How do continuing resolutions legally affect federal contracting and grant awards for agencies covered by the CR?
Executive summary
A continuing resolution (CR) legally freezes most funding actions at prior-year levels and constrains agencies from creating “new starts,” which in practice limits the initiation of new contracts and grant awards and delays modifications to existing instruments for programs covered by the CR [1] [2]. Agencies therefore often postpone new awards, shift to shorter or stop-gap procurement strategies, and face legal and operational limits under the Antideficiency Act and CR-specific language until full appropriations are enacted [3] [4].
1. What a CR legally does to funding and why that matters for awards
By design a CR provides interim funding for covered accounts—generally at the prior fiscal year level or following specified statutory directions—so agencies lack an enacted, full-year appropriation authorizing new obligations beyond those explicitly permitted; CRS explains that CRs “prohibit an agency from taking most actions that would initiate new obligations or ‘new starts’,” thereby limiting grants and contracts that would require fresh year-one funds [1] [2]. The CR’s legal text and accompanying CR guidance therefore operate as a ceiling and a procedural brake: without a specific appropriation line for a new award, obligating funds for a new contract or grant risks violating the Antideficiency Act or the CR’s terms [3] [1].
2. Practical contracting behaviors driven by legal constraints
Faced with the CR’s prohibitions, agencies frequently delay new solicitations, pause advisory panels or review meetings, or rely on existing instruments and options rather than launching competitions—outcomes documented in government analyses and industry advisories warning of potential award delays and modifications [5] [4]. Academic and market analyses find that CRs correlate with increased use of sole-source or cost-reimbursement vehicles and rushes to obligate funds once full-year appropriations are available, behaviors that both stem from legal constraints and produce procurement risks like reduced competition and higher administrative churn [4] [6].
3. How CRs affect grants from pre-award to post-award
CRs influence every phase of the grant lifecycle: pre-award advisory or peer-review panels can be frozen, award decisions delayed because the CR treats many grants as “new starts,” and existing multi-year grant activities can be held to prorated or restricted obligational rates tied to the CR’s terms [1] [7]. The Library of Congress and other government reporting stress that while some grantees may continue under forward funding or specific statutory exceptions, many state and local recipients see timing and cash-flow disruptions because federal fiscal calendars and state fiscal years are often misaligned [7] [1].
4. Exceptions, reimbursements, and agency discretion
CRs are not absolute halts: statutory language often carves out exceptions—such as continuing certain mandatory programs or authorizing agencies to reimburse grantees for allowable costs incurred during a funding gap—and agencies retain limited discretion to manage existing awards within the CR’s constraints [3] [1]. In addition, some CRs include specific provisions requiring agency notifications to appropriations committees before terminating or altering grants or contracts over certain dollar thresholds, a transparency measure that appeared in recent legislation requiring USDA notice for awards exceeding $1 million [8].
5. Downstream legal and operational risks for contractors and grantees
Legal limits under a CR create knock-on risks: delays in award notifications, frozen advisory bodies, and programmatic uncertainty can prompt agencies to terminate or cancel awards in ways that are legally fraught—recent shutdown-era actions illustrate how terminations can occur even when legally unnecessary, exposing recipients to abrupt losses and litigation risk [9] [1]. Observers and law firms advise contractors and grantees to expect delays, prepare for interrupted cash flow, and watch for agency-specific CR guidance because execution strategies differ by department and by the exact wording of the continuing resolution [5] [9].
6. Competing perspectives and implications for planning
Supporters of CRs argue they prevent shutdowns while preserving fiscal oversight and cap spending at known levels; critics counter that repeated or long CRs institutionalize uncertainty that encourages riskier, less-competitive contracting and disrupts grant-driven services [3] [4]. Practically, legal constraints in a CR push both vendors and grantees toward contingency planning—expecting delays, conserving cash, and monitoring committee notices and agency guidance until regular appropriations replace the CR [5] [8].