As the longest government shutdown in U.S. history drags on, even the nation's fastest-growing companies are feeling the pain.
President Trump and Democrats in Congress have been unable to reach a compromise to reopen the government, with the former insisting that any deal must include $5.7 billion in funding for a border wall with Mexico. Roughly 800,000 federal employees are furloughed, and government contractors hired by the shuttered agencies have been scrambling to figure out what to do with their employees--and their dwindling cash reserves.
"There are two impacts: one is the revenue that I'm not generating and the other one is revenue that I am due that I am not being paid," says Corliss Udoema, founder and CEO of Contract Solutions, a Manassas, Virginia, company that offers staffing services for project management, court reporting, and IT-related jobs. Clients have included the National Park Service and the U.S. Department of Agriculture. As a government contractor, Udoema had to stop all work related to contracts she has with agencies closed during the shutdown. Because these agencies are closed, even work that has already been completed and invoiced remains unpaid. The loss of work and owed bills amount to a 50 percent revenue loss this January.
Contract Solutions has been featured twice on the Inc. 5000, a list of the fastest-growing private companies in the country. It made $4.5 million in revenue in 2018, and Udoema points out that she has access to financial resources to "withstand the storm," but even that has its limits.
"Once we get at the end of the month, I'm going to need to make some adjustments to my overhead," Udoema adds, noting that the shutdown has meant that half of her 50-person staff can't work.
In 2018, government contractors made up about 5 percent of the fastest-growing companies in the Inc. 5000, and generated more than $11.9 billion in revenue combined. These businesses also added roughly 20,000 employees between 2014 and 2017.
The Biggest Pain Point
In Beavercreek, Ohio, Brian Chaney, president of three-time Inc. 5000 honoree TACG, says the company's profits will decline about 40 percent this month. TACG offers IT, supply chain, and health care management services to the government, with clients including the U.S. Food and Drug Administration, an agency subject to the partial shutdown.
"Our actual impact is staff," he says, noting that some of his highest-paid employees, those working in cybersecurity, are not working during the shutdown.
"These people have opportunities to go and move anywhere. We obviously love our folks and we don't want to see anybody go," Chaney adds. Of his 183-person staff, about 25 employees are unable to work but are still on the payroll. "By keeping them around, we're going to take a significant financial hit in January."
Unlike for federal employees, there is no official metric to track the number of government contractors. Some experts estimate that there are as many as four million federal government contractor employees in the U.S., compared with two million federal workers, reports The Wall Street Journal.
"There's this assumption that contractors are these sort of big, large, behemoth corporations that have big [profit and loss statements] and can afford not to work," says Veeral Majmudar, founder and CEO of the Savan Group, a McLean, Virginia-based business that provides IT management and strategy services to the government. "But the fact of the matter is most of these contractors are small businesses like us, and we don't have the luxury or cushion to manage that kind of a shutdown."
To be sure, most business owners who spoke to Inc. said that their companies are diversified enough to handle the slowdown. Or they're working with agencies that are fully funded. However, as the government shutdown drags on, their fast-growing trajectory might be forced to slow down.
"You're going to run out of special projects," says Udoema from Contract Solutions. "I'm staffed to support a higher number than I am supporting now, because those people are not able to work. At some point, the numbers are the numbers."
Correction: An earlier version of this story misidentified one of TACG's clients as the Federal Aviation Administration and mistakenly said that the agency, along with the U.S. Food and Drug Administration, has been closed during the shutdown. Parts of the FAA and the FDA continue to operate.