[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
GOVERNMENT SHUTDOWNS:
CONTRACT KILLERS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON GOVERNMENT OPERATIONS
OF THE
COMMITTEE ON OVERSIGHT
AND REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
MAY 6, 2019
__________
Serial No. 116-19
__________
Printed for the use of the Committee on Oversight and Reform
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
http://www.house.oversight.gov
http://www.docs.house.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
36-438 PDF WASHINGTON : 2019
--------------------------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Publishing Office,
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center,
U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free).
E-mail, [email protected].
COMMITTEE ON OVERSIGHT AND REFORM
ELIJAH E. CUMMINGS, Maryland, Chairman
Carolyn B. Maloney, New York Jim Jordan, Ohio, Ranking Minority
Eleanor Holmes Norton, District of Member
Columbia Justin Amash, Michigan
Wm. Lacy Clay, Missouri Paul A. Gosar, Arizona
Stephen F. Lynch, Massachusetts Virginia Foxx, North Carolina
Jim Cooper, Tennessee Thomas Massie, Kentucky
Gerald E. Connolly, Virginia Mark Meadows, North Carolina
Raja Krishnamoorthi, Illinois Jody B. Hice, Georgia
Jamie Raskin, Maryland Glenn Grothman, Wisconsin
Harley Rouda, California James Comer, Kentucky
Katie Hill, California Michael Cloud, Texas
Debbie Wasserman Schultz, Florida Bob Gibbs, Ohio
John P. Sarbanes, Maryland Ralph Norman, South Carolina
Peter Welch, Vermont Clay Higgins, Louisiana
Jackie Speier, California Chip Roy, Texas
Robin L. Kelly, Illinois Carol D. Miller, West Virginia
Mark DeSaulnier, California Mark E. Green, Tennessee
Brenda L. Lawrence, Michigan Kelly Armstrong, North Dakota
Stacey E. Plaskett, Virgin Islands W. Gregory Steube, Florida
Ro Khanna, California
Jimmy Gomez, California
Alexandria Ocasio-Cortez, New York
Ayanna Pressley, Massachusetts
Rashida Tlaib, Michigan
David Rapallo, Staff Director
Wendy Ginsberg, Subcommittee Staff Director
Kristine Lam, Subcommittee Counsel
Laura Rush, Deputy Chief Clerk
Christopher Hixon, Minority Staff Director
Contact Number: 202-225-5051
Subcommittee on Government Operations
Gerald E. Connolly, Virginia, Chairman
Eleanor Holmes Norton, District of Mark Meadows, North Carolina,
Columbia, Ranking Minority Member
John P. Sarbanes, Maryland Thomas Massie, Kentucky
Jackie Speier, California Jody Hice, Georgia
Brenda L. Lawrence, Michigan Glenn Grothman, Wisconsin
Stacey E. Plaskett, Virgin Islands James Comer, Kentucky
Ro Khanna, California Ralph Norman, South Carolina
Stephen F. Lynch, Massachsetts W. Gregory Steube, Florida
Jamie Raskin, Maryland
C O N T E N T S
----------
Page
Hearing held on May 6, 2019...................................... 1
Witnesses
Panel I:
David J. Berteau, President and CEO, Professional Services
Council
Oral statement............................................... 6
Roger A. Krone, Chairman and CEO, Leidos, Inc.
Oral statement............................................... 8
Edward Grabowski, President, Local Lodge 2061, District 166,
International Association of Machinists and Aerospace Workers
Oral statement............................................... 10
Alba M. Aleman, CEO, Citizant
Oral statement............................................... 11
Michael A. Niggel, CEO, Advanced Concepts and Technologies
International, L.L.C.
Oral statement............................................... 13
Panel II:
Jaime Contreras, Vice President, 32BJ, Service Employees
International Union
Oral statement............................................... 29
Anthony Crescenzo, CEO, IntelliDyne, L.L.C.
Oral statement............................................... 31
Wesley Ford, President, TKI Coffee, Inc.
Oral statement............................................... 33
Tamela Worthen, Security Officer, National Museum of African
American History
Oral statement............................................... 34
Mark Hall, Executive Vice President, ServiceSource
Oral statement............................................... 35
*Written opening statements, and the written statements for
witnesses are available at the U.S. House of Representatives
Repository: https://docs.house.gov.
NO DOCUMENTS WERE SUBMITTED FOR THIS HEARING.
FIELD HEARING.
GOVERNMENT SHUTDOWNS:.
CONTRACT KILLERS
----------
Monday, May 6, 2019
House of Representatives
Subcommittee on Government Operations
Committee on Oversight and Reform
Washington, D.C.
The subcommittee met, pursuant to notice, at 9:10 a.m., in
room 1201, Merten Hall, George Mason University, 4441 George
Mason Blvd., Fairfax, Virginia, 22030, Hon. Gerald E. Connolly
(chairman of the subcommittee) presiding.
Present: Representatives Connolly, Norton, and Raskin.
Also present: Representatives Beyer and Wexton.
Mr. Connolly. Good morning everybody. And welcome to the
first field hearing of the new Congress of the Government
Operations Subcommittee of the Committee of Oversight and
Reform. I want to welcome my colleagues from Northern Virginia,
Don Beyer from the Eighth congressional District; Jennifer
Wexton from the 10th congressional District; and our dear
friend and colleague, the Congresswoman from the District of
Columbia, Eleanor Holmes Norton.
Greeting us first will be the president of George Mason
University, Angel Cabrera. Thank you, President Cabrera.
Mr. Cabrera. Thank you.
Thank you so much, Congressman Connolly. Thank you to all
the members of the subcommittee. It is a pleasure to host you
at the largest, fastest growing, and most diverse university in
Virginia. We are very proud to have been reclassified three
years ago as a Research 1 university in the country. We Are the
youngest Research 1 in the Nation. And yet we Are fully
committed to our public mission of access. That is what is
unique about our university. And we love to be a place where
the community comes together for important questions, including
this one. We are one of the biggest producers of employers in
our leading government contracting companies in the region. So
the matter being discussed here today matters to our alumni a
great deal.
So thank you so much to all the members of the subcommittee
and to you, Congressman Connolly. Thank you so much, and
welcome to Mason.
Mr. Connolly. Thank you so much, President Cabrera. And
thank you for your hospitality here at George Mason University.
I want to thank members of the Government Operations
Subcommittee and, of course, members of the D.C. area
delegation for coming to this very important field hearing to
examine the impacts of government shutdowns on contractors. I
would also like to thank our hosts again for their hospitality.
Just five months ago, from December 22d through January
25th, we were in the throes of the longest government shutdown
in the United States history. President Trump used nearly
800,000 Federal employees as pawns in what I consider to be a
ruthless attempt to fulfill a wrong-headed political promise.
He wanted to build a wall. According to our estimates, an
additional 1.5 million Federal contract employees may also have
been affected by the unnecessary shutdown and prevented from
working and serving the American people.
Virginia's 11th District, which I represent and where you
are now, is home to about 55,000 Federal employees, one of the
largest populations of Federal employees of any congressional
district.
But for every Federal worker in my district, we estimate
there are roughly 1.5 contractors. According to Federal
contracting data, the agencies affected by the longest gap in
the funding of government history experienced a drop of
approximately 75 percent in contract obligations when compared
to the same 35 days from the previous year. And more than five
Federal agencies saw reductions in contract obligations of
approximately $150 million during that same 35-day period.
Contractors serve important roles alongside Federal
employees. They respond to citizens in need by answering phones
in call centers. They analyze classified intelligence
information. They help maintain agency information technology
systems. They secure Federal buildings and provide the Federal
Government and American taxpayers with goods and services. They
are laboratory technicians. They are machinists. They are
janitors, cafeteria workers, cybersecurity experts, lawyers,
and engineers. Our government could not function without them.
While Federal employees deservedly received backpay when
the government reopened, Federal contractors did not. This
disparity is wrong, especially when one considers that, in many
cases, contract employees are embedded in Federal agencies
working side by side with Federal employees doing the same
work.
Federal contractors and their families should not be
penalized for a government shutdown they did nothing to cause.
As a result of the nearly five-week shutdown, Federal contract
employees lost more than a month's pay and often missed several
paychecks. Like all of us, these workers have financial
responsibilities, such as rent or mortgage payments, childcare,
household bills, medical expenses, not to mention everyday
purchases such as food and gas.
That is why I wrote a bipartisan letter, signed by 48
Members of the House, including our friends here today,
encouraging the House Appropriations Committee to include a
provision to provide backpay to Federal contract employees for
wages lost during the shutdown in any supplemental
appropriation bill for Fiscal Year 2019 or as part of the
regular appropriations process in 2020.
Businesses that contract the Federal Government were also
greatly impacted by the partial government shutdown. And many
are still feeling the effects to this day. According for the
Congressional Budget Office, the effects of the partial
government shutdown ending in 2019, Federal spending on goods
and services was about $9 billion lower during the five-week
shutdown than it otherwise would have been. Additionally,
private producers that had contracts with Federal agencies that
were affected by the partial shutdown, and probably their
employees and suppliers, saw a reduction in income during the
shutdown.
When the government is shut down, contractors may lose
compensation for a number of reasons. First, agencies may issue
a stop work order freezing the contract to minimize the cost to
government. Second, during a shutdown, agencies have no staff
to process invoices for work that was performed and billed to
the government prior to the shutdown. Companies could also have
lost income because agencies deferred or canceled new contracts
due to the uncertainties caused by the shutdown. There are
likely numerous additional ways in which the partial government
shutdown negatively affected contractors, and we will explore
many of them in this hearing today.
Amidst the turmoil of the shutdown, we also saw how
companies and coworkers banded together to mitigate some of the
pain in the gap and funding that was caused. Today we will hear
from small and midsize businesses who went to great lengths to
avoid laying off or furloughing their own employees during the
shutdown. Some used the 35-day partial government shutdown as
an opportunity to offer their employees additional training.
Others allowed employees who were not furloughed to donate
their leave to those who were. These companies also had to
consider whether to continue paying for a lot of employees'
medical insurance premiums and any retirement contributions.
Many businesses did all they could to help their employees,
but some eventually had to lay people off. Unfortunately, there
were some small businesses that did not survive the financial
hardships presented by the shutdown.
Like everyone in this room today, I hope we never
experience another government shutdown. However, we do not know
what the future holds. Therefore, Congress must take action, it
seems to me, to lessen the impact on contractors, work with
agencies to improve their communication with contractors ahead
of a shutdown, and, most importantly, ensure the contract
employees are able to receive backpay.
I want to thank all of our witnesses in advance for
appearing before the subcommittee this morning, and we all look
forward to hearing from them.
Now, I call on my colleagues for any opening statements
they may have.
Ms. Norton.
Ms. Norton. Thank you, Mr. Chairman.
I think that more than contract workers are grateful to you
for this subcommittee hearing today. You and I are on several
bills to help make up for this. But this hearing is necessary
to give the facts to undergird those bills and those
appropriation matters.
This 35-day shutdown was unheard of in American history.
Our job is to make sure it doesn't happen again although, of
course, we were not responsible for it. But one way to do that
is to make sure that it is clear that everyone who was affected
by this shutdown is, in fact, made as close to whole as
possible.
We are particularly grateful for all of you who are
witnesses who have come because you are helping us to make that
record.
I thank you, Mr. Chairman.
Mr. Connolly. I thank Ms. Norton.
Without objection, the chairman is authorized to declare a
recess of the committee at any time.
Without objection, the following Members are authorized to
participate in today's hearing: Mr. Don Beyer and Ms. Jennifer
Wexton.
The Subcommittee on Government Operations is convening
today to hold a field hearing on the effects of government
shutdowns on Federal contractors. Without objection, it is so
ordered.
Mr. Beyer, do you have an opening statement?
Mr. Beyer. Just a brief one.
First, Jerry, Congressman Connolly, thank you very much for
holding this hearing. I think all Virginians, probably all
Americans, should be grateful for the leadership role that you
play on Oversight right now. No better person to do that. And
thank all of you for coming.
This was some of the hardest days I have ever had in public
service. You know, all of our government employees, government
contract employees, and all the people who serve them, you
know, the car mechanics and the waitresses and the people at
the car wash and people at the grocery store, everybody that
wasn't making money during the recession--or during the
shutdown who could never come back again.
With my friend Tim Kaine, whom all of you know, we
introduced a bill in the Senate and the House that would
propose a solution to avoid all further solutions. It is called
the End Shutdowns Act. And it sets up a process where, if there
is a lapse in appropriations, if there is a shutdown, an
automatic continuing resolution kicks in. And no other
government activity, no legislation could pass the House or the
Senate until we open the government again, until the
appropriations process is finished.
The theory on this is that we are all sent there to work.
And to sit there and do nothing day after day after day will be
incredibly frustrating. So the appropriations come first. It is
a little different from our pal Senator Mark Warner's
legislation, the so-called stupid act that denies our pay,
which is perfectly fine with me except it is probably, A,
unconstitutional and, B, would never pass. So we think this is
a more--given that politics is the art of the possible, this is
a better way forward.
But I am very committed to working with Congresswomen
Wexton and Norton and our leader, Jerry Connolly, to make sure
that we are doing everything we can to make sure that this is
the last shutdown of our careers.
Mr. Connolly. Thank you, Mr. Beyer.
Congresswoman Wexton, do you have an opening statement?
Ms. Wexton. Thank you, Mr. Chairman. I do, very briefly.
And I want to thank you for holding this hearing and for your
leadership on this issue and also thank Congresswoman Norton
for her leadership on this issue.
So I have a unique perspective because I am the brand new
freshman Member of Congress, and I came in--I was--I came in
with the freshman class in the midst of this shutdown. So that
was my introduction to serving in Congress as we, day after
day, passed appropriation bills that went to the Senate and sat
there and nothing happened.
But it was also extremely hard for me because I kept
hearing from constituents about how they were impacted by the
shutdown. So many people who didn't know where they were going
to be able to get the money for their mortgage payment or for--
you know, or for food who were having to see about getting
abatement of their student loans. And some who knew that they
might never actually recoup the pay that they were losing who
were contract employees.
So we need to do better for our employees. We need to do
better for our contract workers, especially as more and more--
there is more pressure on the government to do more work
through contract employees. So we need to do better for them.
And we also need to recognize that--one of the things I have
noticed in my short tenure on Capitol Hill is that folks in
Washington have really short memories. And so we need to make
sure that they do not forget the pain that was suffered by all
these folks and businesses during the shutdown and make sure
that it never happens again.
Thank you.
Mr. Connolly. Thank you, Congresswoman Wexton.
Our first panel, let me introduce. First, we have David
Berteau, who is the president and CEO of the Professional
Services Council in Arlington. PSC represents more than 400
members of the Federal services industry. And as CEO, Mr.
Berteau focuses on legislative and regulatory issues related to
government acquisition, budgets, and requirements by working to
improve communications between government and industry.
Welcome, Mr. Berteau.
Roger Krone is chairman and CEO of Leidos. And I need to
reveal that I used to work for the united SAIC before Leidos
broke off. Leidos has approximately $1 billion in annual
revenue, 32,000 employees worldwide, and is a leader in
government IT services and solutions. Despite the size and
diversity of its business lines, Leidos faced difficult
management decisions, which we are going to hear about, to
mitigate the impact of the shutdown.
Ed Grabowski is president of Local 2061, the International
Association of Machinists. Mr. Grabowski represents NASA
contracts in Florida and will tell a variety of stories related
to contractor hardship, including the layoff notices,
challenges in applying for unemployment insurance and local
food pantries helping contractors facing hardship.
