Navigating the Impact of Stop Work Orders Issued with Executive Order to Federal Contractors and Implementing Partners

Introduction
President Trump’s Executive Order (EO) “Reevaluating and Realigning United States Foreign Aid,” issued on January 20, 2025, has introduced significant changes to the landscape of federal contracts and assistance awards, particularly for those involved in Department of State and US Agency for International Development (USAID)-funded programs. In this post, we explore implications of this executive order, focusing on the impact of stop work orders on contractors and implementing partners; and the necessary preparations and actions to mitigate potential disruptions and business continuity impacts.
Stop Work Orders
Impact of Stop Work Orders
The issuance of stop work orders under the EO will have profound effects on federal contractors and implementing partners. A stop work order requires an immediate halt to the work specified in the respective contract or grant, leading to potential delays, increased costs, and operational disruptions. Contractors must comply with the order and take steps to minimize costs during the stoppage period.
Rights of Contractors and Implementing Partners
Contractors and implementing partners working on USAID-funded programs have specific rights under federal regulations. These include the right to an equitable adjustment for increased costs resulting from a stop work order. Additionally, contractors can submit claims for costs incurred due to the impacts caused by government stop work orders.
Actions Post-Receipt of Stop Work Orders
Once stop work orders/suspension orders are received, contractors and implementing partners should:
- Review contracts and grants: Ensure that all contract/grant clauses related to stop work orders, suspensions, and terminations are well understood.
- Document progress: Maintain up-to-date records of project technical progress, costs, key employees, and communications both prior to and after the stop work order date to support future claims.
- Develop contingency plans: Create scenario plans to address potential work stoppages, including strategies for reallocating resources and managing subcontractors.
Government Actions
Upon issuing a stop work order, the government will:
- Provide detailed instructions: The order will include a description of the work to be suspended, instructions for handling materials and services, and guidance on subcontractor actions.
- Engage in discussions: Contracting officers will discuss the order with contractors to address concerns and modify the order if necessary.
- Decide on further actions: The government may terminate the contract, cancel the stop work order, or extend the stoppage period based on the situation.
Government Timeline for Review
The EO establishes a specific timeline for reviewing foreign assistance programs:
- Immediate actions: Upon issuance of the EO, all new foreign assistance funding is frozen, and a preliminary review of ongoing programs begins.
- Thirty (30) days: The government has 30 days to develop standards for reviewing foreign assistance programs.
- Up to eighty-five (85) days: The government must perform a comprehensive review of all foreign assistance programs within 85 days.
Immediate Actions Upon Receipt of a Stop Work Order
Contractors and implementing partners should:
- Comply immediately: Halt all specified work and follow the instructions provided in the order.
- Notify subcontractors: Inform relevant subcontractors and suppliers in writing with flow-down of the stop work order and provide them with necessary instructions.
- Document costs: Keep detailed records of all costs incurred during the stoppage period to support future claims for equitable adjustments.
- Issue project instructions: Inform project teams with consistent method/approach to complying with stop work order, including analysis of essential personnel and cost-mitigation activities.
- Perform scenario planning: Cash-flow management is critical. Effect eligible drawdowns and issue invoices for billable costs as timely as possible to mitigate cash-flow impacts.
- Seek award officer (AO) cost reimbursement approval: Develop approach for approval of ongoing reimbursement/payments for essential expenditures during the stop work order period. Obtain AO approval for payment plans.
- Mitigate costs: Where possible, identify ways to deploy project personnel on billable activities for awards not subject to suspension or stop work orders. Identify other strategic projects that can minimize idle labor and add value for the organization.
Exceptions and Communication
There may be exceptions to the EO based on specific program requirements or contractual obligations. Contractors and implementing partners can:
- Review the EO: Identify potential exceptions and waiver requests that apply to existing programs.
- Communicate with contracting officers: Engage in discussions with contracting officers/AOs to present a case for exceptions.
- Provide supporting documentation: Submit evidence and documentation to support claims for exceptions.
Terminations for Convenience
My Stop Work Order Was Converted to a Termination. Now What?
If a contract is terminated for convenience, contractors are entitled to compensation for work performed up to the termination date, including reasonable costs incurred due to the termination. Contractors should prepare a termination settlement proposal to claim these costs.
Termination Standard Forms and Thresholds
For terminations for convenience, contractors are required to prepare termination claims using standard government forms and methods. Examples of standard forms often required are:
- Standard Form 1438: Settlement Proposal (Short Form), for use when the termination settlement proposal is for less than $10,000
- Standard Form 1435: Settlement Proposal (Inventory Basis), for use when a settlement proposal must be prepared on an inventory basis
- Standard Form 1436: Settlement Proposal (Total Cost Basis), for use by fixed-price contractors and subcontractors
- Standard Form 1439: Schedule of Accounting Information, filed in support of a settlement proposal
- Standard Form 1428: Inventory Disposal Schedule, prepared when a contractor has inventory and materials upon termination of its contract
Different thresholds and standard forms apply based on the contract type and value. For example, fixed-price contracts exceeding the simplified acquisition threshold have specific clauses and requirements. In our experience, engaging experts to assist with termination claims and equitable adjustments is advised. The costs of engaging experts from firms like BRG are reimbursable in connection with the settlement of these claims.
Conclusion
The EO presents challenges for federal contractors and implementing partners, but organizations can navigate these challenges effectively with proper preparation and understanding of rights, and in a way that minimizes the risks to business continuity. By staying informed and proactive, contractors can minimize disruptions and ensure compliance with federal regulations.
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