Tomeka B. Scales, Ph.D.
Director, Media Engagement & Communications
media@pscouncil.org

“Perfect Storm” for Federal Contractors: PSC Sounds the Alarm to End Shutdown Quickly and Pass Continuing Appropriations to Prevent Unnecessary Harm

Resources: Shutdown Fact Sheet | PSC Staff and Companies Available to Comment

Arlington, Va. (October 1, 2025) -- With the federal government officially shut down as of today, the Professional Services Council (PSC) is sounding the alarm on the far-reaching consequences of this shutdown on the federal contracting community, agency missions, and the broader U.S. economy. 

In a letter sent to Congressional leaders last week, PSC CEO James Carroll emphasized that a lapse in federal funding endangers national security, interrupts critical services to the American people, destabilizes the contractor workforce, and inflicts long-term harm on the federal marketplace. 

“Federal agencies are not able to use the capabilities of contracting partners to sustain vital operations in a government shutdown,” said Carroll. “The national security consequences cause unnecessary risk to U.S. citizens both at home and abroad.” 

“The real economic impact is likely much higher than reported, including lost productivity, missed investments, and irreversible program delays,” added PSC President Stephanie Sanok Kostro. “We are facing what I would term a perfect storm.” 

Federal agencies rely heavily on private-sector contractor employees for a range of critical services, such as maintaining national security infrastructure, responding to emergencies, and supporting agency IT modernization. When funding lapses, these vital programs are put on hold, classified and time-sensitive projects are delayed, and fielding cutting-edge solutions becomes nearly impossible. 

“Defense and intelligence operations cannot afford delays or gaps in mission support,” said Steve Harris, PSC Vice President of Defense and Intelligence. “From logistics to systems maintenance, contractors are integral to readiness. Every hour of a shutdown introduces avoidable risk to our national defense posture.” 

Federal contractor employees — numbering over a million across the U.S. — often bear the brunt of shutdowns. Unlike federal employees, most contractors do not receive back pay, even though many are legally barred from working. For small and mid-sized businesses, which form the backbone of the federal contracting base, this can mean devastating cash flow disruptions and workforce losses. 

“The innovation pipeline that fuels federal tech modernization is at serious risk,” said Tim Brennan, PSC Vice President of Technology Policy and Government Relations. “Shutdowns freeze progress on vital IT and cybersecurity initiatives, waste taxpayer dollars, and undermine the government’s ability to attract and retain top technology talent.” 

The economic consequences extend well beyond federal contractors. The 35-day shutdown in 2018–2019 cost the economy an estimated $11 billion, including $3 billion in permanently lost gross domestic product, according to the Congressional Budget Office. Each day of shutdown now adds more inefficiencies and administrative costs, delaying federal investments in infrastructure, healthcare, and digital modernization. 

PSC calls on Congress to end the shutdown without delay by enacting continuing appropriations, restoring operational stability to federal agencies, and protecting the essential public-private partnerships that enable government missions. 

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About PSC
The Professional Services Council (PSC) is the leading trade association and voice of the government contracting industry, representing more than 400 member companies—ranging in size from start-ups to multinational organizations—that support federal agencies through mission-focused services and solutions. Learn more at: www.pscouncil.org.