Federal Funding Freeze: Steps for Short- and Long-Term Success

The funding freeze on federal aid has crippled government contractors by pausing, delaying, and canceling projects. The freeze – and all the uncertainty that’s followed – has left contractors with a major financial and operational crisis by threatening cash flow, workforce stability, and long-term viability.

Steps for navigating the work stoppages amidst uncertainty

1.Conduct a full business impact assessment

Contractors facing potentially long-term work stoppages, especially if multiple contracts are impacted, need a clear picture of the total financial impact. Identify which projects are paused, estimate the revenue loss, and assess how long your business can sustain operations without those funds. Prioritize cost-saving measures that won’t hinder your ability to restart work later.

2. Secure additional funding and liquidity

A single paused contract may feel manageable, but multiple simultaneously paused contracts may require additional short-term financial support. Evaluate existing credit lines, apply for working capital loans, and explore invoice factoring to keep cash flowing. 

3. Keep your workforce engaged

Layoffs can have long-term consequences, making it harder to restart when projects resume. If possible, temporarily shift employees to billable work on other contracts, invest in upskilling, or explore subcontracting opportunities. Consider negotiating reduced hours instead of full layoffs to retain critical talent.

4. Diversify your revenue streams

Relying heavily on a few federal contracts, particularly within one agency, puts your business at risk when disruptions occur. While the federal government reassesses its policy and funding priorities, use this time to explore new revenue sources from commercial work, teaming arrangements with other contractors, state and local government contracts, or other federal agencies.

5. Document all costs for reimbursement claims

Some costs incurred during a stop-work period may be recoverable under the Federal Acquisition Regulation (FAR). To maximize reimbursement, set up a separate project to track all related costs. Keep in mind that costs included in a Request for Equitable Adjustment (REA) must have been both incurred and paid to be eligible for reimbursement. Detailed documentation will be critical when seeking recovery

The bottom line

When contracts are unexpectedly paused, a strategic and tactical response is necessary to navigate the crisis and mitigate lasting impacts. Focus on financial resilience, workforce stability, and diversification to protect your business in the short term and position for long-term success. 

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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