The 2018 to 2019 Partial Government Shutdown’s Impact on Small Businesses

Editors' Note: On Wednesday, Jan. 16, 2019, Holland & Knight's government contracts team is hosting a complimentary webinar about the partial government shutdown. The webinar will examine the current political situation, provide a contractor's action plan and discuss how employee-related issues should be resolved.

As we discussed in an earlier post, the U.S. government's partial shutdown impacts government contractors across the spectrum. What many contractors may not realize is that the shutdown has an additional impact on small businesses because the U.S. Small Business Administration (SBA) is among the many agencies that have been closed. This means that both the small business loan and government contracting functions of the SBA are affected by this shutdown.

In the face of the longest standing partial shutdown in history, here is what small business contractors need to know:

1. SBA's Small Business Loans cannot be distributed until the shutdown ends.

The government shutdown has resulted in a halt to federally-guaranteed small business loans. While participating banks and borrowers can prepare the necessary documentation, the SBA cannot review and complete the application process. Thus, while the loan process may be started, the loans cannot be distributed until the shutdown ends.

2. Certify.SBA.gov is not currently functioning.

The SBA cannot proceed with most of its small business contracting programs because the backbone of these programs is not available during the lapse of appropriations caused by the government shutdown.

Certify.SBA.gov is used for a wide variety of the SBA contracting activities. This varies from submitting applications for certification for socioeconomic programs (such as the 8(a) and woman-owned programs), to maintaining certification in those programs, and to applications and maintenance of the SBA's All-Small Mentor-Protégé program.

Small businesses will likely feel the impacts long after the shutdown ends, because the work stoppage will add to the backlog of an already overworked agency. By way of example, contractors applying or waiting for a socioeconomic certification or entrance to the Mentor-Protégé program may not receive the certification in time to compete for a solicitation that is proceeding because the agency issuing the solicitation is still operating.

Certain actions do continue under Certify.SBA.gov. These are 8(a) offer letters from federal agencies that are operating during the shutdown, along with the continued operation of the HUBZone Map. The SBA is also continuing to operate the Office of Disaster Assistance (ODA), which plays a vital role in the aftermath of disasters and is not funded by yearly appropriations. All other SBA activities on Certify.SBA.gov (including any other 8(a) requests) are halted and will resume after the shutdown ends.

The SBA's website states that "[t]he SBA will grant extensions for deadlines affected by the shutdown. The SBA will provide more guidance on deadline extensions after the shutdown ends." However, the question remains as to whether any deadlines will be extended for companies who do not obtain certification approval before a solicitation deadline, especially for agencies still operating.

3. Small business may experience delays in payments from the federal government.

The shutdown's delay of payments to contractors will impact small businesses who often have less margin with which to operate. Further, small businesses that have contracts with shuttered agencies may lack sufficient resources to continue to provide services deemed critical and essential by the agencies in the absence of payment. Even small businesses that receive federal scientific research grants may experience delays in payments.

4. The SBA's ability to effect timely rulemaking may be impacted.

Finally, the partial government shutdown may affect SBA's ability to effect timely rulemaking. There are a number of SBA proposed rules outstanding and other areas in which the SBA is planned to engage in rulemaking. With the Office of Management and Budget (OMB) already not permitting rulemaking until at least February, and the shutdown is expected to extend this delay, the SBA will likely encounter a backlog that will stall the issuance of final rulemaking or proposed and interim final rules.

Small businesses should be ready to assert and protect their rights throughout this partial government shutdown. As always, Holland & Knight's Government Contracts Team is ready to assist you in navigating this and other small business issues.