Strategy and Plans of Operation on the Event of a Government Shutdown - Literature review Example

Marketing 521 Theme Case: Economic Challenge Strategy and Plans of Operation on the Event of a Government Shutdown Texas A&M Commerce In partial fulfillment of the requirement for MKT 521 Professor Lloyd M. Basham [Date] Table of Contents Title Page………………………………………………………………………………… 1 Table of Contents………………………………………………………………………... 2 Abstract…………………………………………………………………………………... 3 Introduction……………………………………………………………………………… 4 Federal Shutdown………………………………………………………………………... 5 Causes of Federal Shutdown……………………………………………………. 5 Effects of a Federal Shutdown………………………………………………….. 7 Strategies during Federal Shutdown………………………………………....................... 8 Contingency Plan……………………………………………………………………….. 10 References………………………………………………………………………………. 11 Appendices……………………………………………………………………………… 12 Abstract Government shutdowns occur when the Congress and the President fail to enact and make law the appropriations bills for the agencies of the government. On this case the opinions of Attorney General Civilleti and the Antideficiency Act take in action wherein the government is prohibited to spend, enter into contracts or other obligations, and provide government service and employees, except for those that are rated essential by the law. This paper will be focusing on the understanding of how the government shutdown occurs, as well as its adverse effects on the federal employees, public, and business institutions that are involved in providing goods and services to the federal government. This paper will also cover strategies and plans that a company can establish in order to anticipate and develop a course action plan in the event of a government shutdown. Strategy and Plans of Operation on the Event of a Government Shutdown Government shutdowns are events that can lead to tremendous effects among workers as well as the public. During a government shutdown, the government tends to stop all its services except those who are termed as essential. This leads to thousands of government employees to be furloughed for a certain period of time. In addition, there are also several institutions and business that will suffer the consequences of the shutdown since it will be expected that cash flow will not occur due to non-payment of invoices. Thus, the need of establishing strategies and a contingency plan is crucial for a company to cope up in the occurrence of a government shutdown. Government agencies will cease in the procurement of equipments or service, installation of equipments, and suspend delivery of equipments to these agencies. The closing will cause tremendous losses for the company especially when a significant part of the market share of the business comprises the government offices. On the event of a Federal shutdown, several government agencies will furlough most of its employees. However, specific institutions will still continually operate on a normal basis. These agencies include police, fire fighting, postal services, armed forces, utilizes, air traffic management, and the penal system. The goal of the strategy and planning of a business company is to be able to pin-point the affected areas during a shutdown and be able to anticipate its effects on the normal operations. It will also be beneficial for the company if it can establish a contingency plan that will cover the overall course of action on the onset of the shutdown. This can be developed with the help of past records and data of occurrences of government shutdowns. The plan should also specifically cover the abrupt changes that will be experienced in the operations and how the company can reduce the losses that will be associated with the reduction of revenues for the next hours or days wherein the shutdown will take place. Federal Shutdown Government or Federal shutdowns occur when the legislative body and the executive body, in terms of its vetoed legislative power, does not agree on a budget appropriation on its government programs for a certain fiscal year. The absence of appropriation funds causes the government to discontinue providing non-essential services during the start on the fiscal year. During this specific situation of the US federal government, the Antideficiency Act as well as the legal opinions such the one written by Attorney General Benjamin Civiletti in 1981 will define the constitutional actions in the absence of the budget appropriation (Seam and Shron, 2005). The longest partial shutdown that was experienced by the US federal government began on December 16, 1995 under President Clinton’s administration, wherein an estimated 260,000 federal employees were furloughed. The shutdown ended in January 6, 1996 after 21 days of federal shutdown. The shutdown was lifted after the White House and the Congress on a new resolution that will provide funding for the government until January 23, 1996. However, the earlier shutdown during the said fiscal year reported an estimated 800,000 federal employees furloughed (McGrath, 1997). Causes of Federal Shutdown Federal Fiscal year begins every 1st of October. Agencies and programs that are funded with an annual appropriations act usually depends on the interim that will be enacted by the President and the Congress for a full-year appropriation. On the event that both parties will be unable to enact the appropriations into law, the government activities cannot continue operation. This is considered as a funding gap and can also occur when a CR expires and another CR is not enacted immediately after. Funding gaps result to a state of shutdown in the government, specifically on the areas that are affected including the furlough of non-emergency employees