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Government Shutdown Breeds Uncertainty for Architecture Firms

Unpaid invoices, the loss of important economic forecasting data, and project delays are straining architecture firms

By Angie Schmitt

Since the federal government shut down on Oct. 1, day-to-day business at SmithGroup JJR has become complicated. The firm, which employs 800, has ongoing business with a handful of federal agencies--some that are closed, some that are open--plus numerous ongoing construction projects with the Federal government.

Russell Perry, FAIA, who heads up the firm’s Washington, D.C. office, says each agency and each project is being affected differently. “We’re involved in some rather serious, broad assessments of facilities for the EPA, and the EPA was sent home, so we were told to stop that work,” he says.

The firm also has contracts with the Social Security Administration (SSA), and even has some employees embedded in SSA facilities around the country. The Social Security Administration is still working during the shutdown to complete its core functions. How long facilities work will remain funded is unclear.

SmithGroup’s construction projects continue on pace at the Smithsonian. But that organization, with 19 museums and galleries and nine research facilities, is shut down, and many of its employees are furloughed. Perry says he’s not sure how long the construction schedule can continue as planned if the shutdown doesn’t come to a close soon. “It definitely is affecting us,” he says. “We have contracts with deadlines. We have one with the National Archives and Records Administration where we will submit a milestone printing that they can’t review. Every day that goes by there’s a little bit of erosion on our workload because of the federal shutdown.”

Kermit Baker, Hon. AIA, the AIA’s chief economist, says the shutdown is having an obvious dampening effect on the economy in general, which has implications for the AEC industry. The problem is, no one really knows exactly how serious the effect of the shutdown is on the design and construction industry because the government agencies that produce economic data, like the jobs report or the construction spending release, are another casualty of the shutdown. It is too early to know how this may affect key economic indicators like the October Architectural Billings Index (ABI) but it is clear that this lack of data is making it even more difficult for architecture firms to plan ahead.

GSA furloughs

Certainly, there is one federal government agency that depends heavily on the expertise of architects: Among the 800,000 federal workers furloughed are 207 architects at the General Services Administration. According to a spokesperson, just 10 architects from that agency are still working.

Thomas Luebke, FAIA, secretary of the U.S. Commission of Fine Arts (CFA), is furloughed as well, along with the small agency’s 10 staffers. The CFA works on design and architectural review for public projects in Washington and on special federal projects around the world. During the shutdown, any public projects that require evaluation from CFA will simply have to wait. “I don’t know what it’s going to mean to our schedule,” Luebke says. “The architects may be working but the government isn’t. Nothing can happen right now.”

Another group most obviously affected by the shutdown, Baker says, are businesses that contract with the federal government. “Defense contractors are laying off some of their employees. How about the vendors that are serving defense contractors?” Baker says. “Every day that goes on, more and more companies are going to be responding to this slowdown by scaling back their actions.”

Edifice Studio in Hyattsville, Md., specializes in government contracts. Principal Lisa London, AIA, says the firm is fortunate none of its projects have been interrupted and it hasn't had had to furlough any employees. “Our day-to-day workforce isn’t affected, but there are important things that are,” she says. “We can’t invoice for any of the work that we’re doing for the government right now, and we will not be paid for invoices that the government has approved but not paid.”

Fortunately the firm is well capitalized, she says. But a prolonged shutdown could be very difficult. “We can only self-finance the company for so long if we can’t invoice and we don’t get paid.”

Debt ceiling ahead

As the shutdown has continued, the possibility of reopening the government is becoming linked to Congress’s next looming deadline: raising the federal debt ceiling. The deadline for congressional action on that item, as specified by the United States Treasury, is October 17.

Though both believe it is not likely to happen, Christina Finkenhofer, AIA National’s director of federal relations, and AIA Chief Economist Kermit Baker, say if the debt ceiling is not raised it would be a disaster for the overall economy and the building industry as well. “The debt ceiling has the potential for much more serious implications,” Baker says. “It would take only hours for that to be felt.”

Baker says he would expect the stock market to be lot more volatile if default was a very serious possibility. The stock market has been down slightly, but Baker says he would expect to see it rebound if the government shutdown ends and the debt ceiling crisis is averted in the coming weeks.”

For more information on the effects of the shutdown, see “Shutdown 101 FAQ”

   
   
 
     
 
 

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