Avoiding Work Without Pay: Contractors’ Guide to Recovering Expenses Due to Shutdown

As we enter the second week of the US government’s 2025 shutdown, many government contractors have begun considering how additional expenses they are incurring could be recoverable from the government. Government shutdowns have wide-ranging implications for those who do business or collaborate with the US government—from funding uncertainty to stop work orders to contract terminations.

In general, contractors may continue to perform on contracts and other agreements awarded and funded before the shutdown occurred. However, they may find themselves incurring costs without work to perform or that work being performed costs more than during normal operations. For these and other contractors, additional expenses may be recoverable, but they must meet timelines and documentation requirements to perfect their claims for payment.

EFFECTS OF THE SHUTDOWN ON CONTRACTORS

There are a variety of reasons contractors incur unexpected expenses during a government shutdown. For instance, agreements typically cannot be extended or further funded while the shutdown remains in place, sometimes resulting in a pause in work and necessitating personnel actions. Additionally, if contractors rely on access to government facilities or direction from government personnel to perform, they may find themselves limited in the amount of work they can complete.

Conversely, the government may expand the role of contractors in certain circumstances to address the unavailability of staff at certain agencies during a shutdown, leading to out-of-scope work. A shutdown may also impact contract deadlines and may necessitate acceleration and overtime pay once performance begins again to avoid contract penalties or default. These factors—which range from maintaining an idle workforce, reducing the size of the workforce, demobilizing and remobilizing equipment, or performing out-of-scope tasks—can each result in expenses that are recoverable from the government when it reopens.

CLAIMS FOR REIMBURSEMENT

Depending on the nature of the contract, the work at issue, and the impacts of a shutdown, a claim for reimbursement can take many forms. Importantly, though, most paths to relief impose tight timelines for providing notice to the government.

For example, the standard changes clauses in the FAR (FAR 52.243-1; FAR 52.243-2) require contractors to assert their right to an adjustment within 30 days of an order from a contracting officer that creates a constructive change. Similarly, the Suspension of Work clause (FAR 52.242-14) that applies to fixed-price construction contracts can bar recovery of costs incurred more than 20 days before the contractor notified the government in writing of the government’s “act or failure to act” that triggered the harm.

Other clauses that could provide bases for remedies, such as the Government Delay of Work clause and the Stop Work Order clause, impose similarly short 20- and 30-day deadlines. See FAR 52.242-15(b)(2); FAR 52.242-17(b). Therefore, timely communication to the government regarding the increased costs being incurred can be crucial. Contractors should also be sure to document and preserve communications and relevant records. Maintaining and saving written communications with contracting officers is important, as is saving all records that demonstrate costs incurred and why those costs were necessary.

CONCLUSION

In the end, unexpected expenses associated with the shutdown may be recoverable from the government. However, the timelines discussed above mean that contractors need to begin identifying potentially recoverable expenses soon, as the clock may have started on October 1.

If the political gridlock drags on, waiting until the shutdown ends may mean that a contractor has waited too long and exceeded relevant deadlines.

To be sure that recovery remains an option, contractors should carefully track expenses, preserve copies of communications with the government, and be mindful of any notice requirements that their contracts and the FAR impose.

HOW WE CAN HELP

We are closely monitoring agency announcements and will provide updates as the situation evolves. Please contact our office with any questions regarding how the 2025 US government shutdown affects your contracts, workforce planning, or compliance obligations.

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