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Oles Morrison

Federal Contractors May Have a Bumpier Road to Recovery After the Shutdown

By on January 24, 2019 | Posted in

The partial government shutdown is now the longest running shutdown in history and there is no clear end in sight.  Some 800,000 federal employees have been affected by the shutdown.  They have either been furloughed, or even if they are working, they are going without pay.  However, although affected federal employees will get back pay after the shutdown ends, the current political landscape surrounding recovery for potentially affected federal contractors and their employees is less clear.  Thus, while the shutdown’s effects have introduced significant uncertainty, the aftermath of the shutdown poses an equal degree of uncertainty.

Further to our post about the best practices for contractors to weather the shutdown, contractors should also evaluate their options and strategies for seeking recovery of their costs due to the shutdown.  Although the current political landscape has not provided any full guarantees to affected federal contractors, most government contracts have clauses from the Federal Acquisition Regulation (FAR) that may provide a basis for recovery.  The primary clauses that may aid a contractor in such endeavors include: FAR 52.242-14 (suspension of work), FAR 52.242-15 (stop work order), FAR 52.242-17 (government delay of work), and FAR 52.243 (changes).  A common requirement with all of these clauses, however, is that they impose a quick turnaround on the contractor to notify and assert any rights to the government, with some clauses providing as little as 30 days from the end of the work stoppage period to take action.

As we wrote in our earlier post, contractors should carefully document all costs that have been incurred as a result of and during the shutdown because the more meticulous the records the greater the chance for a recovery.  To this end, contractors should identify any such costs (which may include activities such as idled personnel or facilities, unabsorbed home office overhead, shut down and startup costs, and personnel costs including any severance for layoffs or recruiting costs for replacement personnel), and contractors may also find it useful to separate or isolate shutdown related costs in their accounting systems for better ease of tracking.  Contractors should also document the reasons for any such charges, and if possible, communicate the changed circumstances to their contracting officers on a real time or otherwise timely basis, and document all such communications with the government.  These and the other best practices we addressed should maximize a contractor’s chances of success in seeking a recovery from the government as a result of this historic shutdown.