Congress prevented a government shutdown on October 1, but it did not give federal agencies—or many of the businesses that depend on them—the certainty of a normal fiscal year.
Public Law 119-103, enacted on September 2, keeps agencies operating through December 11, 2026, generally at the rates and under the conditions established for fiscal year 2026. That is enough to preserve many existing activities. It is not the same as a final fiscal-year 2027 budget.
For a federal contractor, the important question is not simply whether the government is open. It is whether money has been obligated for a specific contract, option, task order, grant or subcontract.
Open agencies do not mean normal purchasing
A continuing resolution is a bridge. It allows agencies to keep operating while Congress postpones decisions about final spending levels and priorities. The bridge prevents an immediate funding lapse, but it can make agencies cautious about launching programs, expanding existing work or committing to purchases that may not fit the eventual fiscal-year 2027 budget.
The next hard deadline is December 11. The law also requires the Office of Management and Budget to provide Congress with a list of certain rescissions or cancellations by November 20. Until those decisions are clearer, companies may have difficulty determining which expected opportunities are real, which are delayed and which may disappear.
That uncertainty is different from a shutdown. During a shutdown, payments, contract administration and new obligations may be interrupted. Under a continuing resolution, existing funded work may continue while new awards, modifications, option exercises and expanded scopes wait for clearer authority.
The result is a government that is technically functioning while parts of its commercial calendar remain provisional.
The difference between backlog and funded work
Federal contractors often describe their businesses in terms of backlog. But backlog is not a single category. An already-funded contract with an active period of performance is more secure than an option that has not been exercised, a task order that has not been issued or a new program that depends on final appropriations.
The same distinction applies farther down the payment chain. A prime contractor may have a strong relationship with an agency but still delay hiring a subcontractor until the federal customer authorizes the work. A small engineering, information-technology or logistics firm may appear to have a promising opportunity while receiving no money and no firm start date.
That creates a working-capital problem. A company may spend months preparing a bid, retaining specialized employees, purchasing equipment or completing compliance work before it knows whether the federal customer will proceed. If the award is delayed, the expense is real even though the revenue is not.
Businesses with cash can wait. Businesses without it may reduce hiring, decline the opportunity or borrow against uncertain future revenue.
Continuing resolutions have measurable costs
The effect is not merely administrative inconvenience. The Government Accountability Office reported that continuing-resolution delays affected selected Defense Department programs and activities. Officials told GAO that a facilities-sustainment contract at Joint Base San Antonio rose from an estimated $579,000 to $1.445 million after a delay associated with limited funding under a continuing resolution.
Officials with the Marine Corps Amphibious Combat Vehicle program also reported approximately $17.7 million in additional costs from fiscal years 2022 through 2024. GAO said the increase resulted from shifts in order timing and related foreign-exchange changes. That figure is not an estimate of the cost of the current law. It is evidence of how temporary funding can become a permanent business expense.
Delays can affect production schedules, equipment availability, labor planning and the prices suppliers are willing to offer. When an agency finally receives a full-year appropriation, it may be buying later, under different market conditions and with less time to complete the same work.
Small firms carry more concentrated risk
The federal government is a major customer for small businesses. The U.S. Chamber of Commerce estimated that approximately 65,500 small businesses received more than $155 billion in federal payments during 2024.
The Chamber’s figures describe federal purchasing and the potential exposure of a shutdown, not losses caused by the current continuing resolution. That distinction matters. A shutdown and a continuing resolution are not financially interchangeable.
But the figures show why federal timing matters to small firms. A large contractor may shift employees to commercial work, draw on substantial reserves or absorb a delayed subcontract award. A small specialized company may have one major federal customer, a limited borrowing base and employees who cannot be kept indefinitely without billable work.
Small businesses also face a higher relative burden from fixed costs. Bid preparation, security requirements, certifications, accounting systems and specialized equipment do not become cheaper because Congress has postponed a budget decision.
Who benefits from the uncertainty?
The immediate beneficiaries are agencies that avoid a shutdown and incumbent contractors with funded work. They retain continuity and can keep performing obligations already authorized.
Cash-rich and diversified companies also gain an advantage. They can preserve capacity while smaller competitors retreat. That may gradually concentrate federal work among firms best able to finance delay rather than firms offering the strongest technical proposal or the lowest long-term cost.
That is an important but easily missed consequence. A temporary funding structure can influence the future shape of the supplier base even without an explicit decision to reduce competition or small-business participation.
Congress and the administration gain negotiating time. That political benefit is real. The cost is transferred to agencies trying to plan and businesses deciding whether to spend money before the government has made a final commitment.
The risk moves onto private balance sheets
The mechanism is straightforward. A contractor expects an award and hires workers, buys equipment or reserves production capacity. The agency continues operating under the prior-year funding structure and delays the procurement. The contractor has incurred costs but cannot recognize the expected revenue.
If the firm has liquidity, it waits. If it has a bank line, it borrows. If it has neither, it exits the opportunity.
Lenders may respond before a contractor reports a visible revenue decline. A bank could ask how much of the company’s backlog is already funded, how much depends on future options and whether a personal guarantee supports the borrowing. A firm with a healthy balance sheet today may look more exposed once contingent federal work is separated from obligated revenue.
This is why the phrase “the government is funded” can be financially misleading. Agency-level funding is not the same as a commitment to a particular business.
What to watch before December 11
The most useful indicators will be practical rather than rhetorical:
- Whether agencies issue new solicitations or postpone them;
- whether contract options and task orders are exercised on schedule;
- whether prime contractors delay subcontract awards;
- whether small firms postpone hiring or equipment purchases;
- whether lenders tighten borrowing terms for contractors with contingent revenue;
- what OMB includes in its November 20 rescission and cancellation list; and
- whether Congress enacts full-year appropriations or another temporary extension before December 11.
Those details will show which companies are actually protected by the continuing resolution and which are merely waiting behind it.
Congress avoided the immediate disruption of an October 1 shutdown. It did not eliminate the underlying uncertainty. A continuing resolution rewards liquidity, existing obligations and diversified customers. It penalizes businesses that must invest before they are paid, particularly small contractors and subcontractors.
The economic consequence is therefore not just that Washington has postponed a budget decision. It has shifted part of the cost of that delay onto private balance sheets. The firms that survive the uncertainty may be the firms with the most cash—not necessarily the firms with the best proposal.