Alba Aleman is chief executive officer of Citizant in
Chantilly here in Virginia. Citizant is a small business
offering IT and business solutions to the Federal Government
with current contracts awarded by DHS, DOJ, and IRS. Ms.
Aleman--I am pronouncing that correcting, I hope--CEO of
Citizant, led her company through both the 2013 and last year's
shutdowns, so she has got a lot to tell us about.
And Michael Niggel is chief executive officer of Advanced
Concepts and Technologies International, ACT I, in Arlington.
ACT I is a DOD and DHS contractor with 273 employees, and a
renewal option on the DHS contractor occurred during the
shutdown period. And because procurement officers were not
deemed essential, the option could not be exercised, and a
large amount of employees had to be rolled off projects. ACT I
is currently going through the request for equitable adjustment
to seek compensation for expenses the company incurred because
of the shutdown through no fault of its own. We certainly want
to hear that story.
Mr. Berteau--and I am going to ask all of our witnesses, we
have your prepared statements, if you can summarize in five
minutes, we would appreciate it.
Oh, wait. I got to swear you in. Where is the swearing in?
It is the habit of this committee that we swear in all
witnesses. And let's see, where is the swear? Somebody.
All right, if you'd rise and raise your right hand.
Do you swear and affirm that the testimony you are about to
give is the truth, the whole truth, and nothing but the truth,
so help you God?
Let record show the witnesses answered in the affirmative.
Thank you. Please be seated.
Mr. Berteau.
I didn't think you were going to lie anyhow, but----
STATEMENT OF DAVID J. BERTEAU, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, PROFESSIONAL SERVICES COUNCIL
Mr. Berteau. Thank you, Mr. Chairman, and for both that
vote of confidence but, most importantly, for the opportunity
to be here today. And I appreciate the opportunity to add some
oral remarks.
As you noted, government civilian employees and the
contract workers who support them share many common
characteristics: a passion for public service, a commitment to
meeting the needs of the American people, a dedication to
fulfilling the missions and performing the functions for which
agencies engage them. They also share a common belief that
government shutdowns are misguided, damaging, and avoidable.
But the way in which government agencies and contractors
respond to shutdowns are not the same, and that's why this
record, I think is so important. For the government, the first
action is to stop paying their workers, not because they want
to but because they have to. That's what's a lapse in
appropriations means. But for the companies, the last thing
they want to do is to stop paying their workers because they
will lose them.
When appropriations lapse, of course, funding disappears.
And so the first decision is, what's an essential mission or
function that has to be continued, and what are the workers
that need to be sent to work without pay in order to continue
that going? On any worker who's not doing an essential
function--a misnomer here is that people are essential. It's
not the people that are essential. It's the mission or the
function that's essential. It's the workers associated with
them who have to then work or not work.
But it's very different for contracts. There's a lot of
factors that affect whether contract work continues under a
shutdown. If it's prior obligated funds, for instance, and
everything else is the same, work continues. In fact,
contractors are required to continue working under a--that's
what a contract is. They're required to continue working on the
contract unless an action occurs or the passage of time, the
absence of money occurs, so the work has to stop.
So it's a very, very different dynamic for contractors than
it is for government employees. Of course, shutdowns can
further interfere with the work. You may actually have funding,
a requirement to continue work, but you can't get access to the
facility, or you can't access the data, or there's no
government employee there to certify that you've done what
you're supposed to do so you can move on to the next task. So a
whole host of things that come into that. Our statement goes
into that and some of my colleagues are going to go into that
as well.
So these differences also affect how contractors not only
continue to work, but it can lead to confusion. As you--you'll
see from Mr. Niggel in terms of his option being exercised. It
can lead to conflicting guidance. It can lead to missed
opportunities and a lot of other negative consequences. My
statement goes into key roles there.
So here's how the shutdown really affected contractors.
Three ways. No. 1, on the work force, right? Tens of thousands
of employees lost their work, lost their pay. And unlike
Federal employees, they had no guarantee that they would even
have the jobs there at the end of the process much less--much
less anything like backpay. In addition, it really impacts
recruitment of new workers because who wants to come to work
for an employer that says: You may have to work without pay.
Well, there's plenty enough opportunity to do that in real life
already. You don't need to do it. It makes it much harder to
attract new talent at a time when unemployment is at a 50-year
low, and there are plenty of other options out there for people
to go pursue. So that's the first impact is on the workers
themselves.
The second is financial. So the government, as you noted,
stopped paying invoices including for work that had been done
in October, in November, in December, before the shutdown
occurred, as well as for authorized and funded work that
continued during the shutdown. So companies exhausted their
lines of credit. Many of them--I would hear from member CEOs
who'd say: I'm in a dilemma. I either keep paying my people and
I go out of business, or I quit paying them, and they quit, and
then I go out of business. Please give me a third option.
Then, finally, there's the impact on the government, and
particularly the lost productivity, the missed work, the
delays. Program offices even now five months later, four months
later, are way behind in solicitations. They're way behind in
accepting contractor labels. They're way behind in making
decisions, for example, on new contracts.
Of course, your purpose here today is not to say what a bad
idea shutdowns are. We're kind of in broad agreement on that, I
think. Instead, how do we deal with the consequences and also
how do we reduce the risk of the future shutdowns. We have
several recommendations, but I put them into three basic
categories. First, take care of the workers, right? Backpay, as
we call it, or compensation, as well as allow for untaxed
donation of leave as Federal employees have as well, right?
Second, take care of the companies. Communications, contract
issues have to be addressed before, during, and after a
shutdown. And, third, take care of the government and the
American people who are really the ones that suffer from the
shutdown. And they're not here at the table today, but we think
we're representing them here.
How do you do that? A two-year increase in the budget caps,
full year appropriations on time for Fiscal Year 2020, and
automatic continuing resolution along the lines of some of the
legislation that's been proposed.
So, Mr. Chairman, that concludes my opening remarks. I
thank you, and I look forward to your questions. And I'll yield
the rest of my time.
Mr. Connolly. You are perfect. Thank you, Mr. Berteau.
Mr. Krone.
STATEMENT OF ROGER A. KRONE, CHAIRMAN AND CHIEF EXECUTIVE
OFFICER, LEIDOS
Mr. Krone. Great. Thank you, Chairman Connolly and other
members of the subcommittee for the opportunity to discuss a
key concern facing Leidos and the professional services
industry. And the views I express, of course, today are my own.
The impact of further government shutdowns, whether total
or partial, will have serious and long-term impacts on our
industry's ability to attract and retain the talent to support
the critical missions of our Federal agency customer. I believe
it's through productive dialog such as this that we will find
solutions to the multifaceted challenge that lay before us. As,
of course, is--I'm not able to fully discuss all of these
matters in my oral statement. Therefore, I provided a
comprehensive response in my written testimony. I ask that that
be included in the report.
Mr. Connolly. Without objection.
Mr. Krone. Thank you.
Leidos is a Fortune 500 company with 32,000 employees, Our
work in information technology, engineering, and sciences help
solve some of the toughest challenges we are contending with in
defense, intelligence, homeland security, civil, and health
markets.
Related to the shutdown, we felt the most significant
impacts within our civil group. This is the group that serves
agencies, including the Department of Energy, Department of
Homeland Security, the FAA, and the FBI, among others. We lost
an estimated $14 million in revenue as a result of these
disruptions, or about $400,000 per today. We also experienced a
delay in payments on outstanding invoices totaling about 18
million. But more importantly, we saw work on 22 important
programs come to a halt. This included impacts to about 200 of
our subcontractors of which about one-half are small
businesses.
I want my main focus today, however, to be on the people
side as that is where I believe we saw the most impact. Due to
the partial government shutdown, 893 of my colleagues either
had no or limited work to perform due to being on contracts
associated with closed Federal agencies. We did three things to
support these folks. We redeployed them to open positions
whenever possible. We allowed them to advance paid time off
hours up to a balance of negative 80 hours. And we offered
hardship assistance through our relief foundation.
To aid in the redeployment, we stood up a team to match
affected employees to other jobs within the companies. This
team worked nights and weekends throughout the shutdown. To
help those experience financial hardship, we launched a special
initiative within our relief foundation to enable employed
employees to donate money or their paid time off to help these
individuals. I filled out a donation form myself maxing out a
donation of my paid time off, two weeks of vacation.
During the time of hardship, we received more than 50
requests from the employees for assistance stating that they
were in a state of, quote, ``extreme financial hardship,''
close quote. Each of these individuals was given a $2,500
grant. If the shutdown were to have continued any longer, we
anticipated receiving another hundred requests each week for
assistance. With a lot of maneuvering and extra effort, we were
able to put some workarounds in place for our people.
I assure you, though, individuals and families suffered
losses during these shutdowns. Vacations were canceled.
Birthdays were missed. Holidays were used just to get one more
day of pay. Employees with no other options sank deeper and
deeper into a negative leave status. Some even used their sick
leave to bridge the gap in desperation. These folks are getting
paid now, but they will be recovering this negative leave for a
very long time.
We all need to collectively look for ways to eliminate
government shutdowns. We should harness the pain of this most
recent event and learn from it, working together to enact a
permanent solution. First, we must change the process and the
rules by which we create Federal authorizations and
appropriations. Many ideas have been proposed. The automatic CR
solution, biennial appropriations, designating more government
functions and personnel as essential. In general, we should
enact legislation that prohibits a potential shutdown from
being used as a leverage on the budgeting process.
Second, I ask that, in the event that future shutdowns
cannot be prevented, you see the contractor work force, these
men and women who stand shoulder to shoulder with their
government colleagues as essential to the operation of our
national government. I ask that we work together to find a way
to enact legislation that will recognize the importance of
their contributions on this critical national resource--and the
human impact of a shutdown on this critical natural resource
and treat them just as their Federal work force counterparts
are treated. That means parity in the restoration of pay and
mitigation of other impacts on benefits, such as leave.
I'd like to thank Chairman Connolly for his leadership on
this issue including cosponsoring a number of bills and for
holding this hearing.
With that, I close my remarks, Chairman Connolly, and other
members of the subcommittee. And I thank you for this
opportunity to testify today. And I look forward to your
questions.
Mr. Connolly. Thank you, Mr. Krone.
Mr. Grabowski.
STATEMENT OF ED GRABOWSKI, PRESIDENT, LL 2061, DISTRICT 166,
IAMAW
Mr. Grabowski. Chairman Connolly and members of the
committee, thank you for the opportunity to testify today. I am
the president of Local Lodge 2061 of the International
Association of Machinists and Aerospace Workers. Local Lodge
2061, a machinist union, is based in Cape Canaveral, Florida,
and represents around 700 members that are employed on several
different Federal contracts supporting the U.S. space program
at both the Kennedy Space Center and Cape Canaveral Air Force
station.
The members of our local perform a wide variety of jobs
including helicopter pilot, laboratory technician, propellant
mechanic, machinist, industrial electrician, and crane
operator. These jobs ensure the successful and efficient
completion of vital government operations carried out by
Federal contractors. Many aspects of this work are hazardous,
and the tasks associated with them must be handled with utmost
professionalism to guarantee the safety of personnel and the
vehicles they support.
A large percentage of our members, including myself, are
proud veterans of the Armed Forces. It is partly because of
this service and a security clearance associated with it that
afforded us the opportunity to work supporting the Nation's
space program. I have devoted over 28 years working alongside
our members, and I can personally attest to these individuals'
passionate and conscientious focus when it comes to their work.
We are a diverse group of people in age, ethnicity, religion,
and sexuality.
We recently had to endure three shutdowns within a 12-month
period. The first two shutdowns lasted only 1 day but still
caused many members to lose pay. All have been stressful. But
the last shutdown, which totaled 35 days, created enormous
problems for our members and the local community as a whole.
Though we Federal contract employees work side by side with our
civil service counterparts, there was no guarantee of backpay
for us. We were fortunate that all of our government contractor
employers kept our medical insurance enforced through the
shutdown. However, the members had to meet their portion of
medical insurance premiums for their coverage to remain
current. This was often accomplished by using personal leave
time or by writing personal checks to the employers. We had
many members and their dependents that suffer from serious
medical concerns. So, in addition to the premium costs, these
individuals also had to pay for deductibles, out-of-pocket
copayments, and expensive pharmaceuticals.
The fact is the government may shut done, but life's
challenges remain ongoing. Without a guaranteed income for 35
days, our members still had to meet all their financial
obligations. Some had to take out short-term loans in order to
make ends meet. In some cases, the only hope they have of
repaying these loans without a financial penalty is to receive
backpay for wages lost during a shutdown.
Some of our members have received backpay payments, but
many members still have not received any backpay to their lost
wages. For many, this has resulted in an eight-percent loss of
annual income for them. For those who did receive backpay, it
did not come in full until the end of March.
It is hard to convey the anxiety we all experienced in
these shutdowns. The financial effects for some are lasting and
damaging. Earlier I mentioned that the security clearances many
of us hold provide a gateway to our employment. When
individuals that hold sensitive clearances experience a
financial difficulty, it can place their clearances in peril.
And a loss of a clearance can result in their loss of
employment.
My testimony provides insight on the impact the shutdowns
of just one union local in our country. There were thousands of
Federal contract employees represented by the IAM that were
impacted by this last shutdown. We must remember that the
financial loss experienced by these workers due to the shutdown
ripples through the communities they live in. The goods and
services normally purchased by these workers will not be sold,
not to mention the deep financial impacts to these workers on
their retirement investment, education funding, and general
savings for emergencies.
It is time to provide some financial insurance to the
hardworking, dedicated Federal contractor employees.
The first step can be achieved by supporting and passing
legislation, such as the Fairness for Federal Contractors Act,
H.R. 824, which ensures backpay for all Federal contract
employees impacted by the recent 35 shutdown. I encourage all
to support this legislative effort.
Chairman Connolly, other members of the committee, I again
thank you for the opportunity to testify today, and I look
forward to your questions.
Mr. Connolly. Thank you, Mr. Grabowski.
Ms. Aleman.
STATEMENT OF ALBA M. ALEMAN, CHIEF EXECUTIVE OFFICER, CITIZANT,
INC
Ms. Aleman. Good morning, Chairman Connolly and members of
the House Committee on Oversight and Reform. Thank you for the
opportunity to speak to you about the impact of the shutdown on
our business and the contracting community that I support.
My name is Alba Aleman, and I'm the founder and CEO of
Citizant. It's a small business serving the Federal Government
for the last 20 years based in Chantilly, Virginia. We employ
180 professionals supporting Federal agencies in 26 states. We
have been in business since 1999 and have weathered many
storms: Y2K, 9/11, numerous government shutdowns, continuing
resolutions, and the Budget Control Act of 2011.
Throughout all this, we continued to serve the IRS, the
Department of Defense, the Department of Homeland Security, and
the Department of Justice, the immigration courts. Our services
have supported agencies in improving efficiencies and
effectiveness, allowing them to save or repurpose untold
millions of taxpayer dollars.
The purpose today is to share some of the impact of this. I
do have a longer form in my testimony, and I ask that you
please accept it for the record.
Mr. Connolly. Absolutely. Without objection.
Ms. Aleman. Thank you, sir.
In late December, six of the Federal programs that we serve
were immediately halted. This affected 35 Citizant employees,
cut $430,000 of revenue, forced a $200,000 loss in
profitability, and cost us more than $15,000 in interest,
expenses due to increased line of credit borrowings.