and ceasing of agency activities and services. In addition, Programs that are funded by laws other than the annual appropriations act may also be affected by the funding gap. This includes activities and services that also receive annual funding (Brass, 2011). The opinion of Attorney General Civiletti holds the Antideficiency Act as amended that prohibits the federal government from spending during lapsed appropriations such as the expiration of a CR. It is also prohibited for the federal government to enter into contract or other obligations to institutions and businesses. Government services and employees are also ceased from its operation except those who are considered essential wherein the failure to perform the said functions will result to imminent threat to the safety of human life or the protection of the property of the government. Emergency situations under which federal employees may work without compensation does not include those functions associated with essential employees (Kosar, 2004). The federal shutdown that has occurred during the 1996 fiscal year was mainly due to the failure to pass regular appropriations bills by October 1, 1995, the lack of agreement on stop-gap funding for federal government operations through a continuing appropriation act or resolution, and that there was no agreement to lift the federal debt ceiling. On November 14, 1995, the first 1996 federal shutdown occurred that lasted for six days, the result which was the furlough of 800,000 federal employees. The furlough was a result of the expiration of a continuing resolution and the two measures that was raised by President Clinton, the first was a second continuing resolution and the second was a debt limit extension bill which would have increased the borrowing limit of the Federal Treasury through December 12, 1995. These were not enacted due to disagreements with the congressional Republican majority. It was on November 12 that the President instructed the agencies to begin the closedown operations. There were only four enacted appropriations out of the thirteen agencies that placed the remaining agencies at a threat of being vetoed by the President. November 19 marked the end of the partial federal shutdown and the furloughed employees returned to work the following week. This became possible when the congress and the President agreed to balance the federal budget on a seven-year time table or until 2002 and the government funding was extended through December 15, 1995, which also guaranteed the payment of furloughed days of the employees (McGrath, 1997). The second partial shutdown started on December 16, 1995 and lasted for 21 days, which is the longest shutdown by far. Its immediate cause was the expiration of P.L. 104-56 that only gave provisions for government funding until December 15. Though the furlough lasted for 21 days, there were a relatively reduced number of furloughed employees since several agency appropriations bills had been enacted. In addition, there were about 475,000 rated essential employees who continued work but in a non-pay status. It was caused by the disagreements about health care issues, medicare and Medicaid, which was said to be the cause of the two partial shutdowns during the fiscal year. The shutdown ended when a resolution was enacted that will be funding the government through January 26, 1996. Effects of a Federal Shutdown The effects and impacts of a federal shutdown vary greatly depending on the length of time and the number of personnel involved. Federal shutdowns have caused furloughed employees suffered from paying bills and rents, providing adequate food, and meeting other financial obligations. Many other individuals have also experienced hardships including Native American, veterans, and the elderly. Also, federal programs and services were greatly disrupted including health, welfare, law-enforcement, and the public safety issues. In addition, federal contractors and contract employees also suffered from the shutdown, some of which even permanently closed caused by the event (McGrath, 1997). Health service was also ceased during the shutdown which led to the non acceptance of new patients into clinical research at NIH Clinical Center, disease surveillance have stopped, hot line calls to NIH that are disease concerned were not answered, and toxic waste clean-up work at 609 sites also stopped, which translate to 2,400 workers being sent home (McGrath, 1997). Federal contractors experienced a great effect from the shutdown considering that this segment comprises of over $196.4 billion of government spending. Federal contract during the fiscal year of 1994 had reached to $1.3 trillion in federal receipts and $1.5 trillion on federal outlays. Thus, during the shutdown in 1996, 500,000 small companies faced delays in federal payments and several companies that had millions of dollars worth of export products were allowed to leave the ports since there were no federal inspectors to clear the cargos. The result of which is that these companies have also sent their employees home during the period of the shutdown without pay (McGrath, 1997). Strategies during a federal shutdown During government shutdowns, federal departments, agencies, and the District of Columbia are legally prohibited from incurring further financial obligations for activities that are funded by the annual appropriations that have lapsed. Thus, it is highly important to develop certain strategies within a company that would aid the companies that are federal contractors to make it through the time of the shutdown. Since government shutdowns vary on length and severity, a company should be able to determine the level of effects that the shutdown will have