A federal government shutdown would particularly harm small companies in the Defense Industrial Base (DIB), according to a Sept. 28 letter to congressional leaders from National Defense Industrial Association (NDIA) President David Norquist and Professional Services Council (PSC) President David Berteau.
“The DIB provides employment to 1.1 million Americans in the defense sector alone and support [sic] businesses and communities across the country with 73 percent of DIB companies being small businesses,” the NDIA/PSC letter said. “That industrial base is already grappling with supply chain delays, challenges in recruitment and retention of skilled workers, and increased costs from historically high inflation rates.”
The latter depends on time span. The August inflation rate in the U.S. was 3.7 percent, compared to the post-pandemic high of 9.1 percent last June–the highest since June, 1982’s rate of 7.1 percent.
The Federal Reserve’s goal is two percent. The highest U.S. inflation rate was 23.7 percent in June, 1920, as government price controls lapsed after the Nov. 11, 1918 Armistice ending World War I and as companies restocked inventories and workers received cost-of-living wage increases.
The 3.7 percent inflation rate in the U.S. last month was lower than that of other industrialized nations, including the United Kingdom, Germany, France, and Italy.
A federal shutdown will lead to DIB work stoppages and “cascading effects on military readiness, on systems modernization across the government, and on America’s ability to deter adversaries,” according to the Sept. 28 NDIA/PSC letter. “Funding disruptions, whether from shutdowns or short-term CRs, are particularly hard on small businesses, technology start-ups, and middle-tier companies.”
If a shutdown happens, the federal government would stop payment on invoices for work done before the shutdown began–a situation that portends a loss of pay and job losses for “tens of thousands” of workers, as small businesses are frequently unable to shift workers to other contracts or fund those workers’ salaries and benefits without such other contracts, NDIA and PSC said.
“Unlike their federal counterparts, these workers, and their companies will not receive back pay from the government when the shutdown ends,” Norquist and Berteau wrote.
Pentagon acquisition chief William LaPlante said on Sept. 26 that DoD “testing will stop,” and acceptance by the government of equipment, when it is finished and ready to be accepted, can stop” during a federal shutdown (Defense Daily, Sept. 26).