Based on numerous prior experiences with shutdowns, we
immediately implemented a companywide leave donation program
and collected 2,470 hours of leave from employees working on
programs that were still operating and who had benefited from
these leave donations during the prior shutdown of 2013. We
redistributed these hours to keep our entire work force; 100
percent of our work force was paid throughout the entire
government shutdown. And they never feared--they heard from me
daily and never feared that they would not get their pay, even
as the shutdown dragged on.
However, the official end to the shutdown did not end the
worry or the crisis for Citizant and other contractors. Because
the government had furloughed those responsible for approving
and paying invoices, we did not receive payment for services
rendered throughout the shutdown and, in some cases, for work
performed back in October 2018. Government payments stopped
even for projects that were not shut down, but we were
contractually required to continue to work.
Citizants' unpaid invoices continued to pile up well into
March 2019, putting us more than $4 million in debt. We maxed
out our borrowing capacity and had to postpone paying all of
our own vendors, including the IRS, until early April.
We continued to assess cash-flow and finances daily for
months after the shutdown was over because we were gravely
concerned about how we would cover our $750,000 payroll every
two weeks due to the government's delayed processing of
payments.
When your only customer doesn't pay you for nearly four
months and you've reached your company's borrowing capacity,
you face the dire prospect, as a business owner, to file for
bankruptcy or to sell off parts of your business for pennies on
the dollar in order to pay your employees. We were within days
of having to have made that decision.
In conclusion, I'd like to offer three possible actions
that we would appreciate your support on in terms of
legislative reform. First and foremost is to preserve our work
force. Congress could pass legislation that would guarantee
backpay to contractors, most of whom are essential to the
proper functioning of Federal agencies. Many of our employees
have security clearances and specialized knowledge that are
difficult to replace. Guaranteed backpay would reduce their
anxiety and make them more likely to stay in this industry. In
addition, our banks would be more willing to extend credit to
cover payroll and payments to our vendors if they knew some
type of financial adjustment was forthcoming.
Second, to mitigate the cashflow crisis faced by
contractors, Congress could mandate that processing and paying
invoices are essential activities that must continue during any
future shutdown. This financial function is essential to our
Nation's economic security as well as the viability of small
businesses and the lives of millions of government contractor
employees.
Finally, and most importantly, craft legislation that makes
a shutdown the tool of last resort. Citizens elect you to
represent them to negotiate on their behalf and to make
compromises. Shutdowns have become weapons of failed
negotiations and have eroded our political system. They risk
the welfare and lives of millions of Americans. We require
civil discourse, collaboration, and compromise from our elected
officials in order to reach agreement on important legislative
and budgetary matters. Please put an end to this abuse of power
and trust.
I'm grateful for this opportunity. I'm passionate and
deeply to committed to serve. And I look forward to your
questions. Thank you so much for your time.
Mr. Connolly. Thank you, Ms. Aleman.
Mr. Niggel.
STATEMENT OF MICHAEL A. NIGGEL, CHIEF EXECUTIVE OFFICER,
ADVANCED CONCEPTS AND TECHNOLOGIES INTERNATIONAL
Mr. Niggel. Chairman Connolly, members of the subcommittee.
Mr. Connolly. Am I pronouncing your name correctly?
Mr. Niggel. Niggel, yes, sir.
Mr. Connolly. Niggel. Excuse me.
Mr. Niggel. Thank you for the invitation to testify on
behalf of Advanced Concepts and Technologies International,
known as ACT I. My name is Michael Niggel, and I am the CEO
headquartered here in Arlington.
ACT I delivers total acquisition management solutions to
the U.S. Government and allied governments. Our staff provide
trusted technical and management advice on complex programs and
systems. We have over 200 experts in four domains: defense,
homeland security, space and intel, and international programs.
We work in functional areas like requirements, acquisition,
program and financial management, engineering logistics, and
cybersecurity. Most of our staff live and work in Fairfax,
Arlington, and surrounding counties.
First, I'll summarize actions that Congress can take, and
then I'll describe problems we faced during the shutdown. To
protect government employees and small businesses, Congress
could give definitive guidance to swiftly pay requests for
equitable adjustments, guaranteed compensation for contractors
during budget shutdowns, enact timely budget bills. And if CRs
are needed, make them automatic. And, finally, increase the BCA
caps for two years, fiscal years 2020 and 2021.
Now I'll address the impacts that shutdown had on ACT I. It
affected two of our DHS contracts. The first was our largest
contract supporting the Enterprise Program Management Office,
called EPMO, where we provide program support across seven
programs, including cargo and passenger systems, tactical
communications, enterprise engineering, and enterprise
networks. We won this 45-person LPTA contract in January 2018.
Also affected was our contract with the Civil Rights and Civil
Liberties Office where we have nine technical and admin
staffing working on a firm fixed price LPTA contract.
Here are the positive impacts of the shutdown, and they
were driven by ACT I and DHS. ACT I's number corporate goal is
employee satisfaction. We made a strategic decision to pay our
DHS support staff during the shutdown. We brought the team to
headquarters for training and team building. This decision
increased employee satisfaction and corporate loyalty, allowed
us to retain our highly cleared technical staff, and mainly
provided steady income and benefits for our employees and
families.
Our decision to fund all salaries and benefits protected
our employees, their clearances, and DHS. The result was we
built both employee and DHS loyalty and respect. This was a big
investment for a small business like ours with a very high and
continuing risk that we may never be fully or even partially
reimbursed.
Now, the not-so-good news. We knew we'd lose sales,
experience slow payments, and possibly lose top talent,
especially our staff with high-level clearances. Commercial
firms target our top cyber, comm, and intel talent, exploiting
government salary caps and unpaid shutdowns to entice our
talent.
So, early on, we talked with our bank, First Virginia
Community Bank, and together analyzed that we could go four to
six weeks on our line of credit. We're lucky. Most small
businesses are less than a million dollars in sales. They may
only support one agency. And with a shutdown, they may have to
lay off folks or close.
Here are the direct DHS shutdown impacts on ACT I. We lost
sales over 500K. We had a million dollars of delayed cashflow
from 2018 payments unable to be processed while the government
was closed. We submitted two REAs to DHS in February 2019 for
about $500,000. We're dealing with different legal
interpretations from two offices in the same agency. One office
says it doesn't agree that it must pay based on legal counsel's
interpretation of the FAR. The other office is evaluating our
request.
We would like these REAs approved to recover shutdown
losses. Ninety-five percent of the negative impact to ACT I
could have been easily avoided if the government had a
contracting officer available to execute our contract option
any time during the shutdown.
Finally, to reiterate our recommendations to Congress for
action, please provide uniform clear guidance to agencies and
contracting officers to swiftly approve REAs. Please give
agencies authority to guarantee compensation for contractors
performing during budget lapses and shutdowns. Please enact
appropriation bills on time and for the full fiscal year; or if
a CR is needed, then ensure it's an automatic CR. Please
provide a two-year increase in the BCA caps for fiscal years
2020 and 2021.
Thank you for inviting ACT I to share our story which can
be echoed by many other small businesses. And given that
there's another panel after us, I request unanimous consent to
revise and extend my testimony.
Mr. Connolly. Thank you so much, all of you.
We're going to have a round of questions, and each member
will have five minutes with which to ask questions.
Mr. Niggel, let me just pick up on your testimony.
If there had been authority to suspend the expiration of a
contract pending the reopening of the government, you would
have been kept whole, or without prejudice, with respect to
reauthorizing that contract you lost. Is that correct?
Mr. Niggel. Yes, sir. We were in an option here situation
that was due on January 15. The shutdown started December 22.
Between the 22nd and the 25th, when the government reopened,
there was no contracting officer available in our enterprise.
There might have been one at the top of DHS who probably had
thousands of these situations to deal with. So they weren't
able to execute our option, so we basically were off contract
and could not show up in the offices.
And our customer was frustrated with us, because we weren't
there and other contractors were, because they had funded
contracts, and we did not. So it was until the government
reopened, and we could go explain to them that we were off
contract; we were not legally allowed to be there. And then
they understood better what our situation was.
Mr. Connolly. But you were caught in kind of a catch-22
situation?
Mr. Niggel. Yes, sir.
Mr. Connolly. I think that's important. As we look at
things we can do, certainly one of them is to have some kind of
provision in law that says during a shutdown, the expiration is
on ice, so that you don't lose a contract simply because
contract officers aren't there.
Mr. Niggel. Or an option automatically extended without
written permission.
Mr. Connolly. Right. I think we have to look at that, Mr.
Berteau.
Let me just say, both, Mr. Berteau, Mr. Krone, and you, Mr.
Niggel, talked about automatic CRs. And I like your reaction,
but I--we think that's good public policy. But on the other
hand, it almost invites some people, politically, to seize on
that and say, Good, that's how we're going to fund the
government. And so, yes, we avoid shutdowns, but we also never
get to a substantial budget that looks at the merits of the
case. We stay at a low funding level as the, sort of, permanent
solution that some people will seize on.
And politically, I think certainly all of us here at this
table would have that concern. In an ideal world, that wouldn't
be a problem, but we live in anything but an ideal world where
we work.
Your reaction?
Mr. Berteau. Mr. Chairman, you are a good student of
history. There are a number of times where the scenario that
you've proposed would have been desired by a majority of the
U.S. Congress. You know, at PSC, we actually decry continuing
resolutions as a very, very bad way of governing. About the
only thing worse is a shutdown, right? And so the idea that an
automatic continuing resolution would prevent a shutdown is a
very appealing idea. Clearly, a far better approach is, in
fact, to use regular order and fully fund government
requirements through appropriations, as the Congress actually
sort of did this past year for five of the 12 appropriations
bills.
I think, though, that the leverage--so what you really
propose is kind of two things: One is, is it a good idea to
provide an automatic CR as opposed to a shutdown? Generally
speaking, yes. The second, more complicated question is, how do
you execute that so that it doesn't create negative incentives
and actuate create an opportunity to have an ongoing CR all the
time? And I think that that's a flaw in all of the existing
legislation so far, and it needs to be corrected before
Congress would finally act.
The third would be what do you do in the event a
Presidential veto? Obviously, you are going to have to support
to override this. And, you know, we've actually had shutdowns
that were created through a veto of a continuing resolution;
1995 being a case in point in that regard. So all three of
those I think, have to come into play in your conversation
there.
Mr. Connolly. Mr. Krone, did you want to comment on that
or----
Mr. Krone. No. I think, given the choice of a--of a CR or a
shutdown, we'd would rather see the CR.
Mr. Connolly. Sure.
Mr. Krone. But we do understand the negative ramifications
that you could end up in a perpetual CR and we actually never
get authorizations or an appropriations bill done. But if I had
to choose one or the other, I would rather have the CR.
Mr. Connolly. And Mr. Berteau made a really good point
about recruitment. We now have the lowest unemployment rate
we've had since 1969. Here, it's even lower. I don't know--it's
about 2 percent? And that means it's a very tight labor market,
especially for skilled labor. And I would think it affects
everybody from a big company like yours, Mr. Krone, to a
midsize business like yours and yours, Mr. Niggel, and Ms.
Aleman.
Recruitment--after the shutdown, did recruitment become a
problem for you?
Ms. Aleman. Yes, absolutely. But not just for us serving
the government, but several key, highly technical leaders from
the Department of Homeland Security left in the middle of the
shutdown to go back to industry. I think it's--I did an article
for Forbes during the shutdown and looking at the statistics of
how long it's taking us to bring great talent into the
government marketplace, both government employees as well as
contracting, and it's going to take years to recover from--from
that, and you are not going to be able to draw that top talent
into our marketplace. So it's a real concern in terms of
technology and innovation and modernization, which is so
critically needed.
Mr. Berteau. We had a number of stories from our member
companies of recruits who were actually canceling interviews
during the shutdown. Why bother? You know, I'm not going to go
to work for you, so I'm not even going to waste my time. And
you can't ever make that back up. You can't ever make that back
up.
Mr. Krone. Mr. Chairman, we have seen more commercial
companies come to the national capital region because of the
large concentration of computer science majors and highly
educated work force.
We compete with them every day for our work force. And they
can now say we can offer you a job that is immune to the
vagaries of the government funding and budgeting cycle. And
that becomes an advantage for them, and we go head to head
against those companies to recruit the employees who then
perform the work for the Federal Government.
Mr. Connolly. Mr. Grabowski, I assume you maybe experienced
the same thing?
Mr. Grabowski. Mr. Chairman, as far as people departing the
contract after a shutdown--as a matter of fact, we've had crane
operators. That skill is needed in the private industry, in
construction. And it's a very critical skill on at Space Center
for lifting flight hardware. And that's hazardous, and if they
don't do it right, you possibly impact the mission. So we have
lost--like that was one of the jobs, I remember, in January, we
had an individual, they left, they did not come back.
Mr. Connolly. Thank you. My time is up.
Ms. Norton.
Ms. Norton. Thank you, Mr. Chairman.
You represent, for the most part, skilled workers. The
chairman mentioned we're trying to see what can be done. I have
a bill that would allow some backpay for workers who work in--
who are contract workers in retail, food, custodial and
security.
I'm wondering whether any of your work force would be
included and what you think of a bill of that kind in a
Congress of this kind, which is unlikely at this time, at
least, to take care of all workers. I would like to hear what
all you have to say about that bill.
Mr. Berteau. Congresswoman Norton, let me go first. We have
quite a number of member companies who have employees exactly
as you have described, as part of their work force, or who
employ subcontractors who also have such workers and so the
prime contractors--and it's not only in Washington, DC.; it's
across America, as you well know. So we applaud the support and
the focus of that--of the problem for those that you have
brought to bear on there.
I think it's difficult to figure out exactly where you draw
the line for those workers, you know----
Ms. Norton. If I could say, I'm also cosponsoring a bill
that makes it 200 percent of pay. Mine actually lays out who
the workers are----
Mr. Berteau. Right.
Ms. Norton [continuing]. because we figure that's who they
are.
Mr. Berteau. Right. And so as a matter of political
practicality, there may be a need to do that. But, you know,
for the Federal workers, we don't draw any such line. If you
are on the Federal payroll, regardless of whether--I don't
think we have any GS-1s anymore. There were GS-1s when I first
came into the government. But all the way up to the super
grades. All of the Federal employees are covered by that, and
we would seek to have that same coverage extended to all the
contract workers.
Ms. Norton. Well, of course, you are entitled to that, just
as all workers are, all Federal workers are covered.
Let me ask about unemployment insurance, whether or not any
of your employees applied.
We understand there was some--some concern that some had--
had some--had some opportunities, others didn't.
Does the unemployment insurance program need to be attuned
to contract workers who, by the way, are a larger number of
workers than Federal workers now.
Could I hear how unemployment insurance--Mr. Grabowski, why
don't you start.
Mr. Grabowski. Yes, Congresswoman. As far as my experience
with it, most of our members were too confused, like, were they
eligible for it, because they were furloughed, they actually
did not receive a layoff notice. So they weren't astute enough
to how do I apply, and if I don't take personal leave time, am
I still entitled to collect unemployment compensation?
So how--the suddenness and it was over the holidays, and we
had a problem with communication. So I would--I don't know of
anyone that filed for unemployment compensation because it was
too complex and they didn't know if they were still entitled to
it because I used my personal leave time. Some, like we said,
they exhausted all of their personal leave time in order so
they would have a paycheck.
Ms. Norton. Any of you have similar experiences?
Mr. Berteau. We surveyed our member companies about the
third week into the process about this, and what we found were
three key things that are noteworthy here.
