Considering recent events, we have prepared a comprehensive, side-by-side analysis of critical contract clauses and other considerations for contractors and grantees seeking to address any updates to their agreements. The guide covers stop-work directives, suspensions, terminations, payment delays, and tariff increases — highlighting specific provisions and timelines essential for protecting rights and pursuing potential cost recovery. View the complete guide below:
| Contractors | Grantees | |
|---|---|---|
| Direction to Stop-Work or Suspending the Contract | Affected contractors should review the terms of
the clauses in their contract that may provide the government to
suspend performance (e.g., FAR 52.242-14) or issue a
stop-work order (e.g., FAR 52.242-15) for limits
associated with this kind of direction, such as the
government's inability to issue a stop-work order for longer
than 90 days (unless agreed-to by the contractor) or due dates for
the contractor's notice of any impact if it intends to seek an
adjustment on the basis of the "suspension" or
"stop-work order."
Affected contractors should also be aware that even where the government does not issue a suspension order, its conduct may rise to a "constructive suspension" under FAR 52.242-14 if its actions unreasonably suspend or interrupt contract performance. Those constructive suspensions generally require written notice within 20 days of the act or failure to act by the government that the contractor views as a suspension. And even if the contract does not explicitly reference the suspension clause (FAR 52.242-14), that clause may sometimes be viewed as being part of the contract under the law because it is mandatory for incorporation in some cases. G. L. Christian & Associates v. United States, 312 F.2d 418 (Ct. Cl. 1963). The same, however, cannot usually be said for the stop-work clause (FAR 52.242-15) which is not mandatory in most cases. Konecranes Nuclear Equip. & Servs., LLC, ASBCA No. 62797, 2024 WL 2698011 (May 7, 2024). Contractors facing suspensions or stop-work orders should consider sending Contracting Officers notices of any impacts from such actions within the time frames prescribed in the above-referenced clauses for the relevant situation. Upon doing so, contractors should treat any requests for recovery under the applicable clauses in the same way that they would treat any other request for an equitable adjustment or certified claim. |
Grantees should review any grants specifically
affected by notices for a suspension or stop-work, as well as the
agency and program-guidance associated with those grants, for terms
allowing recovery.
Grantees should look to 2 CFR §200.343 of the Uniform Guidance for verbiage addressing the impacts of any suspension on allowable costs. As provided therein, costs will be allowable in only limited circumstances, where: (1) The costs result from financial obligations which were properly incurred by the recipient or subrecipient before the effective date of suspension or termination, and not in anticipation of it; and (2) The costs would be allowable if the Federal award was not suspended or expired normally at the end of the period of performance in which the termination takes effect. |
| Terminations | If facing a termination of the contract in whole
or in part for the government's convenience (T4C), review and
follow the steps identified in the specific termination for
convenience clause identified in your Contract (e.g., FAR
52.249-1 through 5; FAR 52.212-4(l) for commercial contracts). But
contractors need to be aware that notices of a T4C termination will
NOT generally serve as a contracting officer's final decision.
Rather, as several variants of those T4C clauses provide, any
terminated contractor must submit a settlement proposal to the
government within one (1) year of the from the effective date of
termination (unless extended in writing by the Contracting Officer
upon written request within that one-year long period). If the
contractor does not do so, it will lose its rights to obtain
recovery for that termination.
If facing a termination for default (T4D), remember that your contract almost certainly contains a clause specific to such terminations as well (e.g., FAR 52.249-8 through FAR 52.249-10; FAR 52.212-4(m) for commercial contracts). As several variants of those clauses provide, a notice of a T4D termination will generally serve as a contracting officer's final decision – which must be appealed to the appropriate Board of Contract Appeals (within 90 days) or the Court of Federal Claims (within a year) in the case of any disagreement. If contractor does not do so, it will likely lose its rights to challenge that termination. Even if the contract does not explicitly reference the necessary clauses, however, those clauses may sometimes be viewed as being part of the contract under the law. G. L. Christian & Associates v. United States, 312 F.2d 418 (Ct. Cl. 1963). So contractors must be aware, that in some cases, the government retains the right to terminate the contractor despite the absence of the clauses listed above from the contract. |
The Uniform Guidance treats terminations of grants
differently than the FAR does contracts. But 2 CFR §200.340(a)
provides the government and any pass-through entity with the
discretion to terminate a grant "to the extent authorized
by law, if an award no longer effectuates the program goals or
agency priorities" and "if the recipient or subrecipient
fails to comply with the terms and conditions of the Federal
award."
