Solution Providers Want Out Of Public Sector After Government Shutdown

After the sequestration and now the shutdown, many government solution providers are throwing up their hands with plans to turn toward the private sector while others are holding fast and hoping for a more stable future.

The federal government shutdown went into effect Monday at midnight after the government failed to come to a compromise on a spending bill to fund the government, which resulted in hundreds of thousands of "non-essential" workers being told to stay home and frozen government funds.

The biggest effects on solution providers will be seen if the shutdown continues for more than a few days, said Bill Gleich, president of Jeskell Systems, which does more than half of its business with the government. Gleich said that for now, companies can make do, but they will start to struggle as contracts go unpaid and no new contracts can be signed.

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"It certainly makes the nonfederal markets attractive," Gleich said. "There's more consistency and visibility about the future. There's more clarity in doing business with commercial entities because of the dysfunction that is going on with the government right now, or more specifically that is going on with Congress."

Dennis Jeter, president of A Sound Strategy, Inc., said his company has already transitioned away from working with the government after the sequestration took effect earlier this year. His company lost two large army contracts because of the uncertainty around the sequestration.

"We made a decision to not focus on government as a vertical. We literally just shifted all of our energies and focus onto SMB market. That’s what we've been trying to do. Government was so nonfunctional that it was impossible to get contracts," Jeter said.

The other problem going forward is that events such as the shutdown will discourage new talent from venturing into the public sphere, said Steve Halligan, COO of n2Grate Government Technology Solutions.

"If people feel annually that they're caught up in bigger issues outside of their control it has an impact on desirability of the next generation of federal workers," Halligan said. "It will be a huge detractor to attracting top talent."

Between the pay freezes and furloughs for government employees, Halligan said that the reputation of working with the government is affected as future talent may look elsewhere. The unstable environment affects job stability, benefits and pay raise expectations, he said.

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However, n2Grate's Halligan said he sees a silver lining to the situation in that if his company can remain viable in a difficult marketplace, it can pick up some incredible talent as other companies fold.

"There's going to be many commercial/contract layoffs of those whose primary business is government. We know they're coming. There's some challenging times ahead," Halligan said. "We're optimistic, we need to adjust and look for the best talent to come join us. I would prefer it to be growth everywhere across the board, but we need to be aware of market conditions, and now we have an opportunity to grow and pick up good talent."

Halligan said his company has been working in overdrive to keep up during the shutdown, with one employee clocking 86 hours last week, 46 above what is allowed on the government contract. He said his company has no choice but to accelerate what they are doing.

Other companies aren't so lucky, as their contracts were shut down along with the government. V3Gate does 95 percent of its business on government contracts, and Department of Homeland Security Account Manager Bree Poland, who manages V3Gate's DHS business and has had her contract frozen, said that means 95 percent of V3Gate's business is now put on hold. Meetings have been cancelled, and Poland said she is just waiting for a phone call or an email that says she can get back to work.

Poland said it is tricky to shift the government-dedicated company more toward healthcare or education services because the relationships don't already exist there. She said her company, in the meantime, is just hoping this whole situation gets resolved quickly and everyone can get back to work.

"We're hoping that this gets resolved soon and there won't be an issue," Poland said. "I thought that people would come together and find something and I still hope that it won't be longer than this week."

PUBLISHED Oct. 2, 2013