One, of course, is each state sets its own rules when it
comes to unemployment eligibility and to the process for both
applying for and verifying eligibility for unemployment
insurance. And workers from the same office and the same
company in this area, for example, would have three or four
different jurisdictions that they would be eligible to apply
for: Maryland, Virginia, the District of Columbia, West
Virginia and Delaware. And the rules are very, very different.
In addition, the question of how do you verify and validate
that eligibility? What kind of document do you need to have in
hand from your company----
Ms. Norton. Are you saying this would have to be done at
the state level? There's nothing that could be done to clarify
this--the layoff took place at the Federal level.
Mr. Berteau. I think there are----
Ms. Norton. Is there any legislation we could put in that
would clarify what the state should be doing at such a time?
Mr. Berteau. There are Federal standards that exist today
and, of course, allow for the Federal reimbursement of those
unemployment benefits up to certain loads, and you could change
the requirements associated with those Federal standards.
Ms. Norton. Mr. Chairman, under things that we might
consider, this confusion, at least, it seems to me we could
help eliminate.
If I could just ask one more question.
Mr. Connolly. Sure.
Ms. Norton. Mr. Krone, you indicated that some of your
employees were redeployed to other contracts. I wish you'd
clarify how that might--how that occurred and whether it, in
fact, was helpful to people who were laid off.
Mr. Krone. Yes. Well----
Ms. Norton. And where were those--how come those contracts
were okay to continue?
Mr. Krone. Thank you for that question, Congresswoman.
The Department of Defense was funded during the shutdown.
And at Leidos, we have a relative balance across the Federal
agencies. And because, frankly, of the shortage of computer
science majors and engineers, we had open jobs on contracts
with the Department of Defense that needed the skills of the
furloughed workers, the workers who were taking paid time off
in the Department of Homeland Security, you know, FBI and DOE.
And so, we created, in our H.R. department, a reallocation
or redeployment process where we inventoried the skills of the
people who were furloughed, and then matched them with open job
requisitions in some of our Department of Defense contracts and
were able to move them over to those contracts so they could
continue to work on programs.
Ms. Norton. This is a very important point. We're different
agencies here, and I wonder if any of the rest of you used this
redeployment?
Ms. Aleman. We attempted to. But the clearances that we
hold at the IRS take about six months to a year to get a
laptop, and the clearances at the Department of Justice take
about six months, three to six months, and at Homeland
Security, depending on whether it's ICE, DHS headquarters, or
S&T, could take anywhere from 60 to 180 days. So there was no
way we could move someone from one agency to another. It was
not possible.
Mr. Berteau. I would note also, Congresswoman Norton, that
in a number of the shuttered agencies, the personnel were
required to approve such a transfer were furloughed, and they
were not available to approve such a transfer.
Ms. Norton. Mr. Krone, how were you able to do this?
Mr. Berteau. He was doing it with agencies that weren't
shut down.
Ms. Norton. I see. And you-all--you couldn't even do it
with agencies that weren't shut down.
Ms. Aleman. No.
Ms. Norton. I applaud your creativity.
Mr. Krone. Well, thank you.
Ms. Norton. Thank you, Mr. Chairman.
Mr. Connolly. Thank you, Ms. Norton.
And following up on Ms. Norton's suggestion, I just commend
you, Mr. Berteau, representing 400 companies--and others
obviously could participate--it might be useful to think about
preparing a set of recommendations that's fairly comprehensive.
We're capturing some of them, as Ms. Norton just indicated. But
I think we have an opportunity here to be fairly comprehensive
and systematic. And here's what has to be addressed: From
unemployment insurance at the Federal level, what we can do, to
the guarantee of backpay and lots of other issues as well.
Mr. Berteau. We will undertake, too, sir, Mr. Chairman.
Mr. Connolly. And part of the problem we've got in a
private sector is each contract stands on its own.
So, Mr. Krone, how many contracts does Leidos manage with
the Federal Government at any given time?
Mr. Krone. Oh, maybe 10,000.
Mr. Connolly. Ten-thousand?
Mr. Krone. Yes.
Mr. Connolly. And each one has its own provisions?
Mr. Krone. Its own provisions, its own terms and
conditions, its own contracting officer, its own program work
state, yes.
Mr. Connolly. And that's what complicates things.
Mr. Krone. Right.
Mr. Connolly. Thank you.
We're joined by our good friend who dared the cross the
river from Maryland, Jamie Raskin.
Jamie--thank you so much, Mr. Raskin, for joining us here
today.
Mr. Raskin. Mr. Chairman, thank you very much.
So, yes, it did take me a few minutes extra to arrive,
crossing the Potomac.
Ms. Norton. He swam.
Mr. Connolly. I'm going to call on Mr. Beyer, and you can
catch your breath. We're so glad to have you here today.
Mr. Beyer.
Mr. Beyer. Thank you, Chairman Connolly, and again, thanks
all of you for coming.
You know, you read again and again, the No. 1 reason why
security clearances are denied is because of financial
hardship. And so I sent a letter, joined by most of our folks
here, back in January, urging the administration to prohibit
agencies from penalizing security clearance for shutdown-
induced poor credit.
One of the things is we don't even know how many security
clearance applicants are actually affected. And Mr. Grabowski,
you mentioned specifically the security clearance with your
folks in Florida.
Are there specific examples in cases, or is this more the--
the existential threat to their livelihood?
Mr. Grabowski. It's more of a--Congressman, more of a long-
term threat. Because how do you identify it? You know, if you
did not get 8 percent of that pay, the financial hardship
continues on much later, months later, even a year later,
because you have not made the payments of a car payment that
you thought I would catch up on, maybe work some overtime.
So as of yet, no one has come to me and said, Hey, I'm in
financial ruin and I might lose a clearance. I think it's as we
move forward and we never get the backpay, that's when it will
happen.
Mr. Beyer. Thank you.
Mr. Berteau. Mr. Beyer, could I add one thing for----
Mr. Beyer. Yes, Mr. Berteau.
Mr. Berteau. So that's backward looking in terms of the way
the clearances have been done. But as you know, the President,
just on the 23d of April, signed an executive order--24th of
April, signed an executive order transferring background
investigations from OPM, the National Background Investigations
Bureau, to the Department of Defense. And that is supposed to
take effect by the end of this fiscal year, September 30.
What DOD has been doing is----
Mr. Connolly. But, Mr. Berteau, let me just interject,
Congress will have some say over this.
Mr. Berteau. I do understand that, sir. I understand that.
Mr. Connolly. They have yet to come before--my subcommittee
has jurisdiction. They have yet to come before us with a single
shred of paper justifying any of this.
Mr. Berteau. I'm aware of that, and I stand in awe of your
reminding me of that. Nonetheless, for the portion that the
Defense Department does have responsibility for, what they are
implementing is a process of continuous evaluation.
So unlike the process that Mr. Grabowski described, where
when you come up for your periodic reinvestigation, your
financial records might be a part of it, now it will be on the
instant case that you are late, it can pop up. And we're still
developing this process, so I think it bears watching as you
continue, regardless of what actions the committee or the
Congress may take on the overall question.
Mr. Beyer. Thank you.
Ms. Aleman, I want to thank you for clarifying one thing
that I had not really realized, which is that not only were
people not getting paid for work not being done at the time of
the shutdown, but invoices for work that had been done earlier.
So you suggested that Congress actually mandate that paying
duly earned invoices, bills, et cetera, be classified as
essential, and therefore be paid.
Ms. Aleman. Payment, process of invoices. As Mr. Niggel
also referenced, approving invoices, extending options. All of
those things are being done by contracting officer
representatives, which were furloughed, contracting officers,
which were furloughed, and then the folks inside the payroll.
So there's folks on the programmatic side and folks inside
the acquisition organization, or the processing payroll part of
the organization. So it's all connected. And if any one member
of that process is removed, the whole thing falls apart.
And, of course, when they're getting back to work, they're
overwhelmed. And that's why it took 60 days for us to start to
receive pay.
Mr. Berteau. And they had already spent the money. I mean,
they had paid the employees, right? They were out of that cash.
OMB--three days before the shutdown ended, OMB circulated a
revised guidance. So OMB's rules had always been you cannot
call employees back off of furlough and put them in unpaid
status to process invoices. That was a rule. You couldn't do
it.
With three days left before the shutdown ended, OMB
circulated revised guidance that said it's okay to do it, but
not required. We think you should make it mandatory, unless
there's an exception, because the companies are out of the
money, they paid their employees, they're going into debt to do
it, they've done the work, the government should pay up.
Mr. Beyer. Very good. Thank you.
And, Mr. Berteau, I just want to thank you for pointing out
the larger picture, as you talk about the competition for
employees and the like. But the advent of Amazon, Nestle,
Gerber, all of the high-tech that's coming, the huge expansions
of George Mason and Virginia Tech into that space, that the
competition is only going to get much more severe.
Thank you, Mr. Chairman. I yield back.
Mr. Connolly. Thank you, Mr. Beyer.
Ms. Wexton.
Ms. Wexton. Thank you, Mr. Chairman.
I want to take a moment to talk about some of the
provisions in these contracts and how your relationship with
the Federal Government, and then below that, with
subcontractors that you work with and what the consistency is
in terms of contract provisions.
Ms. Aleman, you pointed out that during the course of this
shutdown, you were still contractually obligated to perform
your functions under the contract. Is that correct?
Ms. Aleman. That's correct.
Ms. Wexton. Okay. So how--how were you able to do that? Or
what challenges did you face in trying to make that happen?
Ms. Aleman. So the IRS is a good example. Part of those
contracts were shut down; part of them were not. And we were in
the middle of filing season launch. I believe the date of
filing season launch was January 22d. And part of the work we
do is validate the integrity of the launch.
And so in the middle of some of the largest tax reform
legislation that was being implemented in the systems at the
time, we were unable to validate the integrity of those. And we
even offered to come in and do it for free, because our folks
had been doing it for so long, and we knew they were stressed
and their own staff couldn't come in, but we were unable to do
so.
But--and I'm sorry--your question?
Ms. Wexton. So would that then impact your ability to
continue--like how--your performance on that contract would be
evaluated----
Ms. Aleman. So----
Ms. Wexton [continuing]. for future bidding?
Ms. Aleman [continuing]. I did mentor a number of business
owners that were concerned about their performance overall. In
our case, our customers were equally feeling the pain of it on
their side with their staff. And they were not of the opinion
or mindset that they should do anything to further damage what
we were trying to do.
So in our particular case, we had close working
relationships. They did everything possible to move our
payments and move everything along as quickly as possible. They
advocated on our behalf. They did everything possible.
I was working at DHS at the time, and I was onsite. I
showed up on Monday after the shutdown, and they had all just
received their paychecks and they were hustling to try to get
our invoices processed and everything moved quickly.
So from our case, we did not experience that. But I can
certainly see if there's any kind of a lack of communication
with a government representative, that they may not be as
willing to advocate on your behalf. And we've had that happen
before.
Ms. Wexton. I don't know if anybody on the panel can answer
this. But is it at all customary to include provisions in
contracts that provide that in the case of a government
shutdown, that the contractor will continue to be paid some
minimal amount, or what the base amount is, or is it if you
don't work, you don't get paid?
Ms. Aleman. We sign the contracts; we don't write them. So,
no, unless they are----
Ms. Wexton. Contracts of----
Ms. Aleman [continuing]. unless there's a clause that they
can leverage in putting into contracts and flow those contracts
from the FAR--if we can flow them down from the FAR, that would
be--that would be an avenue to pursue. But we cannot recommend
clauses in government contracts.
Mr. Krone. Congresswoman, it is not customary that a
government shutdown is considered in the terms and conditions
of the contract.
Ms. Wexton. And is there something like a stop-work clause
that is included in all of the government contracts that say
that if you are ordered to stop work on a contract, you have to
do it?
Mr. Krone. Oh, absolutely.
Mr. Berteau. There is. And I would note that it is much
easier and faster to issue a stop-work order than it is to
issue an order to start work again.
We proposed--at PSC, we wrote a letter to the Office of
Management and Budget last October, taking lessons learned from
prior government shutdowns of a number of activities that they
could undertake to put into guidance to contracting shops
around the government.
One was, in fact, to cover exactly that sort of thing.
We're going to redouble those, taking lessons learned from this
shutdown, and provide OMB with another activity.
You could, for instance, put a clause in that says if a
stop-work order is issued as a result of a lapse in
appropriations, upon restoration of those appropriations, other
things being equal, work is authorized to start again without
further action by the government. That alone would save days or
weeks in terms of that.
I know, Mike, you ran into that and you probably did----
Mr. Niggel. On our DHS contract, we were not issued a stop-
work order, and that's why we have a request for equitable
adjustment in review right now.
And going back to your question----
Mr. Berteau. But you should have been issued one, had they
been doing it correctly?
Mr. Niggel. They had the option.
Mr. Berteau. They had the option.
Mr. Krone. It was just inconsistent. I mean, agency by
agency, they were ill-prepared for the shutdown, and each one--
there wasn't uniform direction across all of the agencies.
Mr. Connolly. I think that's really an important point. On
top of the multiplicity of contracts, each of which has----
Mr. Krone. Right.
Mr. Connolly [continuing]. unique features, we don't have
any standardized policy across agencies, even divisions that
are managing contracts, when it comes to something like this.
Mr. Berteau. So--go ahead.
Ms. Aleman. But to that point--because I think you were
about to make that point, you were not issued a stop-work
order. The head of procurement at DHS specifically sent a memo
to all COs and CORs saying unless you issue, or your contractor
is issued a stop-work order, you can--as long as you don't need
guidance from government to keep doing your job, leave it
alone, walk away, let them keep doing their jobs.
The problem is, they sent the notice the day after the
shutdown, and they were no longer to--able to read their
emails, so they didn't know that. So they shut us down
temporarily. And then when we got a copy of the memo--because
one customer that was working sent it to us--we sent it to them
and then they logged in and said, Yep, keep working; you are
not on stop-work order. There's a lot of confusion--to Mr.
Krone's point, a lot of confusion even amongst the government
staff.
Ms. Wexton. Some consistency would help.
Okay. And then I see----
Mr. Connolly. Go ahead. I interrupted you. Go ahead.
Ms. Wexton. Mr. Krone, you talked about reassigning
employees. And you have 32,000 employees, so you have the--a
number of different contracts, so you are able to do that.
Mr. Krone. Right. Much easier, right.
Ms. Wexton. I guess my question is, what impact were you
hearing about from the subcontractors that you work with?
Because presumably----
Mr. Krone. Oh, very difficult.
Ms. Wexton [continuing]. it was making it hard for you to
pay their invoices.
Mr. Krone. Yes, very, very difficult. And we don't get
processed, therefore, there are--any deficiency clauses and
other things. It makes it very difficult to pay our subs. Many,
many times, we couldn't even contract the--contact the
contracting officer at the agency to get direction, because
they weren't--although they may have come in on their own, they
weren't allowed to answer the phone, they weren't allowed to
adjudicate some of our issues.
And although we are larger and more diverse, and so we were
able to move people around, certainly our small businesses are
not, and they had no choice but to furlough their work force.
Mr. Berteau. Mr. Chairman, would you indulge me to--allow
me to elaborate on that as well?
Mr. Connolly. Of course.
Mr. Berteau. One of the problems, especially a smaller
company faces, even if they have the objection to do what
Leidos did in this case, is when the government reopens, the
contracting officer of the originating place where that
contractor was working, will wonder, Where's my guy? Right? How
come he's not here? Well, you laid him off. We had to move him
to another contract, right? So there's--you can suffer both
ways in this circumstance if you're not careful. You probably
ran into that.
