Contractors’ Rights when the Federal Government Issues a Stop-Work Order

When the federal government issues a stop-work order, contractors must be aware of their rights and responsibilities to navigate the situation effectively. A stop-work order is a directive to halt all or part of the work on a contract, often due to budgetary constraints, changes in project scope, or other administrative reasons. To protect your interests and minimize financial risks, consult with your legal counsel and accounting firm to assess your options and determine the best course of action.

Critical actions following a stop-work order:

• Acknowledging and reviewing the order: Promptly acknowledge receipt in writing to the contracting officer to ensure a clear record of communication. Carefully review the order to understand scope, duration, and any special instructions. Verify that the order complies with the terms of your contract and relevant regulations.

• Communicating with stakeholders: Inform all affected personnel, including subcontractors, suppliers, and relevant employees, about the stop-work order. Direct them to halt any related work immediately. Clear communication helps prevent misunderstandings and promote alignment across the team.

• Safeguarding work in progress: Take steps and precautions to protect materials, tools, and documents to prevent any loss or damage to work that was in progress before the stop-work order was issued. Track and document any costs incurred due to the suspension, including storage fees and labor costs related to demobilization.

• Tracking costs and seeking adjustments: Maintain detailed records of all costs associated with the stop-work order. These records will support your request for an equitable adjustment (REA) to recover additional costs resulting from the suspension. Best practice is to file your REA as soon as you can substantiate your costs and before the contracting officer finalizes funding decisions.

• Staying in communication with the contracting officer: Maintain ongoing communication with the contracting officer. Request clarifications if needed and stay updated on the status of the stop-work order. Should the contracting officer issue instructions to resume work or modify the contract, promptly comply and adjust your operations accordingly.

• Preparing for termination (if applicable): If the stop-work order leads to a termination for convenience (T4C), the contract may be formally ended by the government. In such cases, follow the procedures outlined under FAR Part 49 to prepare a termination settlement proposal, including all allowable costs.

• Seeking legal guidance: Given the complexities and potential financial impacts of a stop-work order, consulting with an attorney who specializes in government contracts is often advisable. Legal guidance can help ensure compliance with all requirements, assist in preparing your REA, and guide you through the termination process if necessary.

The bottom line

Government contractors impacted by the influx of stop-work orders have rights. By understanding and exercising those rights (with the help of legal counsel), contractors can protect their interests while maintaining compliance with federal regulations.

Navigating terminations, claims, and settlement packages can be complex, but you don’t have to do it alone. Aprio’s Government Contracting and Nonprofit teams are here to guide you every step of the way. Whether you need support with claims work, termination settlements, or strategic planning, we’re ready to help.

Connect with an Aprio team member.

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