Continuing Resolutions and Government Contracting
When Congress fails to pass full-year appropriations bills by October 1, the government operates under a continuing resolution (CR). For contractors, CRs create uncertainty, delay new awards, restrict spending, and compress the procurement timeline once full funding finally arrives.
Understanding how CRs work — and preparing for them — is essential for any company doing business with the federal government.
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What Is a Continuing Resolution?
A continuing resolution is a temporary spending bill that Congress passes to fund the federal government when full-year appropriations have not been enacted. CRs typically extend funding at the previous fiscal year's levels for a specified period — usually weeks or months — giving Congress more time to negotiate final spending bills.
Under a CR, agencies can generally continue existing programs and contracts at the prior year's rate. However, they face significant restrictions on starting new programs, increasing production rates, or taking actions that would commit the government to spending beyond prior-year levels. These constraints are designed to preserve Congress's ability to make policy changes in the eventual full-year appropriation.
CRs can include "anomalies" — specific provisions that override the general rules for particular programs or agencies. For example, a CR might include an anomaly that allows a specific defense program to continue at a higher rate than the prior year, or permits a new program to begin despite the general prohibition on new starts.
How CRs Affect Contracting
Spending Rate Limits
Under a CR, agencies can only spend at the rate of the previous year's appropriation. If an agency received $10 billion last year and the CR covers three months, they can spend approximately $2.5 billion (one quarter of the prior year level). They cannot front-load spending even if a new program was planned.
New Start Restrictions
CRs generally prohibit agencies from initiating new programs, projects, or activities that were not funded in the prior fiscal year. This means new contract awards for programs that do not have a predecessor are delayed until full-year appropriations pass. Agencies may continue to plan and solicit, but cannot obligate funds for new starts.
Delayed Contract Awards
Even for existing programs, agencies become more conservative with contract awards during CRs. Contracting officers may delay large awards until full-year funding is confirmed. Source selections may be completed but awards held in abeyance. This creates a backlog that must be cleared once appropriations pass.
Reduced Scope and Shorter Periods
When agencies do award contracts during a CR, they often reduce scope, shorten performance periods, or use incremental funding. A contract that would normally be funded for a full year might receive only three months of funding under a CR, with the expectation of a modification once full appropriations arrive.
Contract Modifications Delayed
Planned modifications that increase contract value or scope are frequently delayed during CRs. Agencies may lack authority to commit funds beyond the CR rate, making it difficult to exercise options, add work, or extend performance periods.
Historical Frequency of CRs
Continuing resolutions are not the exception — they are the norm. Since FY1997, Congress has passed full-year appropriations on time (by October 1) only four times. In every other year, the government started under at least one CR, and often multiple sequential CRs.
Some fiscal years have operated entirely under CRs, with Congress never passing full-year appropriations at all (instead relying on a year-long CR or an omnibus spending package enacted months into the fiscal year). FY2011 and FY2013 are notable examples where CRs lasted most or all of the fiscal year.
The typical pattern involves one or more short-term CRs in October through December, followed by either an omnibus appropriations bill or a longer-term CR that funds the government through March, with final action on individual spending bills completed sometime in Q2 or Q3 of the fiscal year. This means agencies often operate with budget uncertainty for three to six months at the start of each fiscal year.
When CRs extend deep into the fiscal year, they compress the effective spending timeline. Agencies that receive full-year funding in March or April have only six months to execute a twelve-month spending plan, which intensifies the Q4 spending surge and further concentrates contract awards in the summer months.
Impact on Contractors
Revenue Uncertainty
Contractors depending on new awards or contract expansions face revenue delays. Companies that planned hiring or capital investment based on expected Q1 awards may need to adjust timelines. Cash flow planning becomes more difficult.
Workforce Management
If contract funding is incrementally loaded or delayed, contractors may face gaps in employee utilization. Key staff may need to be carried on overhead, increasing indirect rates and reducing competitiveness on future bids.
Proposal Pipeline Uncertainty
Solicitations that were expected in Q1 get delayed. Proposal teams that were staffed and ready have nothing to respond to. When funding finally arrives, multiple delayed solicitations may drop simultaneously, straining bid and proposal resources.
Small Business Impact
Small businesses are disproportionately affected because they have less financial cushion to absorb delays. A three-month postponement of an expected contract award can threaten the viability of companies with thin margins and limited reserves.
Strategies for Contractors During CRs
Maintain Cash Reserves
Build and maintain cash reserves that can cover at least 90 days of operating expenses without new revenue. CRs are predictable enough that they should be built into every contractor's financial planning. Companies that assume on-time appropriations will be caught off guard repeatedly.
Focus on Recompete and Option Work
During CRs, agencies can generally continue funding existing programs. Recompete contracts and option year exercises are less affected than new starts. Focus your business development on incumbencies and existing program continuations rather than net-new programs during CR periods.
Stay Ready for the Funding Release
When full-year appropriations finally pass, agencies release a flood of pent-up acquisitions. Have your proposals pre-positioned, your teams ready, and your pricing current. The post-CR award surge can be as intense as the Q4 year-end rush.
Track Anomalies
Read the text of each CR carefully. Anomalies can create opportunities for specific programs or agencies that are exempt from the usual restrictions. Congressional Research Service (CRS) reports and trade publications provide analysis of each CR's specific provisions.
Diversify Your Customer Base
Companies that depend on a single agency or program are more vulnerable to CR-related disruptions. Diversify across agencies, contract vehicles, and service areas so that delays in one area do not threaten the entire business.
Stay Ahead of Budget Uncertainty
Bureauify tracks contract awards, solicitations, and spending data in real time. Monitor how agencies are spending during CRs and be first to respond when full funding arrives.
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