White Paper on NASA Johnson Space Center Shutdown Impacts

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Johnson Space Center

Impact of the Federal Shutdown on Private Industry and the Nation: The NASA-Johnson Space Center Experience: The national discussion about the government shutdown has been focusing on the plight of the federal worker, a legitimate concern. However, with every passing day, the impact on the private sector as a whole is more pronounced.

Specifically, increasing numbers of employees from both large and small businesses are furloughed daily as contracted work ceases due to the shutdown. While the media reports that the federal employees, or civil servants, likely will be held harmless financially, the same is not the case for business. Indeed, the situation is dire.

The broader picture, with potentially more devastating impacts, must include the private sector workforce. This includes those people whose companies have contracts with the federal government and who perform the services necessary to keep the space program aloft and the nation's economy humming. When furloughed, the employees stand to lose everything, and their companies are at risk of bankruptcy. These companies support the nation's space program and are considered an integral part of this "national asset." The potential loss of these skills jeopardizes the ability to sustain this critical national asset.

The NASA-Johnson Space Center (JSC) is a microcosm of what is being played out across the country.

Before the shutdown, JSC had approximately 3,200 federal employees and 11,000 private sector employees supporting its human spaceflight and exploration mission. As a result of the shutdown, JSC is closed, except for 100 federal and a very limited number of contractor employees who support the International Space Station's operations, which have been deemed critical, or in fed-speak 'excepted services.'

For a company, the shutdown means that contract work stops. Employees who work in a federal facility are already home. Employees who work on a contract off JSC property will be furloughed as the respective contracts run out of money.

That means about 20% of the 11,000 private sector company employees are furloughed now. About 60% will be furloughed by mid October. Over 90% will be furloughed by November 1.

If the shutdown continues, an additional 10,000 people will not have a paycheck. Dozens of companies will have been severely weakened, and an entire support community of small service businesses will be damaged as their customer base erodes. These businesses include, but are not limited to, small disadvantaged businesses, women-owned and service disabled businesses.

The short-term harm to workers and their families is incalculable. The longer-term harm to the companies is just beginning to be understood.

For example, while federal workers will reportedly be paid for their furloughed time, private sector employees are not eligible for what is being called a 'paid federal vacation.' The private sector workers might continue to be paid on furlough if they use their accumulated personal time or accumulated vacation time. This tactic helps for a while, but those funds will soon lapse. Importantly, companies continue to pay people for their accrued time, plus benefits, plus unemployment insurance and all the rest of their indirect costs, regardless of how long the shutdown persists and for as long as the person is employed by the company.

The companies have no way to recoup those mounting costs. At some point, the company has to make a decision about whether to lay people off rather than sustain furlough costs, and this scenario creates obvious new problems for the companies.

Further, when NASA shut its doors, it stopped paying its bills. Thus, companies will not receive critical funds needed to pay people for work they have done, nor will they have the ability to recover the costs for any additional expenses incurred performing their required tasks.

It gets worse. For companies, especially smaller ones, the shutdown creates a cash flow problem, with continuing expenses, with no revenues, and with commitments to rigid contracts that specify what is to be done and when. The companies' management must go back to their banks seeking funding to carry them through the crisis, further weakening their positions.

An additional concern is the loss of institutional knowledge. Employees who decide to apply for unemployment benefits will be required to interview for new jobs. Some will receive offers, leave the aerospace industry, and add to the corporate and government woes as talent leaves and critical manpower gaps open.

In the past, government policy shifts or natural disasters like hurricanes resulted in dramatic impacts on the private sector. In this man-made disaster, there are no recovery funds, as we saw after Hurricane Ike, and there are no layoffs that effectively stop the cash outflow, as we witnessed when the Shuttle program ended.

The present shutdown means that a company continues to hemorrhage dollars with no way to recover them. Added to the misery is the fact that schedules for contracted services are rendered meaningless, and costs to the government will rise in the long run.

In technical, complicated programs like NASA's, recovery from disrupted work is difficult, to say the least.

For the NASA community, the shutdown price is quite high. The impact to the business community will be irreversible.

If the shutdown does not end immediately, then there are at least seven things that can be done to help the private sector workers and the companies survive the shutdown:

1. Extend the same benefits to employees on existing government contracts as have been extended to federal workers;

2. Open the NASA Shared Services Center, NASA's procurement office, to allow invoices to be paid;

3. Assure companies and workers that contracts can be renegotiated to account for the impact of the shutdown;

4. Allow procurement teams to return to work to provide additional/long-term funding to existing contracts to allow contractor employees to continue to work;

5. Allow and encourage agencies to define "excepted services" in a reasonable manner (e.g., in NASA's case, that might mean to honor international agreements, to maintain launch schedules, and to maintain critical national services like weather and communications satellite development and deployment);

6. Invoke a 'common sense' provision to allow companies that have leased government facilities to continue to use those facilities. One example is a current private company that leases space from JSC but has been denied access to its space to work. The private company is expected to honor its commitments, while the federal government is not expected to respect its obligations, even though no additional costs are being incurred.

A second example relates to information technology services. Employees who are required to perform work on federal contracts away from government facilities ought to have access to the servers needed to actually do the job. They do not, again contributing to waste, inefficiencies, and lost productivity; and

7. Honor existing contracts and make the contracting company whole, meaning, among many things, that a federal agency cannot pick and choose what is an excepted service. Rather, provide clear guidelines to define how our nation's space program priorities and commitments will be addressed.

The private sector impact of the shutdown is real and profound, especially to the aerospace industry and NASA-JSC. Coming on the heels of the significant downsizing due to the end of the Space Shuttle program and the Constellation initiative, a protracted disruption hurts the dedicated men and women of this vital industry, the companies for which they work, and the communities they call home.

Bob Mitchell
President
Bay Area Houston Economic Partnership
www.bayareahouston.com
bob -at - bayareahouston.com
832.536.3255

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