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Congress is about to pass a stopgap spending bill. That’ll cost taxpayers.

When federal agencies have to put off spending decisions until the last minute, they are forced to take shortcuts

- September 30, 2021

Congress and the president are on the verge of enacting a stopgap bill to temporarily fund the federal government for the fiscal year that begins Friday. By putting off any major decisions, such “continuing resolutions” (or CRs) buy Congress time to reach bipartisan agreement on funding for both defense and domestic programs for the full fiscal year.

CRs are popular with lawmakers, who have deployed them every year but four since 1976. But CRs can be costly for federal agencies, especially when they cover government operations deep into a new fiscal year.

What exactly is a CR?

CRs provide stopgap funding for federal programs when Congress and the president do not enact any or all of the dozen appropriations bills that typically fund government programs for a full fiscal year. Because government offices must shut down if Congress and the president do not enact funding by the start of each fiscal year, Oct. 1, lawmakers turn to CRs to temporary keep the lights on.

CRs vary by breadth, depending on how many appropriations bills Congress has not completed by Oct. 1. That means some CRs cover all of the government’s so-called discretionary spending, while others provide funding for just a few departments or agencies.

CRs also vary by duration. Sometimes Congress provides funding for just a few days while lawmakers sew up loose ends on the annual spending bills. Other times, CRs provide funding for weeks, months or even a full fiscal year.

In many years, Congress needs to pass several CRs for each appropriation bill, because a CR may end before the Congress has agreed on the appropriations. Between 1998 and 2019, Congressional Research Service reported, Congress enacted 117 CRs, averaging about six per fiscal year and lasting about five months into the new fiscal year.

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But CRs keep agencies from planning and create a ‘use-it-or-lose-it’ attitude

CRs have some down sides. First, funding by CR means that agencies can extend only projects that existed during the prior fiscal year. Until agencies have a new regular appropriation from Congress, they cannot start new projects and must defer hiring and training employees.

Second, operating under a CR precludes agencies from awarding new federal contracts to carry out federal programs. Given that the federal government spends about $550 billion each year on contracts (or almost 9 percent of the entire federal budget), CRs force agencies into holding patterns.

What’s more, once an agency secures its annual funding, the rush is on to spend the funds before the end of the fiscal year, when unspent funds must be returned to the Treasury. Preparing a request for proposals and awarding contracts is time consuming. And that means agencies often take short cuts in deciding where and how to spend their funding to avoid allowing appropriations to go unspent.

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CRs encourage shortcuts and increase government costs

The stopgap nature of CRs changes the way agencies advance federal contracts. In my research, I focused on two types of contracting shortcuts: sole-source and cost-reimbursement contracts. Both can be costly for agencies.

Sole-source contracts allow agencies to skip the stage of vetting multiple bids. However, because there is no competition, an agency may pay more for the contracted services. Cost-reimbursement contracts, unlike fixed-price contracts, compensate the vendor for costs incurred, thereby potentially encouraging cost overruns. Still, they are simpler to write because they do not require bids that estimate costs in advance.

I found that for agencies that rely on discretionary funding, meaning that Congress provides new spending each year, the longer the period covered by CRs, the more likely the agency issued a sole-source contract. For example, agencies funded by CRs lasting for six months — meaning that they did not know their final appropriation until half the fiscal year was gone — were one-third more likely to issue sole-source contracts over the course of the year than agencies financed with CRs that lasted only two weeks into the fiscal year.

Agency reliance on cost-reimbursement contracts follows a similar pattern. Agencies are nearly twice as likely to issue these costlier contracts when covered by CRs lasting six months compared to CRs that last only the first two weeks of the fiscal year.

Automatic CRs would make matters worse

Lawmakers have proposed a variety of revisions to improve the appropriations process, including how to avoid government shutdowns, which is what happens when an agency’s appropriation bill has not been passed in time.

Observers frequently suggest that whenever there’s a lapse in appropriations, a continuing resolution should automatically go into effect, without Congress needing to take any action at all. Many congressional leaders, including Sens. Rob Portman (R-Ohio), Mark R. Warner (D-Va.), James Lankford (R-Okla.), and Rand Paul (R-Ky.), support these sorts of proposals.

Automatic CRs would prevent government shutdowns. But they would do little to alleviate agencies’ problems when operating under CRs. In fact, if automatic CRs make Congress’s reliance on CRs even more likely, federal agency contracting would likely become even less efficient — while costing taxpayers even more.

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Stuart Kasdin is a member of the Goleta City Council and teaches at Santa Barbara City College.