Personnel Management, and this month’s shutdown affects about a quarter of the government.

About 26,500 workers in Maryland work for agencies that are not operating, according to an estimate from the office of U.S. Sen. Chris Van Hollen.

Several affected agencies, such as the National Institutes of Health in Bethesda, the National Oceanic and Atmospheric Administration in Silver Spring and the Food and Drug Administration in White Oak, have large operations or headquarters in the county.

Maryland Democratic U.S. Sen. Ben Cardin sponsored a bill passed in the Senate last week ensuring back pay to furloughed employees. Rep. Don Beyer, a Democrat who represents a Northern Virginia district, has introduced a similar bill in the House.

Congress is not expected to take action on a short-term funding plan until Friday at the earliest and leaders have said any vote could be shifted into next week.

On Thursday morning, Trump sent a tweet on social media asking, “Do the Dems realize that most of the people not getting paid are Democrats?”

Dan Schere can be reached at Daniel.schere@bethesdamagazine.com

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