Shutdown Starting to Hurt Contractor Staff Recruiting, Retention

Key Takeaways for Executives

• The government shutdown is making it harder for contractors to attract and retain top talent.
• The tight labor market worsens this effect, as employees have more options for jumping ship than they had during previous shutdowns.
• Larger firms have been able to switch employees to other contracts that still have funding or pay them to take additional training, but these stop-gap measures won’t work much longer.

The grand bargain used to look something like this: take a government job, and although you might not be paid as much as you would in the private sector, you will enjoy stable employment, great benefits and a guaranteed pension upon retirement.

But the bargain might be losing its luster. Now that we’re in the middle of the longest government shutdown in history — and the third since the beginning of 2018 —government jobs aren’t looking quite so stable.

That’s obviously a problem for government recruiters looking to attract and retain top talent. But it’s a problem for contractors, too.

In a tight labor market, contractors already compete fiercely for employees with other private sector firms. The shutdown is forcing many of them to compete with one hand tied behind their backs, Wesley Hallman, senior vice president for policy at the National Defense Industrial Association, told WashingtonExec.

He said retention is becoming especially difficult for small firms.

“They’re not going to have the wherewithal to keep folks on staff while their contracts are suspended, frozen, or canceled,” he said.

For example, small companies can’t necessarily shift employees to other contracts that still have funding or pay them to receive additional training.

Small firms also struggle to jump through all of the administrative hoops required to win and successfully perform government contracts. The shutdown adds to the overall burden of doing business with the government.

“This is just one more aspect of why the government is a tough customer,” Hallman said. “Over time, you’re disincentivizing folks who come into this sector with good ideas for providing services for the government, and by extension for all of us.”

Hallman additionally pointed out that the shutdown could harm government contractor employees who are out of work and waiting to receive security clearances, because financial hardship doesn’t look good to background checkers. That alone might drive many of those employees to seek jobs elsewhere.

‘Getting Worse on a Daily Basis’

David Berteau, president and CEO of the Professional Services Council, told reporters during a press call that although no one knows exactly how many employees contractors and the government have lost because of the shutdown, the number is “in the tens of thousands.”

“Retention is a key issue,” he said. “There’s not enough people to go around in almost any area we’re working on today.”

He added that because the commercial marketplace is currently so competitive, workers have more opportunities to leave than they did in previous shutdowns.

“How long people can work without getting paid is a question we’ve never tested at this level before,” he said. “It’s pretty scary.”

Recruitment is a longer-term problem, but one that is bound to rear its ugly head if the shutdown continues much longer.

For one thing, this is the time of year when contractors recruit on college campuses. Asking someone with a newly minted degree and plenty of opportunities to come work on a contract that may lose its funding is a tough sell.

“The long-term impact of losing future workers will be felt for years to come,” Berteau said.

Appeal Fading?

Ray DeMeo, co-founder and chief operating officer at Virsec, told WashingtonExec it’s hard for a company to recruit people to work on contracts whose government counterparts — contracting officers, etc. — are currently furloughed.

And like Hallman, he noted many firms don’t have much financial flexibility.

“Contractors bid these jobs as tight as they can and work very hard to recruit, DeMeo said. “Not every contractor has huge operational overhead to retain people.”

He also agreed the shutdown is threatening to take the sheen off government contract work.

“It makes those jobs less stable than other jobs in the commercial sector,” DeMeo said. “And if a government contractor employee feels like a job is less stable or less fulfilling, it’s a no brainer to take another opportunity.”

Related: Here are Concrete Steps for Contractors to Mitigate Shutdown Effects