As with suspensions, grantees should look to 2 CFR §200.343 for verbiage addressing the impacts of such a termination on allowable costs. As provided therein, costs will be allowable in only limited circumstances, where: (1) The costs result from financial obligations which were properly incurred by the recipient or subrecipient before the effective date of suspension or termination, and not in anticipation of it; and (2) The costs would be allowable if the Federal award was not suspended or expired normally at the end of the period of performance in which the termination takes effect. |
| Payment Delays & Withholds | The Payment terms incorporated in the affected
contracts (e.g., FAR 52.232-1 through FAR 52.232-17; FAR
52.212-4(m) for commercial contracts) will typically govern the
government's obligations for payment. In some cases, those
clauses will even address limits on the right to withhold contract
sums. Though, the government's right to withhold sums is often
identified separately in the contract.
There are also usually Prompt Payment clauses that address the time frame within which the government must make those payments, which is set to 30 days in most cases (e.g., FAR 52.232-25 through FAR 52.232-27). Where Prompt Payment clauses are applicable, and payments are delayed, a contractor may be entitled to interest (and sometimes even penalties against the government if they follow the defined process and submit a written demand within 40 days of invoice payment). In instances where a contractor has also received a T4C notice, a contractor may also incorporate any outstanding portions of the contract price for completed supplies or services accepted by the Government a part of their settlement proposal (upon adjusting for any saving of freight and other charges). Contractors facing any delays should consider sending Contracting Officers notices of any impacts from the delays with a reference to the clauses imposing payment obligations in their specific contract. |
The Uniform Guidance addresses the requirements
for Payment Delays and Withholds under 2 CFR §200.305. As with
contracts, those terms generally require payment within 30 days.
2 CFR §§200.305(b)(6) through (7) also indicate that: Payments for allowable costs must not be withheld at any time during the period of performance unless required by Federal statute, regulations, or in one of the following instances: (i) The recipient or subrecipient has failed to comply with the terms and conditions of the Federal award; or (ii) The recipient or subrecipient is delinquent in a debt to the United States as defined in OMB Circular A-129, "Policies for Federal Credit Programs and Non-Tax Receivables." Under such conditions, the Federal agency or pass-through entity may, after providing reasonable notice, withhold payments to the recipient or subrecipient for financial obligations incurred after a specified date until the conditions are corrected or the debt is repaid to the Federal Government. A payment withheld for failure to comply with the terms and conditions of the Federal award must be released to the recipient or subrecipient upon subsequent compliance. When a Federal award is suspended, payment adjustments must be made in accordance with § 200.343. Like contractors, grantees facing any delays should consider sending their Agreement Officers notices of any impacts from the delays with a reference to the clauses imposing payment obligations in their specific contract. |
| Tariff Increases | Where applicable, the FAR 52.229-3 clause provides
contractors the right to recover the costs spent specifically on
most tariffs, if those tariffs were imposed after the "date
set for bid opening or the effective date of the contract or
modification" in the case of a negotiated contract or
modification for work. To obtain any recovery, the contractor must
warrant "in writing that no amount for such newly imposed
Federal excise tax or duty or rate increase was included in the
contract price, as a contingency reserve or otherwise."
Contractors should treat any requests for recovery under that clause in the same way that they would treat any other request for an equitable adjustment or certified claim. But, if possible, contractors should certainly incorporate any expected tariffs as part of their pricing in any forthcoming bids since that will not only remove the need for such a request but minimize the likelihood of any delays or challenges to obtaining recovery under this term. |
Grantees should review any grants specifically affected by tariffs, as well as the agency and program-guidance associated with those grants, for terms allowing recovery. |
These are the clauses that would normally be in contracts and grant agreements. Individual agreements may incorporate other terms, including clauses specific to any specific agency, and they should also be evaluated when determining your rights to recovery. There may also be additional rights that contractors and grantees may be able to assert, even though not explicitly outlined in your contract or agreement. Consider the clauses above to be the starting point. Also, key to applying any of these clauses, contractors and grantees must carefully separate and track any costs associated with the government's direction(s) or changes to their agreement from those in the original effort.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
