A federal Stop-Work Order (SWO) is a directive from the federal government requiring a contractor to temporarily halt work.

How does it affect my business?

1. Immediate Halt in Operations: When a stop-work order is issued from DOGE or another government entity, all work on the project must cease immediately. This can lead to delays, disruptions, and even dismissal of employees or closure of operations altogether.
2. Financial Impact: The halt in operations can result in financial losses due to idle labor and equipment, as well as potential penalties for not meeting project deadlines. Additionally, there may be costs associated with resolving the issues that led to the stop-work order.
3. Compliance and Documentation: Federal contractors, nonprofits, and businesses must ensure they comply with the terms of the stop-work order and take all reasonable steps to minimize the incurrence of costs during the period of work stoppage. Detailed records of costs incurred up to the stop date, including labor, travel, and other direct costs, should be maintained.
4. Potential for Termination: A stop-work order can be a precursor to a termination for convenience (T4C) or default. If the issues are not resolved, the contract may be terminated, leading to further financial and operational impacts.
5. Cost Recovery Strategies: Businesses may be able to recover certain costs incurred during the stop-work period, such as demobilization costs, legal fees, and other allowable costs under federal contract rules. It is critical to understand what costs are recoverable and to document them properly.
6. Legal and Professional Assistance: Engaging with Aprio can help navigate the complexities of stop-work orders, ensuring compliance with federal regulations and maximizing cost recovery.

As a government contractor who received a stop-work order related to DEI, DEIA, or any other matter, you have the right to:

• Request clarification on the scope and duration of the stop-work order.
• Seek equitable adjustments (Request for Equitable Adjustment) for increased costs due to delays.
• Recover allowable costs incurred as a direct result of the stop-work order. Fee likely will not be included.
• Resume work upon authorization without penalty.

Upon receiving a stop-work order, government contractors should:

1. Review the SWO carefully to understand its scope and duration.
2. Notify subcontractors and suppliers to halt affected activities.
3. Assess financial impacts and begin documenting costs for a potential Request for Equitable Adjustment (REA).
4. Engage with the contracting officer for clarification and guidance on next steps.
5. Monitor the situation and prepare to resume work promptly when the stop-work order is lifted.
6. Consult legal counsel and Government Contracting CPAs, like Aprio, to ensure compliance, prepare documentation, and efficiently navigate next steps.

Yes. Certain costs can be recovered after a federal contract is canceled, and a settlement proposal is key in that. These include demobilization costs, legal fees, direct and indirect costs, severance costs, and lease agreement expenses. It's essential to maintain detailed records and seek professional assistance to maximize recoverable costs while ensuring compliance with federal regulations.

A Request for Equitable Adjustment (REA) arises from a stop-work order or another government action that changes contract terms. A REA seeks compensation for additional costs, but is considered a request rather than a formal claim.

A Termination can occur for either Convenience or Default. Both types of terminations follow specific FAR clauses and settlement procedures:

• A Termination for Convenience, or T4C, occurs when the federal government cancels a contract not due to contractor fault, but because it no longer needs the work or the funding is unavailable.
• A Termination for Default, or T4D, happens when the federal government cancels a contract due to contractor performance issues.

A claim represents a formal demand for payment under the Contract Disputes Act (CDA). Claims can arise from a REA or an unresolved termination settlement. Claims can be pursued through contracting officers, boards of contract appeals, or federal courts.

Cost recovery for government contractors vary based on the type of claim, but generally include:

• Direct labor costs for work performed before the claim event.
• Severance and retention costs if termination leads to layoffs.
• Work stoppage expenses, such as lease break fees or restocking fees.
• Unrecoverable materials, supplies or services, purchased in good faith.
• Legal and accounting fees for claim preparation (where allowable).
• Overhead and administrative costs impacted by the claim event.

Nonprofits can take several steps to protect themselves from the impact of government funding freezes. First, diversifying funding sources is vital. By not relying solely on grants, nonprofits can ensure a more stable financial foundation. This can include seeking donations from individuals, corporate sponsorships, and other forms of fundraising.

Maintaining a reserve fund is another important strategy. Having a financial cushion can help nonprofits manage cash flow during periods of funding uncertainty. It's also essential to stay compliant with all grant requirements and maintain good relationships with grantors. Regular communication with grantors can provide early warnings about potential funding changes and allow nonprofits to prepare accordingly.

Additionally, having a contingency plan in place is imperative. This plan should outline steps to take in the event of a funding freeze, such as prioritizing essential services, reducing expenses, and identifying alternative funding sources. Nonprofits should also regularly review and update their contingency plans to ensure they remain effective.

Deadline parameters vary depending on the type of action.

• REA: There is no specific FAR-mandated deadline, but contract terms or modifications may include time limits (often 30 to 90 days). It is best practice to submit a REA as soon as possible after identifying cost impacts, as delays can weaken your case. Some contracting officers require prompt notification, so contracts should be checked for deadlines.
• Termination for Convenience (T4C): A Termination Settlement Proposal (TSP) must be submitted by a government contractor within one year of the termination notice, per FAR 49.206-1. The deadline may be extended if the contracting officer approves an extension in writing. In a Termination for Default, there is no standard deadline, but federal contractors must act quickly to mitigate losses and prepare for potential appeals.
• Claim: Under the Contract Disputes Act (CDA), contracting officers may set deadlines for claim submissions, often within 30 to 90 days, of an event that causes increased costs. Federal contractors must file a formal claim within six years from when the claim arose, per the CDA statute of limitations. If the claim exceeds $100,000, the contractor must certify it when submitting it to the contracting officer. If the contracting officer fails to respond within 60 days, the claim may be deemed denied, allowing the contractor to appeal.

It is critical to review contracts for specific deadlines and notify contracting officers as soon as possible about potential cost impacts. Engaging Government Contracting accounting professionals and legal counsel early can help ensure compliance and cost recovery for government contractors.