Federal Government Shutdown 2025
The 2025 federal government shutdown is disrupting procurement cycles, delaying payments, and freezing new contracts. Here’s what contractors and consultants need to know — and how to stay prepared until appropriations return.
How Procurement and Contractors Are Impacted
How the Shutdown Is Disrupting Procurement — and What It Means for Contractors
When the federal government shuts down, procurement is one of the first functions to come to a halt. Appropriations lapse, and contracting officers are furloughed; as a result, the entire rhythm of awards, task orders, and renewals falls into limbo. For contractors and consultants alike, this shutdown is more than political noise — it’s a direct hit on planning, cash flow, and opportunity pipelines.
New Awards on Hold
Procurement shops cannot obligate funds during a shutdown. That means no new awards, no exercised option years, and no contract modifications. For firms awaiting decisions on submitted proposals, the silence is not a rejection — it’s a freeze.
Stop-Work Orders and Ongoing Performance
Not every contract halts. If funding is fully obligated before October 1, performance can often continue. But contracts relying on incremental appropriations are at risk of stop-work orders. This creates uncertainty for project staffing and subcontractor obligations — especially in long-term IT or staffing contracts.
Payment Delays and Strain on Cash Flow
Shutdowns ripple through the payment system. Even invoices for completed work can sit unprocessed until agencies reopen. Larger firms may weather the lag; small businesses and freelancers often cannot. Contractors should anticipate potential delays and plan for adequate cash buffers accordingly.
Administrative Processes Stalled
Procurement isn’t just contracts — it’s certifications, audits, evaluations, and renewals. Many of those support functions are now on pause. That creates a backlog for small businesses seeking set-aside certification or updating GSA schedule qualifications.
What Contractors Can Do Now
Audit your portfolio: Separate funded contracts from those that require incremental appropriations.
Review FAR clauses: Understand your rights for cost recovery under stop-work or suspension clauses.
Preserve cash: Expect delays in invoicing and payments; plan accordingly.
Stay visible: Even while awards are paused, keep building relationships, updating capability statements, and preparing proposals.
Bottom line: The current shutdown will end — they always do. But how contractors respond during the freeze often determines who emerges with resilience and who loses ground. Staying proactive is the only hedge against uncertainty.