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Navigating Government Contract Terminations: Essential Steps

Here are tips on how you should manage a stop-work or termination notice from the government:

Recommended Actions

1. Keep Detailed Records. Ensure you thoroughly document your costs, specifying exactly when and under which contract provisions they were incurred.
2. Communicate Early and Often with Government Representatives. Keep your Contracting Officer (CO), Contracting Officer’s Technical Representative (COTR), and program representatives consistently informed about project status, government-caused delays, incurred costs and your efforts to minimize impacts.
3. Document Cost-Saving Efforts. Use email to detail all actions taken to minimize costs and avoid unnecessary expenses, ensuring a verifiable record.
4. Request Contract Modifications. Address unavoidable costs by regularly requesting that your CO issue contract modifications, equitable adjustments or other instruments to cover those expenses.
5. Prioritize Tasks. Work with your CO to identify what costs will be allowable and which essential personnel and tasks must continue at the government’s expense. Non-essential tasks should be paused, and the contract adjusted proportionately in its scope, timeline and deliverables.
6. Follow Up Proactively. Anticipate delays or initial unresponsiveness from government representatives. Use multiple channels—emails and phone calls—to follow up consistently.
7. Track Communication. Send emails with delivery and read receipts to maintain proof of communication.
8. Reference Relevant FAR Provisions. Strengthen your requests by quoting applicable Federal Acquisition Regulation (FAR) clauses.
9. Time is of the Essence. File claim soonest within 90 days.
10. Seek Support. Get legal and accounting guidance.

Key FAR Clauses to Reference

Be familiar with the following FAR clauses and identify their applicability in your contracts or similar provisions.

• FAR Part 52.232 (Availability and Limitation of Funds):
  • 52.232-18: Availability of Funds
  • 52.232-19: Availability of Funds for the Next Fiscal Year
  • 52.232-20: Limitation of Cost
  • 52.232-22: Limitation of Funds
• FAR Part 52.242 (Suspension and Delay of Work):
  • 52.242-14: Suspension of Work
  • 52.242-15: Stop-Work Order
  • 52.242-17: Government Delay of Work
• FAR Part 52.243 (Changes to Contracts):
• FAR Part 249 (Termination for the Government’s Convenience based on the type of contract)

The Bigger Picture

1. Government’s Discretion in Contracts. The federal government retains broad discretion to fund, administer and terminate contracts. While pursuing non-contract remedies is an option, they are unlikely to result in reinstating terminated contracts in this environment. (See #4 below for more on this) Instead, focusing on established contract procedures is the more practical path to compensation for past work, costs and deliverables.
2. Focus on Your Contract Terms. The broader funding or operational situation may shift multiple times, but your priority should remain on adhering to and leveraging the specific terms in your contract.
3. Contracts Subject to Funding. Most contracts depend on the “availability of funds” clause and are terminable at will by the government. Current conditions are akin to those experienced during a Government Shutdown, which may be impending.
4. Legal Challenges and Cost Constraints. While litigation or agency protests are conceivable, they are often cost-prohibitive and carry a low probability of success given the government’s broad discretion in terminating contracts. Small to medium-sized businesses generally lack the financial resources for such actions and may benefit from aligning with larger organizations pursuing legal recourse.

By focusing on pragmatic actions and leveraging contractual mechanisms, contractors can best position themselves to protect their interests and secure appropriate compensation amid challenging circumstances.

For further guidance and support, we encourage you to connect with the Shulman Rogers attorney with whom you normally work or contact Mark Maier in our Government Contracts practice.

CONTACT

Mark Maier

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The contents of this Alert are for informational purposes only and do not constitute legal advice. If you have any questions about this Alert, please contact the Shulman Rogers attorney with whom you regularly work or one of the attorneys listed above.

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