As of October 1, 2025, the federal government has entered a shutdown following Congress’s failure to pass a funding agreement. While some essential services remain operational, the effects are already being felt across the construction industry, including commercial contracting work tied to federal projects, permitting, workforce programs, and small business financing.
The impact for contractors depends on the length of the shutdown and the type of projects or services connected to federal agencies. Here’s a breakdown of what’s happening and what you should be watching.
Federal Construction Projects May Pause
When a shutdown occurs, many federally funded construction projects are put on hold, even if funds have already been allocated. Federal contract officers and oversight staff are often furloughed during a shutdown, which means projects may be paused due to lack of required supervision or approvals.
This affects a range of commercial work, including military facilities, federal buildings, and infrastructure tied to federal agencies.
If you're working under a government contract, it’s important to review project timelines, contact your contracting officer, and understand what “stop-work” clauses may apply.
Delays in Permitting and Approvals
Many commercial projects depend on permits, inspections, or environmental reviews from federal agencies such as the Environmental Protection Agency (EPA) or the Department of the Interior. During a shutdown, these agencies typically operate with reduced staff. This can lead to slower permit processing, delayed approvals, and bottlenecks that affect both new and ongoing construction jobs.
Projects that require federal input to move forward should expect delays until normal agency operations resume.
Payments and Invoicing for Federal Work
Contractors performing work under federal contracts may see delays in receiving payments. Although some contracts may remain funded, shutdowns reduce staffing levels at federal payment offices. This slows down invoice processing, even for work that’s already completed.
For firms relying on timely payments to manage payroll, materials, or subcontractors, this can create short-term cash flow challenges.
SBA Loans and Workforce Programs on Hold
During a shutdown, the Small Business Administration (SBA) usually pauses approval of new loans. Contractors relying on SBA loans for working capital or expansion will need to wait until the shutdown ends to access those funds.
Additionally, federal workforce development initiatives, including apprenticeship grants and training programs, may also be paused. This can affect hiring pipelines or training partnerships that depend on federal funding.
Regulatory Activity Paused
Any pending regulatory actions, including those related to energy efficiency standards or equipment rulemaking, are generally paused during a shutdown. Contractors monitoring federal updates for compliance or planning purposes should anticipate delays in new rules or guidance until agencies resume normal operations.
Lack of Economic Data
Government agencies also pause the release of key economic reports during shutdowns. This includes data on construction spending, job openings, materials prices, and unemployment. Without these updates, industry forecasts and market trend visibility become limited, especially for firms using government reports to guide business planning or bidding strategies.
Local and State Projects May Also Slow
Some state and municipal construction projects rely on blended funding sources, including federal dollars. During a shutdown, uncertainty or delays in federal funding can lead to local agencies pressing pause on upcoming bids or slowing the start of new projects. This can create ripple effects for contractors who depend on steady public sector work.
Steps Contractors Can Take Now
If your company is involved with federal work or services, these steps can help minimize disruptions:
- Reach out to contracting officers to clarify how the shutdown affects each contract.
- Submit any outstanding invoices as soon as possible to get ahead of backlogs.
- Review contracts for stop-work clauses or payment delay provisions.
- Monitor cash flow and consider temporary adjustments to manage delays.
- Communicate with clients about potential delays tied to permits, inspections, or federal rebates.
- Track updates from trade associations or agency websites for any changes to contingency plans. (ABC has compiled contingency plan links for several federal agencies that contractors may work with)
Outlook
While the duration of the current shutdown is still uncertain, past experience shows that most construction-related disruptions are temporary. Once operations resume, payments restart, and project timelines typically recover.
Still, if you’re working near or within federal programs, you should stay informed and ready to adapt. Communication with customers, suppliers, and project stakeholders is key to staying ahead of delays and keeping jobs on track.
