Shutdown Week 2: How Small GovCons Can Stabilize, Survive, and Get Ready to Restart
Week 2 of the federal shutdown is here, and let’s be real, if you're a small or mid-sized government contractor, you're already feeling the squeeze. Payments are frozen. Contract mods are stalled. Communications from agencies? Crickets.
But this isn’t the time to sit still. This is the time to act.
Whether you hold 8a contracts, rely on your women owned small business certification, or are working toward disabled veteran government contracts, how you manage the next few weeks could determine whether you ride out the storm, or get swept away by it.
Here’s what you need to know, and more importantly, what to do.
What’s Happening: Cash, Contracts, and Communication All in Limbo
By Week 2, the impact of a shutdown moves from inconvenient to operationally painful. Federal agencies have issued widespread stop-work and suspension orders under FAR 52.242-15 and 52.242-14. Invoices submitted before the shutdown are stuck in limbo. Contracting officers are furloughed or silent. And your cash runway is starting to shorten fast.
Meanwhile, SBA loan processing is delayed, and even firms with SBA 8a certification or women business certification aren’t shielded from the liquidity crunch.
Why It Matters: Small Businesses Are on the Front Line
Large primes can weather the storm. They’ve got deep reserves, diversified portfolios, and access to credit. But small GovCons? You live and die by cash flow.
And this isn’t just about short-term survival. It's about protecting your team, preserving your reputation with agencies, and positioning your company to rebound hard when the government reopens.
Here’s what Week 2 calls for: a tactical shift from shock to action.
What You Should Be Doing Right Now
1. Build a 60–90 Day Cash Strategy
Forecast your payroll, rent, and benefits. Prioritize these expenses.
Draw on reserves or open a line of credit. If that’s not possible, explore invoice factoring.
Defer non-essential spend: travel, equipment, and unstaffed contract ramp-ups can wait.
2. Lock Down Your Contract Status
Got a stop-work or suspension notice? Acknowledge it in writing. Then document everything.
Set up cost codes for shutdown-related time and expenses, this will be critical if you file for an equitable adjustment later.
Communicate with your CO (if reachable) and ask whether specific CLINs or task orders still have available funds. Don’t assume. Get it in writing.
3. Don’t “Volunteer” Work
Don’t keep performing tasks without clear funding direction. That’s considered voluntary and unallowable.
Focus instead on internal readiness: training, proposal development, back-office prep, or planning your restart.
4. Use This Time to Diversify
Shift staff to funded SLED (state, local, education) or commercial contracts if you have them.
Explore subcontracting with primes on essential services.
Revisit your business plan, this is a good time to realign your contractor NAICS code portfolio or explore SBIR Grant Assistance or other federal contracting certifications that expand your market access.
5. Stay Visible
Don’t go dark. Send check-in messages to clients. Coordinate with subcontractors. Update your capture plans for pending RFPs.
Agencies will remember which vendors stayed ready and responsive. That goodwill matters in future awards and sole-source opportunities.
The Bigger Picture: From Survival Mode to Advantage
Past shutdowns have shown us that recovery can be just as chaotic as the closure. When appropriations return, expect a surge of RFPs, modifications, and task orders with tight turnarounds. The contractors who kept their teams ready and their pipelines warm will have the edge.
That means:
Draft your restart plans now
Preload your proposal library with updated past performance and capability statements
Review your government contracting certifications, expired reps & certs, incorrect contractor NAICS code listings, or outdated SBA 8a certification data can delay your ability to respond fast
Remember: small business set-asides won’t help if your SAM.gov profile is inactive or your documents are outdated.
Final Thought: This Is a Stress Test, But It’s Also a Strategy Test
This shutdown is exposing weaknesses in pipeline diversification, cash reserves, and contract management practices. It’s also revealing which companies have the resilience, and grit, to keep moving even when the work stops.
Use this week to become the firm agencies and primes want to work with when the lights come back on. And if you’ve been putting off certifications, set-aside eligibility reviews, or building a government contracting business development plan, don’t wait for normalcy. Start now.
Need help mapping your NAICS code strategy or getting through the government contracting certification process? You’re not alone, and you don’t have to figure it out solo.
Check out our deep dive on how to protect your contracts and cash flow during a government shutdown for more strategies and resources.
If you aren't a Squared Compass partner, what are you waiting for? From getting your business set up with specific government set-aside programs at both the State and Federal level, to being empowered by a Fractional Capture team to win government contracts, to receiving tailored government contract opportunities Squared Compass delivers immense value which helps propel our partners to success. Schedule a chat with our team today.