Ms. Aleman. It's a reputation hit.
Mr. Krone. Let me just clarify that. When we move someone
to another contract, they actually say, Well, I like this other
contract, I may like it better. I may actually get paid working
on this Air Force program instead of a program for Department
of Energy. And we have to be thoughtful about now, if you will,
forcing that employee to go back.
And it is disruptive, at least--by the way, the start-stop
costs, which I think we've only touched on, stopping a contract
and then restarting it, and the inefficiency that that creates,
both on our side and government side, is tremendous.
Ms. Wexton. And you have a duty to mitigate any damages
that might be associated with that as well.
Mr. Krone. Yes, we do.
Ms. Wexton. Right? So I don't know--is that interpreted
that you need to force that employee to go back, or we don't
know?
Mr. Krone. Yes, we have a Constitution that doesn't allow
us to do that. And we allow our employees as much latitude as
we can. Our employees are our most valuable resource. And to
keep them happy and to show them that they're valued and
appreciated, and if an employee says I really want to do this,
and this is my third shutdown--maybe they were there in 1913--
we were heavily impacted in 1913 by the shutdown. We're very
thoughtful about--we can't force anyone to do anything----
Ms. Wexton. Right.
Mr. Krone [continuing]. right? So we can beg, borrow, hope,
incentivize, wish, but if that employee says "No, I do not want
to go back to that DHS, Department of Energy, FAA contract,"
where we have IM representation, then we would rather keep that
employee on a contract than force them to go back.
Just--ma'am, if I could, we have, today, 1300 open
positions, about half of those in the national capital region.
So the ability of an employee to pick and choose a job or a
contractor is almost unprecedented in my 41 years in the
industry. And they literally can pick up a Washington Post and
find a job tomorrow and move across the street. And they have
mobility that is unprecedented in our experience here.
Mr. Connolly. And to make it all special, you are about to
compete with 25,000 job openings in Amazon, and they're
accelerating hiring.
Ms. Wexton. Thank you very much.
Mr. Krone. And, Mr. Chairman, we've already felt that.
Ms. Wexton. Thank you, Mr. Chairman, for your indulgence.
Mr. Connolly. No, no. Thank you, Ms. Wexton.
Mr. Raskin.
Mr. Raskin. Thank you very much, Mr. Chairman, and thank
you all for your testimony.
The disruption caused by the last shutdown in Maryland was
profound and comprehensive. And I know that the same
devastating impact was felt in the District of Columbia and in
Virginia. So, I thank you all for your seriousness in
addressing this, and for taking the care that you did in
preparing your testimony, which I thought was excellent.
Mr. Grabowski, let me start with you. As an elected
official, I heard--and I'm sure my colleagues did--from lots of
constituents who considered this emotionally and
psychologically devastating period for them and for their
families.
And I wonder if you would just speak to what the experience
of workers is going through the shutdown.
Mr. Grabowski. Yes, Congressman.
First of all, like I said, it happened over the holidays.
And we already spoke earlier about the communication gap. Most
of us use government email. Well, that was gone. So we had to
deal with the stress in trying to communicate to people, Hey,
this is where you can seek resources. And we had no information
about unemployment compensation.
So the anxiety--trust me, my phone was ringing from seven
in the morning till midnight, people asking, When can we go
back to work? And I can tell you this as president of our
local, it's not very often I get consensus on something, but I
had 100 percent consensus, they didn't want a shutdown, they
want to get back to work.
So everything you can think from that aspect. We had
members where both spouses were not working, but they had kids
in daycare. They had to put their--still keep their kid in
daycare and pay for it. Because it's a small business. If they
didn't keep their spot filled, they would lose it. So it's a
very important service, and that's a small business. So things
like that that--you had to lay out money, which you normally
wouldn't have to.
And so it's very stressful for my members.
Mr. Raskin. A lot of people think that when the shutdown
ended, the problems ended. But I wonder whether any of you
would speak to--to the long-term impact, in terms of loss of
employees, employee morale, and just trying to recover from the
shock of these financial events. I don't know--Mr. Berteau.
Mr. Berteau. As of two weeks ago, Congressman Raskin, we
still had member companies who had not had invoices paid from
work done before the shutdown. Those invoices were still in
process, right, still being reviewed and being processed.
Mr. Connolly. I think that goes back to December.
Mr. Berteau. Back to invoices filed before December 21 for
work done, paid for, before December 21. Now, that's not
common, but it's not out of the question. That's the far end of
the lasting effect.
Mr. Krone. Congressman, one point--you may have picked up
from a prior conversation, but this is important. Everyone
thinks that the shutdown ended on the 25th. The shutdown ended
on the 25th for government employees. The shutdown didn't end
for our employees until we got a letter from a contracting
officer authorizing us to come back to work. That took weeks.
So where it may have been 35 days for government employees,
it could be another 14 days or more for the contractors,
because the contracting officer had to come to work, get
through the pile of paper, figure out what contracts were under
a stop-work order, and then to prioritize those and then
authorize the contractors to come back.
We had 893 employees who were furloughed. About 400 of
those employees used up all of their vacation and then went to
what we call negatively. We let them take vacation they had not
earned. It will take them years to build back what we called
paid time off, which is vacation and sick leave combined. It
will take them years to build back that base of paid time off
bank that they had prior to the shutdown.
Mr. Raskin. Did you favor this idea of an automatic
rescission of a stop-work order at the point at which the
government shutdown ends so that people can----
Mr. Krone. Oh, we would certainly favor that.
Mr. Raskin. Ms. Aleman.
Ms. Aleman. To the point that we also mentioned earlier,
just having clarity around the rules and regulations and the
processes around a shutdown for stop-work orders and restart,
so that everybody is clear in advance of a shutdown and knows
how to operate, and it's abundantly clear, like much of the
FAR--you have clarity as to the paths that can take place. If
there's clarity--if we're going to use shutdowns in the future
continuously, if there's clarity around it, we can all respond
proactively, and our government customers can respond
proactively as well.
Mr. Raskin. Yes, it seems a little bit sad that we would
have to basically develop procedures and rules for a shutdown,
as if this is going to become normal operating procedure.
However, we've got to get ready for it, because it's
fantastically expensive and disruptive.
Yes?
Mr. Berteau. One other impact that's worth noting is that
the agencies affected by the shutdown are way behind in getting
the work out that they need to have done for their fiscal 1919
appropriations, which, of course, they didn't get until
February 15, right?
And so the impact of shutdown not only extends to the work
being done under previous contracts, but extends to the
solicitation/evaluation award of new contracts. And that's very
widespread across--and I think we're all seeing delays there in
terms of solicitations that were expected, that were built into
the work plans, that you had hired people and put them on the
payroll to be able to perform the work, although you're not
getting reimbursed on them yet. That kind of impact is
continuing well into the year.
Mr. Niggel. The final--sorry. The final lingering impact is
our concern over performance ratings. Will we be downgraded
during the shutdown period because, A, we couldn't legally
come, but they don't realize that sometimes. So we're concerned
about poor performance ratings, when we have the highest
ratings that you can get, and we could get dinged and that
jeopardizes our future business.
Mr. Raskin. Right. The government shuts down, and then you
get the bad grade for it.
Mr. Niggel. Right.
Mr. Raskin. Mr. Chairman, would you permit me one final
question?
Mr. Connolly. Absolutely.
Mr. Raskin. I promise it will be very fast.
If each of you could synthesize your views of the
government shutdown, as a way of doing business, in one word,
what would it be?
Ms. Norton. And not a curse word, please.
Mr. Raskin. Yes, make it something publishable.
Mr. Grabowski. Disastrous.
Mr. Raskin. Disastrous.
Mr. Krone.
Mr. Krone. Unthoughtful.
Mr. Berteau. Abominable.
Ms. Aleman. Insanity.
Mr. Niggel. Uncertainty.
Mr. Raskin. I yield back. Thank you, Mr. Chairman.
Mr. Connolly. All diplomatic.
Well, let me just say--well, are there other questions for
the panel?
I want to thank you all. This has been quite thoughtful.
And, Mr. Berteau, I do think if you voluntarily are willing
to undertake it with Mr. Chvotkin and your colleagues at PSC, I
think there's an opportunity here to provide a compendium of
the issues that affect us that many of our colleagues are not
aware of.
And from --I mean, the idea that, well, Federal emails are
shut down, so we can't even notify our employees not to come to
work; the contract officer isn't there, so we have no one to
answer questions about the provisions of the contract and how
they kick in and whether they don't. Stop-work orders were
efficient about; start work, not so much.
The issue of a contract about to be reauthorized or re-
upped expiring during the shutdown and you lose a contract for
no substantive reason other than the system isn't operating, to
just cite some of our problems.
I think all of those, it seems to me, are things we can and
should address. And I think there's a--and as Ms. Norton
pointed out, also the unemployment, there may be guidance at
the Federal level we can provide for unemployment insurance.
And as Mr. Raskin says, we don't want this to become the new
normal, but we have to have a fallback plan and we didn't, in
the event of a future shutdown. The real answer is, don't shut
down.
Thank you all so much for participating here today.
We're going to take a five-minute break while we change
panels, and we'll hear from our second panel in five minutes.
And second panel, Jaime Contreras, Toni Crescenzo, Wesley
Ford, Tamela Worthen and Mark Hall, if you'll get yourselves
ready to come forward.
Thank you all so much.
Mr. Connolly. The committee will come to order. And I would
ask, again, our witnesses to stand and raise their right hand
to be sworn in.
Do you swear or affirm that the testimony you're about to
give is the truth, the whole truth, and nothing but the truth,
so help you God?
Thank you. Let the record show the witnesses answered in
the affirmative.
And I want to introduce you.
Okay. Our first witness is Jaime Contreras. Mr. Contreras
represents over 20,000 members in the Washington, DC, and
Baltimore area. Their numbers include government cleaners,
security officers, and maintenance workers, obviously, many of
whom were affected by the shutdowns.
Tony Crescenzo is the chief executive officer for
IntelliDyne in Falls Church here in Virginia. IntelliDyne is a
professional consulting firm to government clients that faced
impacts during the 2013 shutdown after just hiring 17 employees
who were deemed nonessential. How special. In the last
shutdown, several employees on the DOJ contract were also
affected. Mr. Crescenzo will discuss the overall impact on
morale and fear of more voluntary turnover.
Wesley Ford, good to see you again.
Mr. Ford owns a coffee shop in a government building that
was largely shuttered during the shutdown. TKI Coffee lost
significant revenue but was still expected to pay rent even
though his source of revenue had dried up.
Tamela? Is that correct?
Ms. Worthen. Yes.
Mr. Connolly. Tamela Worthen is a security officer at the
Smithsonian and an SEIU member. She is a security guard that
was furloughed by her contracting firm, Allied Universal. She
has endured significant financial hardship affecting her
ability to pay her mortgage and to get vital prescription
medications. We're going to hear her personal story.
Thank you for coming today.
And Mr. Mark Hall is the executive vice president and chief
strategy officer of ServiceSource in my district in Oakton,
Virginia. Mr. Hall represents an organization that consists of
five nonprofit organizations and operates in 13 states and in
Washington, DC. It has over 80 AbilityOne contracts which
provide employment opportunities for people with disabilities.
Many of those employees were out of work during the last
partial government shutdown. And I am an AbilityOne champion,
and I did my service in the Old Executive Office Building and
saw firsthand, you know, what the dignity of work can do for
people and also how great this work force really was. And to
have them being affected really bothers the heart. So we'll
hear that story as well.
Mr. Contreras, please proceed. Everyone has five minutes to
summarize or read their report. We prefer you summarize. And if
you don't need all five minutes, we can get to questions faster
Mr. Contreras.
STATEMENT OF JAIME CONTRERAS, VICE PRESIDENT, 32 BJ, SEIU
Mr. Contreras. Thank you. Good morning, Mr. Chairman. I am
Jaime Contreras, vice president SEIU Local 32BJ. First, thank
you for the opportunity to testify in front of you today. Thank
you, members of the subcommittee as well.
You know, 32BJ represents around 175,000 members throughout
the East Coast, 11 states, including 20,000 in this area. Our
members secure the region's office buildings, both commercial
and Federal, museums, colleges, and airports. Thousands of our
members are people of color, immigrant workers, you know,
African American, and folks who come from all walks of life.
They work hard every today to support their families, and they
love the job that they do for the Federal Government.
Approximately 600 of our members who work for
subcontractors in the area were impacted by the--if you ask me
one word, I would say inhumane shutdown that happened. It was
unnecessary, for 35 days. You know, and as you've heard by
other speakers before, they're not--they don't work for the
Federal Government, so they don't--it's not guaranteed that
they're going to get paid. So they're--you know, the shutdown
left federally contracted security officers, cleaners, food
service workers, and other workers, who already make less money
than direct Federal employees, without pay for more than a
month, and that to me is shameful.
For workers who already live paycheck to paycheck and many
times work two and three jobs, you know, this was just an undue
hardship to them.
Just some quick stories about some of our members who were
impacted. This is just a few of 600 of them just for our local
alone.
Julia Quintanilla, who cares for a severely handicapped
child and a sick mother, she lost her entire savings during the
shutdown. Yvette Hicks had to ration her children's asthma
medicine during the shutdown. Donna Kelley, who also works at
the Smithsonian, succumbed to having to apply for food stamps
and feared eviction throughout the whole process. Kaneisha
Onley lost her car because she couldn't make her payments. And
then when the government reopened, she couldn't get back to
work because her car had been lost. You're going to hear
Tamela's story in a minute.
So parents, children, independents all felt the pain, the
ripple effect of this really life-altering and, as I call it,
shameful shutdown. You know, we want to thank all of you who
are in front of me because I know you have led many efforts to
try to get these workers paid, from passing bipartisan
legislation to sending letters to Congress, you know, trying to
include backpay for these workers in supplemental
appropriations bill for Fiscal Year 2019 and, you know, regular
appropriations for Fiscal Year 2020.
We have sent--the centers have sent letters to OMB to
basically tell them it's within OMB's power to direct the
agencies to pay these people without congressional action, so
we really truly appreciate that.
But you know--and there remains, you know, attached--
connected with OMB, a very practical way for contractor workers
to receive backpay, you know, through the process that agencies
themselves already have. In fact, at any point, agencies in the
Federal Government, like FEMA or Smithsonian or Department of
Interior or others, can use discretion within their contracts
to ensure the contractors will get paid and be reimbursed so
that they can pay their workers.
And, you know, the cost of backpay, the savings, the
windfall of the government, it's having--by not paying these
workers is really on the backs of these workers who are already
struggling to make ends meet and live paycheck to paycheck
every day.
So my message is very clear. You heard it before. You're
going to hear it again today. This shutdown inflicted
tremendous harm to our members and many others around the
country. The need for workers to cover their medical bills,
rent, loan payments, and simply feed their families should not
be seen as a partisan issue. And I know that you understand
that. So it's really well--it's within Congress' scope to be
able to right this wrong for our members.
So, again, thank you for having me testify today. You know,
I always get a--it's always a blast to be in the same room with
business--labor and business speaking on something with a
unified voice. So thank you very much for having me.
Mr. Connolly. Thank you, Mr. Contreras.
Mr. Crescenzo.
STATEMENT OF ANTHONY CRESCENZO, CHIEF EXECUTIVE OFFICER,
INTELLIDYNE LLC
Mr. Crescenzo. Thank you, Chairman Connolly.
