Federal Stop-Work Orders: Key Decisions Contractors Must Make Now

In the wake of recent executive actions by the Trump administration, federal contractors are encountering an increase in stop-work orders and pauses in federal grants. These developments necessitate prompt and strategic decision-making to mitigate potential disruptions.

Key developments

• January 27, 2025: The Office of Management and Budget (OMB) issued Memorandum M-25-13, directing federal agencies to temporarily pause all activities related to the obligation or disbursement of federal financial assistance implicated by recent executive orders, effective January 28, 2025,at 5:00 PM
• January 28, 2025: A judge issued a temporary stay on the funding freeze; other lawsuits and federal court orders have followed 
• January 29, 2025: The OMB rescinded Memorandum M-25-13
• January 31, 2025: U.S. District Judge John J. McConnell Jr. Issued a temporary restraining order blocking the Trump administration’s federal aid freeze in 22 states and the District of Columbia, citing potential constitutional violations.
• February 7, 2025: Nineteen state attorneys general filed a lawsuit against President Trump and the Treasury Department, challenging the actions of the Department of Government Efficiency (DOGE) within the Bureau of the Fiscal Service.
• February 8, 2025: U.S. District Judge Paul A. Engelmayer issued a preliminary injunction barring DOGE members from accessing Treasury data and ordered the deletion of any unauthorized copies. 
• February 10, 2025: Judge McConnel found that the administration had not fully complied with the previous order and directed and immediate restoration of the frozen funds until a ruling is made.

Immediate Actions for Contractors

1. Review contractual obligations: Carefully examine the terms of your contracts to understand the implications of a stop-work order. Identify clauses related to suspension, termination, and payment to assess your rights and responsibilities.
2. Maintain open communication: Engage proactively with contracting officers to seek clarity on the duration and scope of the work pause. Transparent communication can aid in managing expectations and planning for resumption.
3. Document all activities: Keep detailed records of work performed up to the issuance of the stop-work order, including incurred costs and resource allocations. This documentation is crucial for potential claims or negotiations. 

Strategic Considerations

• Resource allocation: Evaluate the possibility of reallocating resources to other active projects to optimize productivity during the suspension period.
• Financial planning: Assess the financial impact of the work stoppage, including cash flow implications, and explore options such as adjusting budgets or seeking alternative funding sources.
• Legal consultations: Consult with legal counsel experienced in government contracts to navigate compliance issues and to prepare for potential disputes arising from the stop-work order.

The bottom line 

As the administration reassesses funding priorities, contractors should stay informed about policy developments and be prepared to adapt to changes that may impact operations. By taking proactive steps, contractors can better manage the challenges posed by stop-work orders and position themselves for a smoother transition when work resumes. 

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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