Government Shutdowns and Continuing Resolutions: What Small Contractors Need to Know

A continuing resolution (CR) is a stopgap law that keeps federal agencies funded, usually at last year's rate, until Congress passes full-year spending bills. A government shutdown is what happens when neither passes: funding lapses, and agencies must stop any work that isn't already funded or allowed to continue by law. For contractors, a CR mostly means slower and smaller awards, while a shutdown can mean stop-work orders, delayed payments and no automatic back pay for your employees.

What's the difference between a continuing resolution and a shutdown?

The federal fiscal year starts on October 1. Congress is supposed to pass 12 regular appropriations bills by then. It rarely does. The Government Accountability Office (GAO) found that Congress passed CRs in all but four of the 40 years before 2018.

A CR fills the gap. The current one funds projects and activities "at a rate for operations" set by the fiscal year 2026 (FY2026) spending laws. If a CR runs out and nothing replaces it, appropriations lapse. That's a shutdown.

The rule behind a shutdown is the Antideficiency Act. It bars federal officials from committing the government to pay for anything "before an appropriation is made unless authorized by law."

Recent lapses show why this matters. Funding lapsed on October 1, 2025, and the law that ended it was signed on November 12, 2025, a 43-day gap. A short lapse hit several agencies from about January 31, 2026 until a funding law was signed on February 3, 2026. Then funding for the Department of Homeland Security (DHS) alone lapsed around February 14, 2026, until a DHS funding law was signed on April 30, 2026.

What does a continuing resolution mean for contractors?

A CR keeps the lights on, but it's not business as usual. Here's what the current CR's text says, and what GAO has found agencies do under one.

• No new starts. Section 104 bars using CR funds "to initiate or resume any project or activity" that wasn't funded in FY2026. If a contract you're chasing depends on a brand-new program, it may wait.
• Minimal spending. Section 110 says the CR must be carried out so "only the most limited funding action" is taken. Agencies tend to fund only what they must.
• Funding in smaller pieces. GAO reported agencies "delaying contracts" under CRs, and that shorter, repeated CRs lead to "entering into shorter-term contracts or grants multiple times." You might see a contract funded for a few months at a time, or an option year exercised for a shorter period.
• Slower awards. Contracting staff spend time redoing paperwork each time a CR is extended. Expect evaluations and awards to take longer.

You may also see the Availability of Funds clause (FAR 52.232-18) in awards made early in the fiscal year. It says the government's obligation "is contingent upon the availability of appropriated funds." It also says there's no legal liability for payment until funds are available and you're told so, "to be confirmed in writing by the Contracting Officer." Don't start billable work on that kind of contract until you get that written notice.

What happens to contractors in a government shutdown?

The Office of Management and Budget (OMB) publishes the rules agencies follow. Its FAQ for a lapse in appropriations (last updated January 30, 2026) answers the big questions contractors ask.

Which contracts keep going?

According to OMB, if performance "is not impacted by such a lapse," you may keep working. Its main example is a contract or task order where the agency obligated the "entire price" before the lapse began. Work paid from multi-year or no-year funds can also continue.

But continuing isn't guaranteed. OMB tells agencies to suspend performance if government oversight is critical and those employees are furloughed. It also tells them to stop work that would be wasteful. OMB's example: there's no point paying a contractor to empty trash cans in a closed building.

New work mostly stops. During a lapse, an agency generally can't sign a new contract, extend one or exercise a renewal option using lapsed funds. The exceptions include emergencies that threaten life or property. Even then, OMB says, "the agency cannot pay the contractor until appropriations are enacted."

What is a stop-work order?

A stop-work order is the formal way an agency pauses a contract. Negotiated supply, service and research contracts may include the Stop-Work Order clause, FAR 52.242-15. (The rules for issuing one are in FAR 42.1303, or 42.1003 in the FAR overhaul text agencies have adopted.) Under that clause:

• The order can pause all or part of the work for 90 days, or longer if both sides agree.
• You must comply right away and take "all reasonable steps to minimize the incurrence of costs."
• If the pause raises your costs or delays your schedule, the clause provides for an equitable adjustment in price, schedule or both.
• You must ask for that adjustment within 30 days after the stoppage ends. The contracting officer can accept a late request, but don't count on it.