Chairman Connolly, distinguished members of the committee,
my name is Tony Crescenzo. I'm the chief executive officer of a
Federal contractor, IntelliDyne LLC. It's my pleasure to appear
before you today to provide testimony on how the government
shutdown affected not just us but Federal contractors in
general and to provide recommendations to address the issues
created.
IntelliDyne is a midsize Federal contractor located in
Falls Church, Virginia, with over 200 employees. All
IntelliDyne's contracts are Federal Government contracts, and,
therefore, every one of our employees supports, directly or
indirectly, the Federal Government.
IntelliDyne has been in business for over 20 years
providing enterprise information technology, consulting
services, and support. Our primary supported agencies include
the Defense Health Agency, the Department of Justice, the
Department of Homeland Security, and other Department of
Defense activities and organizations. IntelliDyne provides
highly skilled personnel to manage and secure critical agency
IT infrastructure and networks against the existential
cybersecurity threats that they face daily. We have protected
and maintained the vital evolving IT network for nearly 20
years.
Like many Federal contractors, IntelliDyne's commitment to
our Federal Government clients isn't simply a contract for
services. We take on our Federal Government clients' mission as
our own. And we know the risks that arise immediately with any
failure to maintain a continuously secured agency
infrastructure.
I commend this subcommittee for undertaking an examination
of this important topic. Federal Government shutdowns have
significant and lasting negative impacts on Federal
contractors, their employees, and the agencies they support.
These deleterious effects have long gone underrecognized and
unaddressed. These negative impacts can profoundly affect many
different businesses and performance areas for Federal
contractors. Among them financial stability and necessary
credit facilities, human resources, an ability to maintain
qualified personnel, contract and quality performance
management, and the ability to ensure continuity of services
and a robust effective security posture.
As it relates to impacts to financial stability and credit
facilities, government shutdowns have immediate significant
adverse financial effects on Federal contractors as they lose
billable labor revenue with no reimbursement. Contractors are
faced with a choice: Retain furloughed employees during the
shutdown and continue to pay them, minimizing or eliminating
the financial impact on the employees and their families; or
laying furloughed employees off, resulting in often life-
altering negative financial impacts for those employees and
their families.
Either option presents an untenable hardship for the party
bearing the financial burden, employer or employee. For Federal
contractors, particularly small and midsize contractors,
retaining furloughed employees represents an outsized financial
burden as payroll costs may be in the hundreds of thousands or,
in our case, millions of dollars.
Covering unreimbursed salary and benefit costs puts
contractors in the position of needing to use and exhaust
capital reserves or borrow against credit lines, risking
noncompliance and failure of bank lending covenants or
resorting to using subprime credit facilities just to meet
payroll and other costs of business during a shutdown.
Smaller contractors with large proportions of furloughed
employees can and indeed have been driven into a weakened
financial position that lasts long after the shutdown ends.
This disproportionally large and lasting financial impact of
government shutdowns on small and midsize Federal contractors
undermines the efforts of small business programs throughout
the government to expand and sustain opportunities for small
business and Federal contracting.
Understanding the lasting financial impacts of government
shutdowns on Federal contractors, we respectfully recommend the
following suggestions as a means to mitigate adverse financial
impacts, the details of which are contained in my written
testimony.
One, make a provision to keep government personnel,
supervisors, and contracting officers onsite for all contracts
so productive work of Federal contractors can continue. Two,
build a reimbursement contingency in the contracts that either
guarantees line-of-credit loans with banks working with
organizations that have nonessential contracts or reserve
funds, approximately 5 percent, of the contract value, to
minimize the effect of shutdowns.
Three, expand the definition of essential work to include
contracts designated for the common good, those reasonably
necessary to prevent greater eventual losses and risk
continuity of security.
Four, minimize financial impacts to contractors by allowing
other direct costs to be paid out during the shutdowns to
permit contractors to conduct required training without billing
for labor. Federal contractors also experience negative
financial impacts owing to the inability to receive timely
reimbursements from the government for hardware and software
receivables during shutdowns.
During shutdown periods, the government may not have the
ability to pay for money already spent by the contractor.
Contractors must then either bear the financial burden of
paying suppliers without corresponding reimbursement or risk
jeopardizing their supply chain, their relationships, and
credit facilities by failing to pay suppliers on time.
The inability of Federal contractors to timely pay
suppliers during shutdowns will have the expected eventual
effect of decreasing the number of suppliers willing to accept
contracts with Federal contractors resulting in higher prices
paid by the government.
Mr. Connolly. If you could sum up, Mr. Crescenzo.
Mr. Crescenzo. Excuse me, sir?
Mr. Connolly. If you could sum up. Five minutes is up.
Mr. Crescenzo. I'm sorry, sir. I'll end.
Mr. Connolly. Are you sure?
Mr. Crescenzo. Yes.
Mr. Connolly. Okay.
Mr. Ford.
STATEMENT OF WESLEY FORD, PRESIDENT, TKI COFFEE
Mr. Ford. Good morning. I'd like to start by saying thank
you, Chairman Connolly, for inviting me to speak before this
committee even though it doesn't seem like I fit in here email
because I'm not a government contractor here.
My name is Wesley Ford, and I am president of TKI Coffee,
Incorporated, a small coffee cafe in downtown D.C. I'm located
one block west of the main visitor entrance to the White House,
and 90 percent of my customers are government employees and
tourists that visit our national treasures here in Washington,
DC. I've been in business for four years and have had the great
fortune of being profitable since my third month in business.
My staff is very diverse, three of whom are actually convicted
felons that I have given a chance because no one else would.
They have ended up being my best absolute role model employees,
one of whom is now today the manager of my store.
The average hourly wage for my staff is $16 per hour, and
these wages are under tremendous downward pressure because of
the instability of the government. January 2018 through January
2019 has been the most challenging business environment that I
have ever encountered. Three government closures, January 2018,
February 2018, and then what I like to call the big one,
starting December 2018. What many folks don't understand is
that, while the last closure may have lasted 35 days, it had a
direct impact on my revenues for well over 60 days. Many people
look at me like I've lost my mind when I say that the closure
was more than 60 to 75 days in length.
Coffee and eating out are what I like to call niceties in
life, not necessities. When it became apparent that the closure
was going to happen, spending on these niceties stopped well
before December 22d. When the government reopened on January
26th, employees had not been paid for two cycles, thus they had
no money to spend, even though they were back at work. Then you
consider that when the government did reopen on January 26th,
it reopened under a big black ominous cloud with a possibility
of closing again on February 15.
So guess what? Spending for niceties wasn't happening.
People didn't really start spending again until the latter part
of February, early part of March, is when I started seeing my
revenues come back together.
What are the effects of the shutdown on my business? One,
it reduced my revenues, I'll note that I'll never be able to
recoup. The net effect on those reduced revenues on a small
business like mine is that it severely devalues that business.
Two, during what I like to call the big one, I had to lay
off almost 40 percent of my staff and reduce the hours of the
remaining employees. Unlike government employees, my employees
will not receive backpay. Unlike government employees, banks
would not extend bridge loans to my employees to help them
through the closure. Unlike government employees, landlords
would not work with my employees on past due rents or deferral
of rent payments. One of my employees actually lost his housing
as a result of this government shutdown.
Three, because of the layoffs, I'm expecting my cost of
doing business to actually increase because of the increased
cost of unemployment contributions.
In my humble opinion, a government shutdown is unnecessary.
And at the root, it is a failure on the part of all of our
elected officials. The past shutdown was exacerbated simply
because egos on both sides of the aisle got involved. There was
plenty of room for compromise based on previous positions
staked out by both parties.
So the big question, what do I want out of this? I want my
elected officials to understand that even the best economists
in the world cannot accurately encapsulate the true cost to the
U.S. economy and its people from a government shutdown. I want
my elected officials on both sides of the aisle to dispense
with their self-serving egos and do what's best for their
constituents. I want to see legislation pass that prevents
government shutdowns from being used as leverage because of the
inability of our politicians to find a viable middle ground.
In closing, I would like to ask one simple question of my
elected officials: Will you commit to finding a middle ground
this September, or will you be closing the government again and
further tarnishing the reputation of our great country?
Mr. Connolly. Thank you, Mr. Ford.
Ms. Worthen.
STATEMENT OF TAMELA WORTHEN, SECURITY GUARD, NATIONAL MUSEUM OF
AFRICAN AMERICAN HISTORY
Ms. Worthen. Good morning, Chairman, Mr. Connolly. Thank
you so much for making it possible for me to have a voice and
to share my personal feelings on how the furlough impacted me
in several ways in my life before this committee.
My name is Tamela Worthen. I work as a security officer at
the National Museum of African American History and Culture in
Washington, DC. I missed several of my regular weekly paychecks
during the longest government shutdown in U.S. history, and I
still can't afford my diabetic medication or mortgage, car
payments, timeshare for vacation, et cetera. I was even rushed
to the hospital because I could hardly breathe as a result of
missing my medication and couldn't pay my monthly premium. I
feel so overwhelmed by the impact of the shutdown and potential
for future funding lapses that I'm applying to a new
establishment, which this day, the establishment, they observe
your credit history. But because so many establishments have
sent delinquency notices to my credit bureau, it's going to be
pretty kind of hard to get another job because they look at
your credit.
You can't prepare for it, especially if you don't have any
money already. I'm in a difficult position of saving as much as
I can while substantially catching up on bills, debt payments,
paying back unemployment benefits and taking care of other
financial causes inflicted by the shutdown that ended not too
long ago.
I want to refinance my home and go through my equity to try
to solve some of the bills that I have. But because your credit
score had been impacted with certain establishment being
notified by the bureau, you know, of delinquency, that is
impossible because you have to have a certain score, put it
that way.
When you're trying to get back on your feet. That's very
hard. That's the problem with the world today. One man's
decision is another man's pain. Backpay will certainly solve my
today's financial dilemma.
Thank you so much for having me here and hearing my voice.
Mr. Connolly. Thank you for your willingness to share your
personal experience, Ms. Worthen. We appreciate it.
Mr. Hall.
STATEMENT OF MARK HALL, EXECUTIVE VICE PRESIDENT, SERVICESOURCE
Mr. Hall. Good morning, Chairman Connolly, and other
members of the subcommittee. Thank you for inviting me here
today to talk to you about the impacts of the shutdown on
ServiceSource, our employees, and the AbilityOne program. I'm
an executive vice president with ServiceSource headquartered
here in Oakton, Virginia. ServiceSource is an organization
affiliate group of five 501(c)(3)'s with a mission to
facilitate services and partnerships to support people with
disabilities.
We were founded in the early 1970's by a small group of
parents that were trying to create opportunities for their
children. And we became a part of the AbilityOne program in the
early 1980's.
The AbilityOne program is the largest source of employment
for individuals we serve and for individuals with significant
disabilities across the United States. More than 45,000
Americans who are blind or with significant disabilities are
employed through a national network of over 550 nonprofit
agencies, including ServiceSource. Our employees provide mail
services, document management, help desk, total facilities
management, logistics, and food services for 41 Federal
agencies including all branches of the U.S. armed services.
The majority of the individuals working on ServiceSource's
AbilityOne projects are in contracts providing basic government
services in jobs, such as mail clerks, military dining
attendants, and administrative support. They earn an average
wage of over $13 an hour, and each receives a health and
welfare fringe benefit of $4.27 per hour.
While these are good entry level wages, many of the
individuals working on ServiceSource's AbilityOne contracts,
like many Americans, live paycheck to paycheck. During the 35
days the government shut down, 79 employees working on 10 of
our AbilityOne contracts were furloughed. Of course, employee
morale suffered, and high levels of stress were shared by many.
In response, as an organization, we committed to paying
employees' wages and benefits from our reserves for the first
two weeks of the shutdown. During the next two pay periods,
some employees were able to use their limited vacation for
partial pay, and others with no vacation went without pay.
During the shutdown, our team maintained frequent contact
with our employees to assess their well-being and determine
their levels of stress. As a result, we learned that some of
our employees needed direct assistance. We formed a Cans for
Contractors food drive to secure food and other items, which we
passed out. We also appealed to the help of a ServiceSource
foundation, which is a separate 501(c)(3) nonprofit
organization that supports the mission and--of ServiceSource.
Through the foundation's support, we were able to provide
each employee with backpay after the shutdown concluded.
However, that decision impacts the foundation's ability to
provide support for other needed services, including housing,
therapy, veterans programs, and autism programs.
While ServiceSource eventually received reimbursement from
3 of the 10 contracts impacted, we lost more than 300,000 in
contract revenue. I'm proud of all that we did to support our
employees during the shutdown. I'm also proud of our employees'
advocacy efforts.
Let me take a moment to tell you about one individual, Fred
Pickett, who was particularly outspoken. Fred's worked for
ServiceSource for more than 27 years at the EPA. And the EPA
was one of the contracts that was impacted.
Like many of us, Fred finds fulfillment in his work and
takes great pride in supporting the government. Fred was
interviewed by the media, including print television and radio
and was active on Capitol Hill. Fred's message was clear that
he was frustrated with the broken routine and upset that he was
caught in the middle of a political fight through no fault of
his own.
I personally know that Fred appreciates the time you're
investing and learning more about the impacts of the shutdown
and preventing future work disruptions. Fred and more than
2,000 individuals employed through the AbilityOne program
nationwide experienced a loss of work or reduction in hours in
addition to personal and financial consequences. Congress
passed legislation to provide backpay to Federal employees.
Federal contract workers, especially AbilityOne employees,
deserve equitable treatment and should be eligible for backpay
like their Federal counterparts.
Thank you very much, again, for the opportunity.
Mr. Connolly. Thank you, Mr. Hall. I appreciate it.
I know Mr. Beyer's schedule demands that he--he's going to
have to leave a little early. So, with the indulgence of my
colleague, I'm going to let Mr. Beyer have his five minutes
now.
Mr. Beyer. Mr. Chairman, thank you very much.
I want to especially thank you all for making clear how
much human pain was experienced and is being experienced
because of the shutdown. I think sometimes if you just read the
newspaper, you think, well, this is a fight among political
leaders and the government shuts down. But there is just no
concept of the impact that it has on health, on rushing to the
hospital, on long-term bills, on--just the level of anxiety
among you folks. So thank you for--I wish every one of our
colleagues could hear that.
And, Mr. Ford, I very much appreciate your frustration. I
think we were all often frustrated with it. I also want you to
know that everyone at this table was very eager to find the
middle ground. But it takes two players to have a middle
ground. I think, you know, Nancy Pelosi was very clear on
December 20 that she'd be happy to sit down and negotiate until
the cows come home as long as we open the government up again,
but they weren't willing to do that.
Mr. Connolly. If I may interrupt, and not at your expense
if we freeze the time. But I think it is important to remember
an agreement had been reached. The President had agreed to go
forward with the funding of the government. It was only after
he got criticized on a right-wing television that he abruptly
changed his mind and pulled the plug. Against the advice of
Republican Members of Congress, he decided two people on FOX
News were more important than the rest of us on a bipartisan
basis. And we had--that was a unilateral action by the
President. And as a result, the government shut down.
But that was something he triggered. It wasn't something
where there were lots of egos involved that, you know, caused
this to happen. It was one ego that caused this to happen over
an issue that was unrelated to the funding of the government:
the wall.
I ask that an extra minute be restored to my friend. I'm
sorry. But I wanted to----
Mr. Beyer. Thank you for clarifying it.
