Would a shutdown of the Federal Government violate the Contracts Clause?

April 7th, 2011

Yes, I realize that the text of the Contracts Clause (Art I, s. 10) only applies to the states, but the Courts have construed the Due Process Clause of the 5th Amendment to embody a less searching protection against federal interference with contracts.

According to this memo released from OPM, certain types of contracts, that were awarded before the shut-down, may not be paid during a shutdown. Specifically, there would be no federal employees to pay the contractors.

Q9: In the case of a contract or grant that has been previously awarded (and thus for which available funds were obligated), can Federal employees be excepted from furlough in order to make timely payments to the contractor or grantee in accordance with the contract or grant?

A9: No – except in very limited circumstances. (and a bunch of circumstances that deal with situations involving emergency type functions).

So in other words, federal agencies may stop paying willing contractors during the pendency of a shutdown. Contracts clause violation?

Would some kind of Blaisdell emergency analysis apply, such that the Feds can abrogate contracts due to the exigencies of a shutdown? I doubt this issue would ever be litigated, but perhaps some disgruntled contractor may bring suit if they aren’t paid.