Not every contract has this clause, and agencies may send other notices. Read what you receive and do exactly what it says.

Do contractors get paid during a government shutdown?

Sometimes, but late payments are common. In some cases, OMB lets agencies keep employees on duty to pay contractors from funds obligated before the lapse. Whether an agency does that varies, and many invoice and oversight staff are furloughed. For emergency work ordered during the lapse, payment waits until funding returns.

Keep invoicing on schedule anyway. Proper invoices will be in line when payments restart.

Contractor back pay vs. federal employee back pay

Federal employees are covered by the Government Employee Fair Treatment Act of 2019 (Public Law 116-1, signed January 16, 2019). It amended 31 U.S.C. 1341 so that furloughed and excepted federal employees are paid for any lapse starting on or after December 22, 2018, once the lapse ends.

That law covers federal employees, not contractor employees. We found no similar rule for contractor staff in the laws that ended the 2025 and 2026 lapses. So unless a future law provides it, there's no back pay from the government for your idle staff. Your recovery, if any, comes through your contract, such as an equitable adjustment after a stop-work order. That's why the records you keep during a shutdown matter so much.

Does SAM.gov work during a shutdown, and can you still bid?

OMB tells agencies to keep a website running during a lapse when it's needed to support funded or excepted work, or to avoid cybersecurity risk. It says continued public access to information alone isn't enough. So no rule guarantees that any site stays up.

During the fall 2025 lapse, we saw at least one agency still posting to SAM.gov. On October 16, 2025, a U.S. Department of Agriculture fencing solicitation posted an amendment saying its due date was "extended indefinitely due to the lapse in appropriations." That's one example, not a promise the site will be up next time. Check each notice you're bidding on for amendments.

What that means for your bids:

• Some deadlines move, some don't. Agencies extend due dates by amendment. Unless you see one, plan to meet the posted deadline. Our guide to reading a solicitation covers how amendments work.
• Questions may go unanswered. OMB says staff paid from annual appropriations who handle contract administration generally stop working during a lapse.
• Awards pause. Even if you submit on time, evaluation and award may wait until funding returns.
• Keep your registration active. SAM.gov registrations must be renewed every 365 days. If your renewal date falls near December 11, renew early. See how to register on SAM.gov.

How can small contractors prepare?

You don't need to wait for a deadline to get ready. Do these now, while agencies are funded.

For a free second opinion on a contract clause or a stop-work notice, an APEX Accelerator can review it with you at no cost.

Why is July through September busy and October through December slower?

The fiscal year's fourth quarter (July through September) is when agencies award the most. USAspending.gov data, checked on September 28, 2026, shows the pattern in FY2025:

September 2025 alone saw $148.5 billion, almost as much as the whole first quarter. CRs add to the pattern. GAO noted that agencies may be able to cope with CRs by shifting contract and grant cycles "to later in the fiscal year when they are less likely to be under a CR."

For you, that means October through December is usually slower for new awards, and a CR makes it more so. Use the quiet months well:

• Answer sources sought notices. They shape the set-asides agencies plan for later in the year.
• Tighten your capability statement and reach out to small business offices.
• Build a list of target agencies and past buyers, following our guide on how to find government contracts.
• Set up alerts so you don't miss new notices while things are slow. A free FedReady account includes a saved search with email alerts.

Next steps

Mark December 11, 2026 on your calendar and check your contracts' funding before then. If you're new to bidding, start with how to win your first federal contract, then learn to spot early signals in sources sought notices.

This guide is general information, not legal or financial advice. Rules and thresholds change, so confirm details on SAM.gov and the official agency sites linked above before you act. FedReady is an independent company and is not affiliated with any government agency.