We learned during the shutdown that nonessential employees
who weren't working, both contractors, Federal agencies, even
coffee shops, could apply for unemployment insurance, but the
essential employees couldn't because they were working. But
even if you could prove that you weren't working and that you
were applying for other jobs, which is a condition of getting
unemployment insurance, if you did get paid back, then you had
to repay the unemployment benefits. Just a total mess.
Ms. Worthen, you applied--did the unemployment benefits
come in time? Did they make a difference with all the different
bills that you had to pay?
Ms. Worthen. Not really, because they don't pay you what
you make on your job. So it's always a shortage somewhere. And
then you have to apply for two jobs within that week to be able
to get the benefit, so----
Mr. Beyer. Two jobs that you know you're sort of doing
fictitiously because you're expecting to go back to your real
job.
Ms. Worthen. Right.
Mr. Beyer. So there's a--yes. So there's a loss of faith
there too.
Mr. Contreras, did you end of losing many employees through
the course of this?
Mr. Contreras. Well, I mean, our--you know, just at the
Smithsonian alone, you know, there were at least 35 security--
we represent close to 300 and so security officers at
Smithsonian museums. But 35 of those officers just gave up. I
mean, they had to have income coming in to feed their families,
pay their bills, and take care of, you know, their loved ones,
so they quit. They went to find work somewhere else. I mean,
they're members of our union. And that's just one side.
There were people who had to--they felt forced to, you
know, go do something similar. I mean, honestly, some of these
folks were veterans, people--you know, I served in the U.S.
Navy as well, and I too--when I was having conversations with
them, they felt betrayed by their country.
Mr. Beyer. One of the ironies of this is that while the
government is unwilling to pay us, you know, contract employees
and Federal employees, it still expects its bills to be paid on
time.
Mr. Crescenzo, did many of your employees have student
loans that were due and----
Mr. Crescenzo. No, Congressman. Many of my employees don't
have student loans. However, almost 30 percent of my employees
are post-9/11 veterans who don't have big savings, who don't
have any savings, or they are military spouses who are greatly
affected by a shutdown when they're not getting paid. We, on
the other hand, paid all of our employees. But we bore that
cost alone.
Chairman, I'd like to just make a comment about the issue
of the last shutdown. Politics has been around since the birth
of this country, and it will continue on into the future. It's
the rock in the stream. We still need to navigate the stream.
So I commend the committee on future tasks that we can take,
future moves that we can undertake, that will ameliorate some
of these larger issues.
Mr. Beyer. I'd also just like to thank Mr. Ford for
employing ex-offenders. You know, we have 4.4 percent of the
world's population, 22 percent of the world's incarcerated
individuals, most of whom are going to be let out again, and
their best source of not going back is to be able to get a good
job. So thank you very much.
Mr. Chairman, I yield back.
Mr. Connolly. Thank you, Mr. Beyer. I thank you for
participating and your commitment to trying to make sure this
does not happen again.
Ms. Norton.
Ms. Norton. Thank you, Mr. Chairman. This has been very
helpful testimony from all of you giving us yet another
perspective.
Mr. Crescenzo, I was concerned that, in your testimony, you
spoke about the issue of IT and security systems--IT and
security.
Mr. Crescenzo. Yes, ma'am.
Ms. Norton. Sometimes as we look for things that we can get
done, Congress will pay attention--there was something on 60
Minutes. I hope everybody saw yesterday. It was mind-numbing.
That you ask that essential--that included in the definition of
essential work should be those involved in the maintenance of
security or IT systems. Now, what better way to steal the
government's, in this case, money and resources than during a
shutdown. How would you apply that across the board to
contractors?
Mr. Crescenzo. I think there are two different ways to look
at that, Congresswoman. The first would be to either, through
policy or some regulatory lever, to ensure that the parties
responsible for the cybersecurity infrastructure for a
particular agency, whether those parties be government
employees or contractor employees, would be exempt from
shutdowns.
Ms. Norton. So, when you say ``maintenance,'' those
involved in the maintenance of IT and security systems.
Mr. Crescenzo. Correct.
Ms. Norton. Describe for me who those are.
Mr. Crescenzo. So, in every large government agency, in
fact, in almost every government agency of any size, where
there is an information technology infrastructure, there is a
security operations center whose sole job is to secure the
network, email, voice video, teleconference, and the
information technology assets of that organization.
That part of the organization, no matter who runs it,
whether that's a combination of public, private, or it's a
contractor exclusively run organization should be exempt. In
the last shutdown just recently, at the Department of Justice,
we had--we do have a security operations center that we run for
the Department of Justice in the Civil Division, which is the
one--as you know, one of the more busy divisions of the
Department of Justice. Fortunately for us, the deputy CIO, a
gentleman by the name of Todd Miller, furloughed almost
exclusively government employees because he knew that, in order
to maintain the security infrastructure of that agency, he
needed the contractors there.
Ms. Norton. Mr. Chairman, we might at least get their
attention on the security aspects of this issue. We certainly
have done the same for Federal agencies.
I would like to--we hear this notion paycheck to paycheck.
I would like to put on the record, if you would allow us, some
sense of what employees, some of which you either are or are
involved in, what would be the sources of income if, all of a
sudden, as far as you know, if all of a sudden your one source
of income, which is a check from a contractor, were cutoff?
What have your employees done to remain whole even now but
especially during the shutdown?
Any one of you can speak up on that. Where do they go?
Mr. Ford. My employees applied for and received
unemployment.
Ms. Norton. See, this is the private sector. So they--and
one thing----
Mr. Ford. And what I did to help them obtain their
unemployment benefits is I didn't lay them off or I didn't say
``subject to future employment.'' I just flat terminated them.
They didn't understand that at first when they were saying:
You're firing me?
And I'm like: No. I'm actually helping you obtain your
unemployment benefits.
Ms. Norton. Did you hire them back afterwards?
Mr. Ford. I was able to only hire one back.
Ms. Norton. What? They got another job?
Mr. Ford. They were able to find additional jobs. The
layoff happened at a good point, if you want to call it that,
in the economy, because--the low unemployment. So those that
wanted to work were able to get their work.
The one guy that I was able to get back was one of my
convicted felons because nobody else wanted to pick him up
because of his background. And I would have vouched for him if
somebody would have called and asked for a recommendation, but
it didn't happen.
Mr. Crescenzo. If I may, we had some lessons learned from
the 2013 shutdown. I was fortunate enough to be here earlier to
hear the prior testimony. As a matter of course, we cross-clear
employees to other contracts now as a result of the 2013
shutdown.
Ms. Norton. Would you explain what cross-clear means?
Mr. Crescenzo. We have employees in the Department of
Justice. They have a Department of Justice clearance. We have
other employees at the Department of Defense, which has a
completely different clearance process. They take different
amounts of time.
But given our lessons learned from the 2013 shutdown, we
typically and almost continuously apply security clearances
across all of our contracts for all employees. So, if we hire
someone on to a DOD contract, we, at the same time, submit them
for a DOJ security clearance so that in the event there is a
shutdown, we can readily move those people.
There is an issue that you can help with that we haven't
addressed, which is PTO. As you know, vacation and paid time
off can be donated in medical emergencies. That is there is no
tax implication for employees.
In the 2013 shutdown, we had 17 brandnew employees who had
not ever worked for us before. Literally, on day one, they were
furloughed, and they had no leave. What we did, and this can
get a little bit arcane, but it is something that's usually
resolved by you: Leave is a liability on our books. It is an
expense that I must put onto my balance sheet at the beginning
of year that says if I have 100 employees and they get 10 hours
or leave, I have budget for 1,000 hours of leave. And at the
end of the year, as you know, most people don't take all their
leave.
When they don't, we let them carry some over. But the rest,
we take back. And why do we take it back? Because I can't keep
a seven-figure expense on my books at the end of the year.
That's why leave gets wiped out.
However, in a shutdown, what we did is we allowed some of
our employees--we asked every employee, as a matter of fact,
over 87 percent of our company in 2013, pledged not to take
leave that was on the books until the end of the year. That
leave stayed there. But the employees in this particular
shutdown--so we had--again, no employee was affected
financially from our perspective. We were affected as a
company. The employees were not because we took that leave that
was pledged not to be taken, and we let those employees use
paid time off that other employees had essentially abandoned.
Rather than have us go through this arcane five-step process to
avoid tax implications and audits, it would be a lot easier if
we could just pass some legislation that would all government
contractors during a shutdown to allow tax-free leave donations
for colleagues who are affected.
Mr. Connolly. Another thought for PSC. All right. They got
it.
Ms. Norton. Best practices.
Mr. Crescenzo. PSC thought of that after we did, sir.
Ms. Norton. Can I get put more thing?
Mr. Connolly. One more thing.
Ms. Norton. I'd like to just get on the record whether this
bill I am sponsoring would help in any way any of your
employees. Because Mr. Ford wouldn't expect his employees, but
he talked about middle ground. It's really my attempt--it has
many cosponsors--to find something for contract employees.
And as I indicated to the last panel, while it wouldn't
affect all of your employees, it goes to the employees who
could least afford a shutdown. And in my bill, I name retail,
food, custodial, security employees. I'm on another bill that
says 200 percent of income of the employees. They amount to the
same thing. I'd like to know if that bill would help any of
your employees or would help you.
Mr. Connolly. Real quickly.
Mr. Hall. Congresswoman, that would help, but I would like
to encourage you to expand the definition. So many of the
people that we were impacted were mail clerks, paid much like
custodians. They wouldn't be included.
Ms. Norton. Mail clerks.
Mr. Hall. Mail clerks. And there's other positions as well.
So perhaps you could base it on income.
Mr. Crescenzo. Yes. I was going to suggest that as well. We
have many young veterans of Iraq and Afghanistan who are
severely financially impacted in the event that they lose that
money. And they are not highly paid people. They are people who
are getting their first job coming out of the military, which
both the government and private industry are going out of their
way to help provide.
But that creates an almost untenable situation for both the
employer and the veteran when they get eliminated from
consideration there just because they're in a nonexempt status.
I would much rather see that be an income level.
Mr. Connolly. Mr. Contreras, did you want to comment?
Mr. Contreras. No, I'm--absolutely. I mean, what you have
and what they said makes sense. It absolutely helps our
members.
Mr. Connolly. Thank you.
Ms. Norton. We'll work on both of those bills and try to
combine them to get them through. I'm trying to get them
through at least the appropriation process.
Mr. Connolly. Yes. Thank you so much, Ms. Norton.
Ms. Wexton.
Ms. Wexton. Thank you, Mr. Chairman. And thank you to the
panel for coming and joining us today.
Mr. Ford, I would like to say, I know you've said in your
remarks that you didn't know why you were here because you
weren't a contractor.
Mr. Ford. Right.
Ms. Wexton. But that's exactly why you are here. Because,
you know, as we've heard, Federal employees get protected;
Federal contractors don't. Some are better able to absorb those
costs, and then subcontractors below them. But one of the
groups that has been left without any recourse is those in the
private sector.
And as somebody who was sworn in and came to D.C. in the
midst of this shutdown, every time I would go to a restaurant
or a coffee shop, I would ask the employees how has business
been during this shutdown? And it would be dead, nobody in the
shop. So you are not alone and we understand what you're going
through, and we want to make sure that we do not have these
shutdowns again.
Ms. Norton. And if I could just say to my colleague on this
question of--in my own district, the District of Columbia, it
suffered the worst effects of the shutdown, because of
contractors and employees who couldn't shop and couldn't go to
restaurants downtown. So the effect on overall business, and
not only in the DMV, but in the country, ought to be noted.
Thank you, Ms. Wexton.
Mr. Ford. Can I make one comment?
Ms. Wexton. Sure.
Mr. Ford. The one thing that could potentially help a
little guy like me--and I will say, I'm fortunate, if you will,
to be leasing--my landlord is the United States of America,
believe it or not.
If we have a furlough again--not--rephrase that. When we
have another furlough, somehow, somewhere, someway, can the
rent be abated for the period that the government is shut down?
Ms. Norton. That you pay the Federal Government?
Mr. Ford. Ma'am?
Ms. Norton. That you pay the Federal Government?
Mr. Ford. No--yes, I pay the Federal Government. I was
obligated to my rent on time.
Ms. Norton. So he paid the Federal Government.
Mr. Ford. Yes, ma'am. I had to pay the Federal Government
whether I was in business or not, or I got shut out. Good-bye.
So part of what you all could potentially consider is those
of us that are leasing from the Federal Government would
obviously be the most impacted by a Federal shutdown--is that
our rent be abated during the shutdown because--and then we--it
puts us in a better financial position--puts us in a better
financial position, A, to survive the shutdown; B, to
potentially help some of our employees to survive the shutdown.
Ms. Wexton. And I want to thank you for also drawing
attention to the fact that even after the shutdown ended on
January 25, there was that continuing specter of it taking
place again on February 15, and that that impacted a lot of
employees' spending choices and ability to spend during that
period of time.
Mr. Ford. It was a ghost town in my shop, a literal ghost
town.
Ms. Wexton. And you stated in your testimony that it has
impacted your cost of business moving forward. Is that correct?
Your unemployment insurance has gone up?
Mr. Ford. I'm anticipating it will increase my cost of
business going forward, because of the employees that filed for
unemployment--I make a monthly or weekly whatever--my payroll
folks do this for me--but a contribution to the unemployment
insurance for the District of Columbia. As long as I can
maintain my--as long as I'm not terminating employees and a lot
of employees are not filing for unemployment benefits, my rates
stay low. When I begin--when I start seeing a rise in
unemployment requests from my business, my rates are going to
go up.
Now, what I don't know yet--and I won't know this probably
for another three to six months--is if my unemployment
insurance rates are going to go up as a result of the filings.
I don't know that yet.
Ms. Wexton. And you, as an employer, have to make that
difficult decision about whether to terminate the employees and
give them that access to unemployment compensation, or whether
to just furlough them or make them subject to recall whereby
they might not be able to access that.
Mr. Ford. And I chose to bite the bullet and terminate,
which, again, is a morale buster of the biggest, largest
proportion that you've ever seen. Because the employees that
are still there, Oh, my God, am I going to get fired too? They
understood it as being fired. They didn't understand it as
being to their benefit to obtain unemployment insurance. They
didn't grasp that fully.
Ms. Wexton. Right. No. I understand.
Mr. Ford. I think they do now.
Ms. Wexton. I can see why they wouldn't understand that.
Mr. Ford. Correct.
Ms. Wexton. And why, as an employer, it would be easier for
you to just furlough them and then you don't have to incur
possibly the increase in your premiums and----
Mr. Ford. Correct.
Ms. Wexton [continuing]. feel good. But I understand that
was a difficult decision on your part.
Ms. Worthen, you testified that you had incurred--like you
had not been able to pay some bills, and as a result, your
credit score has suffered. Is that correct?
Ms. Worthen. Yes, ma'am.
Ms. Wexton. Okay. Now, I serve on the Financial Services
Committee, and one of the things that we are looking at is to
have legislation that would require that credit reporting
bureaus correct the score and not downgrade your credit for--
for shutdown-related delinquencies in payment.
Would that help you in the terms of correcting your credit
score, and giving you the ability to refinance some things that
you're not able to----
Ms. Worthen. Sure, that would definitely--definitely help.
Because with my bank, PNC, they was able--because I had my home
for five years, never missed a payment until this furlough,
they let me enter into this agreement to where if they give you
six months--even though you don't pay your mortgage every
month, but within that six months, as long as you still come up
with the money, but there will be no late charge or nothing on
it. But still--you still got to look at it this way: If you
still enter into that agreement and you're still going back to
work because of furlough, your money don't go up. You still got
bills piling up. You know what I'm saying?
