Continuing Costs: The Impact of Continuing Resolutions on Federal Contracting

• DOI: 10.1177/02750740211010347
• Published date: 01 September 2021
• Date: 01 September 2021
• Subject Matter: Articles

https://doi.org/10.1177/02750740211010347

American Review of Public Administration

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DOI: 10.1177/02750740211010347

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Article

The implementation of new public programs sometimes

results in surprising unintended consequences. For example,

Courty and Marschke (2003) found that the Job Training

Partnership Act inadvertently encouraged local centers to

focus on those trainees most likely to succeed, called “cream

skimming,” and to avoid those who required greater invest-

ment in time and training, but whose need is greater.

Similarly, in a study of the federal educational law, No Child

Left Behind, Figlio and Getzler (2002) found that in response

to the new legislation, schools classified more students as

disabled, thereby removing them from the school’s test score

average. And Lueck and Michael (2003) found that when

landowners perceived that their property was turning into the

type of habitat that might attract a nesting pair of endangered

red-cockaded woodpeckers, they preemptively cut down the

trees to avoid the potential regulatory burden that the

Endangered Species Act might otherwise impose.

This article examines a different unintended consequence,

based on Congress’ use of “continuing resolutions.” To avoid

government shutdowns when an appropriation bill has not

yet been passed by the beginning of the new fiscal year, typi-

cally Congress passes a continuing resolution (CR), which

provides short-term financing to fund the agencies’ ongoing

operations. In all but three of the past 30 years, Congress has

funded at least one appropriation bill using a CR until it

passed final appropriation bills. Some observers have now

conceded that “CRs are already a common, necessary part of

the budget process” (Lowrey, 2019).

One area in which to understand the impacts of CRs is

how they affect government contracting. Contracting is

restricted while the CR is in place, and when the CR does

end, agencies, whose funding expires at the end of the fiscal

year, face an increased urgency to finalize the awarding of

contracts and thereby obligate their funding. We hypothesize

that as CRs get longer, agencies are encouraged to use con-

tracting processes or designs in which there is an increased

risk of overspending that occurs when contracts are awarded

without the benefit of competition (commonly known as―no-

bid contracts), and . . . the risk of wasteful spending that occurs

when agencies pay for expenses as incurred (cost-reimbursement

contracts) rather than setting a fixed price upfront for the

delivery of a completed product or service (U.S. Office of

Management and Budget [OMB], 2010)

The article is organized by first discussing the impacts of

CRs on agency operations. We then examine contracting and

its impacts of CRs, both in terms of the level of competition

used for the bidding process and in the pricing design. Using

logistic regression, we test whether the length of the CRs in a

research-article2021

1City of Goleta, CA, USA

Corresponding Author:

Stuart Roy Kasdin, City of Goleta, 130 Cremona Drive, Suite B, Goleta,

CA 93117, USA.

Email: skasdin1@yahoo.com

Continuing Costs: The Impact of Continuing

Resolutions on Federal Contracting

Stuart Roy Kasdin1

Abstract

Are there unintended consequences from Congress’ use of continuing resolutions (CRs), which are designed as short-

term funding to bridge the period before regular appropriations are completed? During a CR, agencies are restricted in

their ability to issue contracts, and after the CR ends, agencies may rush to complete their contracting before the fiscal

year ends. To expedite contracting, we hypothesize that CRs encourage agencies to use sole-source contracts, rather

than on a competitive basis, as well as to use cost-reimbursement contract designs, rather than fixed-price contracts.

The Obama Administration found that these contracting practices result in “wasted taxpayer resources, poor contractor

performance, and inadequate accountability for results . . .” We anticipate that the longer a CR is in effect, the greater the

incentive to use sole-source contracts and cost-reimbursement contract designs. There are implications both for future

attempts at contracting reforms, as well as for efforts to establish automatic CRs.

Keywords

continuing resolutions, federal contracting, wasteful spending, sole source contracts, Congressional appropriations

2021, Vol. 51(7) 542–559

year—i.e., how long before the regular appropriation bill is

enacted—affects the likelihood that agencies will opt for

sole-source contracts or cost-reimbursement contract designs.

To enhance our ability to make more causal judgments,

we selected agencies affected in different ways by the CRs.

Those most likely to be significantly affected by CRs are

those that require annual appropriations to function, in which

any unspent funds are returned to the Treasury at the end of

the fiscal year. In contrast, those agencies using mandatory

funds (direct spending) and those that also operate using dis-

cretionary funds, but which can carry over unspent funds for

use in the next fiscal year, are less affected by the terms of

the CR and the need to “use it or lose it.” We consider

whether agencies that rely on different types of funding

equally choose sole-source and cost-reimbursement contract,

as the CR length grows.

While the costs to contractors from having to delay their

projects or redo proposals may be extensive (Bur, 2018), the

estimates of the costs of CRs remain largely anecdotal. This

article provides empirical evidence of the negative conse-

quences of CRs on contract choices. We find that the use of

CRs affects different types of agencies as predicted, and the

effect on agencies relying on discretionary spending was

accentuated the longer CRs were in effect. We also get a bet-

ter window into the determinants for the choice for contract

design and the awarding process. There are implications for

Administrations seeking to reform contracting procedures,

as well as for Congress as it assesses whether to establish

CRs as an automatic part of the appropriation process.

CRs

When an agency’s appropriation bill has not been passed, the

agency must cease operation of any unfunded programs

(Streeter, 2011). When Congress has not completed an annual

appropriation bill, it can resort to a continuing appropriation

act or CR, which provides short-term financing to fund ongo-

ing operations (White, 1988). Since 1976, in all but 40 years

(1977, 1989, 1995, 1997), Congress has funded at least one

appropriation bill using a CR (Brass, 2012; Government

Accountability Office [GAO], 2018; Saturno & Tollestrup,

2016). Because in many years, Congress needs to pass mul-

tiple CRs for each appropriation bill, between 1998 and 2018

alone, Congress enacted 113 CRs, averaging about six per

fiscal year, providing funding for almost 5 months (GAO,

2018; Saturno & Tollestrup, 2016). Figure 1 shows the aver-

age CR time across different appropriation subcommittees

before the final appropriation action (whether a regular

appropriation bill, omnibus, or a full-year CR) for the period

of 2007 to 2018.

The purpose behind a CR is to hold off policy decisions

until Congress can finalize a regular appropriation bill. CRs

are intended to be an interim measure, based on last year’s

funding or the lower of House and Senate passed spending

levels (Brass, 2012; Tollestrup, 2014). While the CRs enable

agencies to function, they also impose restrictions on agency

operations to preserve Congress’ flexibility in the regular

appropriation bill that follows. These restrictions include

requiring agencies to delay hiring, limit the issuing of new

contracts or renewal of old ones, and restrict the awarding of

new grants. CRs impose limits on agencies’ procurement and

capital purchases, and restrict new project starts (Brass,

2012). Agencies are therefore forced to place operations in a

holding pattern until the regular annual appropriations

become available (GAO, 2013; Joyce, 2012). Agencies also

face uncertainty about their level of funding for the fiscal

year and when they will have it. This uncertainty makes proj-

ect, procurement, and maintenance planning more difficult

Figure 1. Average length of annual continuing resolutions.

543

Kasdin