Turning Challenges into Strategic Opportunities

If you've just received a Federal Stop-Work Order (SWO) or Order Cancellation, you might feel like you've hit an unexpected speed bump, or more likely, a massive pothole, on the road to fulfilling your federal contract. Given the recent changes in administration policies, this scenario might feel especially challenging. You're not alone, and there are clear steps you can take. Let's explore what this means, why it happens, and how to navigate it successfully.

What Exactly is a Federal Stop-Work Order or Cancellation?

A Federal Stop-Work Order, as outlined in Federal Acquisition Regulation (FAR) 52.242-15, is a formal notification from the government directing you to pause either all or specific portions of your work on a federal contract. While receiving a stop work order is alarming, it is important to remember that it might be temporary. And receiving a SWO or Cancellation certainly doesn’t necessarily indicate a failure on your part.

Why Do Stop-Work Orders or Cancellations Happen?

Stop-work orders usually occur due to issues on the government's side, such as:

• New Administration policy changes
• Reexamination of project goals or requirements
• Funding or budgetary changes
• Administrative issues or audits
• Legal protests or disputes
• Emergencies or unforeseen circumstances (e.g., public health emergencies or security issues)

While receiving a stop-work order or cancellation can be unsettling, keep in mind that it often has little to do with your performance and usually comes down to external factors beyond your control. In most cases, a Stop-Work Order is issued due to governmental or administrative reasons beyond your control and does not reflect negatively on your performance or reliability as a contractor.

How Does This Affect Your Business?

Understandably, receiving a Stop-Work Order can be stressful and disruptive. It can:

• Temporarily pause revenue streams, affecting your cash flow.
• Introduce uncertainty among your employees and partners.
• Lead to increased costs, especially if the stoppage is prolonged and restarting work later requires additional resources or effort.

Outright cancellation of delivery orders are worse!

Steps to Take if You Receive a Stop-Work Order

1. Pause Work Immediately: Carefully adhere to the directive. Noncompliance can complicate matters further.
2. Read Carefully and Clarify: Review the order thoroughly to understand exactly which tasks are halted or cancelled. Don't hesitate to communicate clearly and respectfully with your Contracting Officer (CO).
3. Keep Detailed Records: Document everything—dates, communications, costs incurred due to the stoppage, and any other impacts on your business.
4. Manage Stakeholder Expectations: Communicate transparently with employees, subcontractors, and partners to minimize uncertainty and maintain trust.
5. Stay Proactive: Regularly follow up with the CO to understand the government’s timeline and expectations clearly.

Can You Receive Compensation?

Yes! Once the Stop-Work Order is lifted, you have the right under FAR to request an equitable adjustment. This compensation is meant to cover additional costs resulting from the delay or interruption. If, however, your contract is cancelled under a "termination for convenience," you are also entitled to compensation. Under FAR regulations, this typically includes reimbursement for allowable costs incurred before termination, plus a reasonable profit on the work completed.

Whichever path you take, be sure your claim is thorough and well-supported by documentation.

Looking Ahead: Turning Challenges into Opportunities

While a stop-work order or cancellation can feel overwhelming and disruptive, it can also open doors to new opportunities.

• Review and streamline internal processes and enhance contract administration efficiency: Take some time to reassess operations, adopt tools or software to automate documentation, compliance tracking, and reporting, and make your contract administration processes more efficient and responsive.
• Strengthen Relationships: Use this time to foster stronger relationships internally and with federal contracting officers and technical contacts through effective and positive communication.
• Prepare Strategically: Use this period to revisit your approach, refine strategies, and align your offerings with current Administration priorities. For instance, firms holding SIN 54151S under their MAS contract might consider explicitly adding any artificial intelligence (AI) capabilities that aren't currently articulated or expanding into Cybersecurity or Cloud SINs. Firms with SIN 541611 should closely monitor upcoming policy changes that could impact consulting and management services. This strategic alignment can position your business to emerge stronger when work resumes or Administration priorities take shape.

If you're facing a stop-work order or cancellation, it's often best to consult with a government contracts attorney who can guide you through the specific legal complexities involved. For navigating strategic or process-related issues regarding MAS contracts, we're here to help you find clarity, reassurance, and a path forward.