scope with (IFPTE, 2011). Among the services that will be affected will include the Federal Housing Agency (FHA) as it would not be endorsing any single-family mortgage loans or have staff available to process applications and approve the loans. National Parks, National Forests, and the Smithsonian Institution will be closed during the shutdown. The Mine Safety and Health Administration will also not be able to conduct its regular safety and health inspections. Passport services will also not be processed. The Community Development Financial Institution will also suspend its grants and technical assistance to communities across the country, thus delaying the investments that can generate jobs. Budget planning of the Department of Defense would also cease and the military personnel would not be able to receive their paychecks during the period of shutdown. Civil right enforcement and defensive litigation would also stop, as well as the processing for Freedom of information Act inquiries and applications will stop (IFPTE, 2011). On the other hand, there are still some services that will continue to operate such as the federal aviation administration to keep the air traffic control system open and safe. The FEMA disaster operations and the Social Security will still be able to provide its beneficiaries with the services. Government services and projects such as the Postal Service, Customs and Border Protection, Military operations, and NASA satellite missions will still continue. Core federal law enforcement will still operate such as the FBI and US Marshals. Food and Medical aids will also continue (IFPTE, 2011). Having this considerations and knowledge of the scenario during a government shutdown, the company will be able to develop a contingency plan on the onset of a funding gap. It can adjust its services and even resort to a furlough of its employees in order to cut the losses of the company. Contingency Plan In preparation to an event of a government shutdown, the employees that would be affected in different degree should be determined. The projected impact of the shutdown should be translated in terms of its effects on the operation of the company. Departments of the company that will be affected must be taken in consideration and a course of action must be drafted for a certain department, focusing on the implementation of a temporary leave of employees if the government shutdown is expected to last for a longer duration. A system of determining the affected employees and operations should also be quantified in order to have a clear picture of who among the employees will be at risk of being furloughed in case the government experiences another funding gap. For the given scenario in this paper, it would be helpful for the general manager to use the documents from the shutdown in the state of Ohio that was experienced a few years back. It should then be used to assess the situation and the direct instant impact of the shutdown must also be determined upon the announcement of the closing of the agencies and departments. The shutdown of a specific agency that the company is supplying goods should also be monitored and the employees of the company that are handling the services for that certain agency can be given a force leave upon the confirmation of the length of the expected shutdown. Suppliers will also be informed that the company will temporarily suspend its orders for a certain period so as not to incur added revenue losses. The company will be addressing the event in a similar manner as its agency does to its employees and departments so as not to suffer the same fate as those companies that have closed due to a government shutdown. References Brass, C. T. (2011). Shutdown of the Federal Government: Causes, Processed, and Effects. CRS Report for Congress. Retrieved from http://www.fas.org/sgp/crs/misc/RL34680.pdf International Federation of Professional & Technical Engineers (IFPTE). (2011). Shutdown Contingency Planning. Retrieved from http://www.ifpte.org/downloads/news/manager/69c.pdf Kosar, K. R. (2004). Shutdown of the Federal Government: Cause, Effects, and Process. CRS Report for Congress. Retrieved from http://democrats.rules.house.gov/archives/98-844.pdf McGrath, J. P. (1997.) Shutdown of the Federal Government: Effects on the Federal Workforce and Other Sectors. Retrieved from http://images.businessweek.com/extras/11/02/ShutdownFedGovt95.906.doc.pdf Seam, P. and Shron, B. (2005). Government Shutdown. Harvard Law School. Retrieved from http://www.law.harvard.edu/faculty/hjackson/GovernmentsShutdowns_10.pdf Smithsonian Institution. (2011). Contingency Plans for Absence of Appropriations or Continuing Resolution. Retrieved from http://www.si.edu/Content/Pdf/About/Smithsonian- Shutdown-Plan-OMB-Dec-2011.pdf Appendices A-1 Appropriate Funding Gaps: Fiscal Years 1977-1996 Fiscal year Date gap commenced Full day(s) gaps Date gap terminated 1977 Thursday 9/30/76 10 Monday 10/11/76 1978 Friday 9/30/77 12 Thursday 10/13/77 Monday 10/31/77 8 Wednesday 11/09/77 Wednesday 11/30/77 8 Friday 12/09/77 1979 Saturday 9/30/78 17 Wednesday 10/18/78 1980 Sunday 9/30/79 11 Friday 10/12/79 1981 [none] 1982 Friday 11/20/91 2 Monday 11/23/81 1983 Thursday 9/30/82 1 Saturday 10/2/82 Friday 12/17/82 3 Tuesday 12/21/82 1984 Thursday 11/10/83 3 Monday 11/14/83 1985 Sunday 9/30/84 2 Wednesday 10/3/84 Wednesday 10/3/84 1 Friday 10/5/84 1986 [none] 1987 Thursday 10/16/86 1 Saturday 10/18/86 1988 Friday 12/18/87 1 Sunday 12/20/87 1989 [none] 1990 [none] 1991 Friday 10/5/90 3 Tuesday 10/9/90 1992 [none] 1993 [none] 1994 [none] 1995 [none] 1996 Tuesday 11/13/95 6 Sunday 11/19/95 Saturday 12/15/95 21 Saturday 1/6/96 Source: Continuing Resolution and Funding Gaps Read More