Ms. Wexton. So it your bank accommodate you in terms of
stretching out those mortgage payments, but they still reported
it to the credit bureaus?
Ms. Worthen. No, no. But some of the establishments did do
that.
Ms. Wexton. Okay.
Ms. Worthen. Which I told them that that was very unfair,
because I did my part as far as submitting a furlough letter.
And when you submit that furlough letter, that is to let you
know that you was affected with the furlough, that they will
waive your late charges.
Okay. But then two--but March and April, now they getting
back--want to give you the late charge. And I go back and tell
them, No, I'm still part of the furlough. Because if you're a
month behind, what makes you think I'm going to be a month
ahead? The money don't go up.
Ms. Wexton. Right.
Ms. Worthen. You just got bills and stuff piling up, and
you got stuff on your credit. And I had real good credit. Now I
can't even refinance my house. So I'm looking at avenues of
what I'm going to do. Because I'm very consistent in paying my
bills. I'm not consistent in staying home. I like to work.
Ms. Wexton. We hear that a lot. We hear that a lot.
May I ask just one question?
Mr. Connolly. Yes, ma'am.
Ms. Wexton. Mr. Crescenzo, you were talking about the
impact on--on your organization. And I understand that you're a
part of the Northern Virginia Technology Council. Is that
correct?
Mr. Crescenzo. Yes.
Ms. Wexton. And have you observed that--that many other
businesses within the council have been affected--were affected
adversely by the shutdown in the same ways that you were?
Mr. Crescenzo. Not only many other businesses during the
shutdown, but we're also a mentor for a service-disabled
veteran-owned business and a woman-owned business. And both
were very badly mauled during the shutdown in terms of the--
both the financial and the--and the H.R. impact.
We, for example, didn't have a single employee who missed a
paycheck, and yet, our voluntary turnover doubled as a result
of the shutdown. And every time you lose a billable resource,
you lose the revenue that goes with that resource.
Ms. Wexton. And just following up on that, if I may very
briefly.
You talked about cross-clearing your employees----
Mr. Crescenzo. Yes, ma'am.
Ms. Wexton [continuing]. for the clearances that they have.
Mr. Crescenzo. Yes.
Ms. Wexton. Is there a streamlined process to make that
happen? Or is it just--is there any economy of scale of getting
them cross-cleared at the same time? I understand that's
probably a different hearing that we're going to have to have.
Mr. Crescenzo. Congresswoman, it is the opposite of the
streamlined process. It was a kluge that, because with have a
full-time general counsel who is a brilliant legal scholar, we
figured after a lot of time and effort, we found a way to do
that that made it reasonable for us to do it for most of our
employee population, but certainly not all, just the ones we
felt would be most at risk in a shutdown.
Ms. Wexton. Okay. Thank you. And thank you for doing that.
And that's a future hearing idea.
Mr. Connolly. While the good news is, Federal IT falls
within the purview of this subcommittee. So maybe we'll have
your back, Mr. Crescenzo, and we can pursue----
Mr. Crescenzo. Very happy to do that, sir.
Mr. Connolly [continuing]. what Ms. Wexton has just
identified.
Mr. Raskin.
Mr. Raskin. Mr. Chairman, I want to thank you for your
leadership in calling this hearing, and bringing us together as
a DMV delegation, as well as members of the Government
Operations Committee.
And I'm very excited about putting together this package of
proposals which go further even than the excellent legislation
that Congresswoman Norton advanced during the shutdown. But
we're learning a lot from this hearing and from all of the
contacts. So I look forward to working with PSC on putting all
of this together and pushing it--pushing it through the House.
Mr. Ford, can I come back to you for a second?
Mr. Ford. Uh-huh.
Mr. Raskin. Where is your shop?
Mr. Ford. I'd would prefer not to spell it out
specifically, because I don't want my doing business out in the
public light, because I try to maintain a neutral political
position.
Mr. Raskin. Gotcha.
Mr. Ford. Because I want to serve both sides of the aisle,
so to speak.
Mr. Raskin. Yes. And you probably have a number of aisles
in your store.
Mr. Connolly. So Mr. Ford welcomes Republicans and
Democrats to his coffee shop.
Mr. Ford. I have numerous--yes, the Vice President has
visited me. I've had numerous Republican and Democrat--I don't
want to alienate either side, either party.
Mr. Raskin. I gotcha. And we don't want to----
Mr. Ford. I would love for you to come visit. I could give
you off the record where I am and come on in.
Mr. Raskin. Can you--can you tell us what your monthly rent
is, and who you write your check to?
Mr. Ford. I write my--no, because I would lay out who I
lease from and where I am.
Mr. Raskin. It goes to the U.S. Treasury?
Mr. Ford. It goes to the U.S. Government.
Mr. Raskin. Okay.
Mr. Ford. And my lease is approximately $6,800 per month,
is what I'm paying.
Mr. Raskin. Okay. So during the shutdown, you paid
something around $6,800 for that time. Did you literally shut
the store down----
Mr. Ford. No, sir.
Mr. Raskin [continuing]. or there was just no action?
Mr. Ford. My revenue was not zero, but my revenue was down
considerably. I mean, substantially, actually.
Mr. Raskin. So it stayed open, but there was----
Mr. Ford. I stayed open. I can't--I mean, I'm one--I'm one
coffee shop competing against--I'll call it the S word that has
got 27,000 coffee shops.
Mr. Raskin. Yes.
Mr. Ford. I don't want to lose the few--I don't want to
lose--I don't want people to break the habit of coming to me
and then going someplace else. So I remained open to try--in
fact, I stopped my own paycheck in an effort to remain solu--
whatever--solvent throughout this.
Mr. Raskin. And your suggestion is that for small
businesses, restaurants, coffee shops that are in the situation
like yours, where your landlord is the Federal Government, that
there would be a rent abatement during the course of the
government shutdown?
Mr. Ford. During the course of the government shutdown.
Mr. Raskin. On the theory that the government has shut down
as an employer, but they haven't shut down as a landlord;
they're still collecting money, but----
Mr. Ford. Correct. Now, here's part of my--my personal
challenge for my shop.
The agency from whom I rent was not shut down; therefore,
they ruled that we don't need to abate your rent, because we
were open for business and you were not impacted.
They had their blinders on. They didn't look at the fact
that I've also got Department of Interior, Department of State,
Office of Personnel Management, Department of Homeland
Security.
Mr. Raskin. Right.
Mr. Ford. All of those represent 70 percent of my business.
And the agency from whom I lease from represents less than 40
percent--30 to 40 percent.
Mr. Raskin. Gotcha.
Mr. Ford. So--and they also said it's not our fault. And
I'm like, you're right, it's not. Absolutely it's not their
fault.
Mr. Raskin. Mr. Contreras, let me ask you something.
The workers that you represent, I'm wondering whether they
experienced this as something completely out of the blue, like
a natural disaster, it was like a hurricane or earthquake, or
did they see this as continuous with other assaults on the
Federal work force and efforts to undermine their position,
their pay, their benefits and so on?
Mr. Contreras. I mean, it was--it was like a tsunami. I
mean, you know, they're used to a day or two or couple of days
government shutdown. And 35 days is just unbearable. You know,
some of these workers, when they heard somebody on the other
side of the aisle say, Well, you should just go tell your
landlord that you will not paint their walls, or cut their
trees or something as a way to pay, you know, help--you know,
they were just offended.
And, you know, they had to do personal loans. You know, if
they work a cleaner in a Federal building in the day and
security officer part-time at night, you know, they--they were
furloughed in the day, they had to go clean houses on the
weekend. You know, and these are not folks who have savings. I
mean, they work two and three jobs because they have a lot of
responsibilities. I mean, they spend it. You know, money in/
money out.
Mr. Raskin. Yes. There were some statements made by people
very high up in government that this is something like a day
off or a vacation.
Mr. Contreras. Terrible.
Mr. Raskin. This is more like an eight or 10 percent pay
cut that people took.
Mr. Contreras. Yes.
Mr. Raskin. When you strip a month of their salary away and
introduce all of that stress and anxiety.
Mr. Chairman, I yield back to you. Thank you.
Mr. Connolly. Thank you, Mr. Raskin.
Let me pick up on that, Mr. Contreras.
So your members, they're all making six-figure salaries,
right?
Mr. Contreras. Right, that would be nice. I mean, our
members, they--you know, they, what, make 30,000 a year, maybe
less. Some a little longer, depending on how long they've been
on the job.
Mr. Connolly. Right. So we are talking really lower end of
the income spectrum.
Mr. Contreras. Absolutely.
Mr. Connolly. And, Ms. Worthen, you're in that same boat?
Mr. Contreras. Yes.
Ms. Worthen. Uh-huh.
Mr. Connolly. And to take a 35-day period of not being paid
is not a minor or trivial issue in the lives of your members or
you, Ms. Worthen; is that correct?
Mr. Contreras. Absolutely.
Mr. Connolly. Mr. Hall, tell us about your--the people you
represent. Who are they?
Mr. Hall. Individuals with significant disabilities
employed in AbilityOne, where they go to work. I mentioned Mr.
Picket had been with us for 27 years. We have lots of
employees----
Mr. Connolly. Right. And if they didn't go to work through
your auspices--and there are some other organizations similar.
Mr. Hall. They're sitting at home.
Mr. Connolly. They're sitting at home.
Mr. Hall. They're sitting at home.
Mr. Connolly. And what does that do to self-esteem if you
are----
Mr. Hall. It lowers morale. It creates a lot of stress for
some of our employees. They didn't have the money to go buy
groceries. We had to start a food campaign. So, we stayed in
touch with them, talked to them often. Eventually, we were able
to make everyone whole, due to the generosity of our foundation
and some donors. But during that 35-day period, it was hell for
them, quite frankly.
Mr. Connolly. Right, the longest ever, so nobody planned
for 35 days.
Mr. Hall. No.
Mr. Connolly. The hope was, well, this would be a
temporary----
Mr. Hall. Why can't I go back to work and do my job?
Mr. Connolly. Exactly.
Mr. Hall. That's what I want to do.
Mr. Connolly. And I would think it must have been a
challenge for some of those folks to explain what this was.
Mr. Hall. They didn't understand why they were pawns in
this political battle which they really didn't understand.
Mr. Connolly. And, likewise, to Mr. Contreras' membership,
you know, the folks you are talking about are not making six-
figure salaries.
Mr. Hall. No. On average, they make about $13 an hour.
Mr. Connolly. $13 an hour. So the loss of this income----
Mr. Hall. Means that they're----
Mr. Connolly [continuing]. very devastating personally, but
financially also.
Mr. Hall. Financially, certainly during that--you know,
they had to talk to landlords, miss car payments, had
difficulty riding the Metro. Forget going to a movie or eating
out. That all went away.
Mr. Connolly. Ms. Worthen, you described a little earlier
in your testimony--and I don't want you to describe your
personal medical information. But you suffered a medical
situation because you could not afford, as I understood it, the
medicine you needed for an underlying medical condition. Is
that correct?
Ms. Worthen. Right. Or pay the premium.
Mr. Connolly. Or pay the premium.
Ms. Worthen. I don't mind sharing any personal thing,
because it's a personal thing I went through. So it's good to
let the record know that I don't mind sharing my story with
anybody, because that's what I went through.
Mr. Connolly. Right.
Ms. Worthen. So to that factor, by me not being able to pay
my premium, I'm not able to pay the copay to go see the doctor
so that he can figure where I'm at with my A-1. You know what I
mean?
Mr. Connolly. And that's not something--I mean, that's not
something that's optional for you.
Ms. Worthen. Right.
Mr. Connolly. You have to have that medicine?
Ms. Worthen. I've got to have it.
Mr. Chairman. Mr. Ford, why do you hire ex-convicts?
Mr. Ford. A gut feeling. When I interview them and I talk
to them--I haven't hired all of them. I've hired a few. When I
sit down and have a long heart-to-heart conversation with them,
and I realize that they are truly remorseful and that they want
to get back as a productive citizen, I'm willing to give them a
chance.
I have hired some, and I have put them right back in jail
because I caught them stealing money from me. I have no qualms
about that. However, the ones that I have that have taken the
opportunity are probably my single most loyal employees that I
own--I wouldn't say I own--that I have. They'll walk with me to
the end of the Earth. It's been a wonderful experience. And I
think a lot of people should reconsider when an ex-con walks
up.
I have conversations with their probation officers. Two of
them are right now still on active probation. I have
conversations weekly, monthly, with their probation officers. I
know what they're doing. I understand what they're doing, and
they know what I'm all about. And they understand that I don't
give--I don't care--as long as they are working and don't take
anything from me, they will have a job.
Mr. Connolly. Yes.
Mr. Ford. If I can possibly maintain the employment.
Mr. Connolly. I commend you for that.
And I hope that the press that's here has captured the
human impact of a 35-day government shutdown. Low wage workers
trying to make ends meet, don't have savings to fall back on,
devastating.
A small businessman who wants to give people a second
chance in American society, and is thwarted from doing so when
the government shuts down, through no fault of his own. You
know, a security guard at one of our museums faces health
crisis because she can no longer pay her premiums and her
copayments for necessary medication, creating a health crisis
for herself, again, through no fault of her own. And a whole
cadre of people who have an opportunity to achieve work and the
self-esteem that comes with that, who are denied that, again,
through no fault of their own because of a 35-day shutdown.
The impacts are considerable. None of these impacts were
particularly focused on during the 35-day shutdown. But they're
very real, in real life. And we thank you all for coming here
and sharing those experiences.
Ms. Norton. Mr. Chairman----
Mr. Connolly. Ms. Norton.
Ms. Norton [continuing]. could I just make one statement in
context? Almost none of the witnesses appearing today would
have been appearing, I guess, when I was a kid growing up in
D.C. And the reason they're here--remember, we have about 2
million Federal employees, where we have more than 3 million
Federal contract employees.
Mr. Connolly. Right.
Ms. Norton. Well, how did we get to that point? The Federal
Government has, over time, made a decision to outsource much of
the work of the Federal Government. That leaves these employees
sometimes without leave they would have if they worked for the
Federal Government, without pensions that you have if you're a
Federal employee.
So the Federal Government did that with great malice
aforethought. They wanted to get that leave, they wanted to get
those pensions, and, yes, they wanted to get those salaries off
of the straight-out Federal budget. It doesn't seem to me that
the Federal Government can, having made that decision, be
allowed to escape responsibility----
Mr. Connolly. Yes.
Ms. Norton [continuing]. for what it has benefited from in
saying to the private sector, "You do it, do it cheaper than we
could do it, and we'll give you as many contracts as we can
find." And I think we need to make sure that that isn't harming
people who would otherwise work for the Federal Government if
we did what we did only a generation ago.
And thank you, Mr. Chairman.
Mr. Connolly. Great observation. Thank you, Ms. Norton.
I want to thank all of our witnesses for your testimony
today.
Without objection, all members will have five legislative
days within which to submit additional written questions for
the witnesses, if they can do that, through the chair, and they
will be forwarded for their responses.
I ask our witnesses, if you are given additional followup
questions, to respond as expeditiously as possible.
I want to thank our staff, our committee staff, our
subcommittee staff, my personal staff, our recorders for making
this look easy when I know it's not, when we do a field
hearing. But thank you.
And, again, thank you to George Mason University for their
hospitality.
We are adjourned.
[Whereupon, at 11:47 a.m., the subcommittee was adjourned.]
[all]