With the possibility of a government shutdown looming, federal contractors are rightfully concerned about how such an event could affect their contracts. Work stoppages, closed government facilities, and furloughed contracting officers can all disrupt contract performance. Fortunately, contractors may have legal avenues to recover certain costs and/or seek schedule relief when a shutdown impacts their ability to perform.
1. Excusable Delays and Time Extensions
Most federal contracts contain a default clause (e.g., FAR 52.249-8 for fixed-price supply and service contracts, or FAR 52.249-10 for construction contracts) that recognizes “acts of the Government” as potential bases for excusable delay. A government shutdown typically qualifies as such an act.
- What this means – If a contractor is unable to perform because an agency facility is closed, a contracting officer is unavailable, or critical government approvals cannot be obtained, the contractor may request a time extension.
- Key point – An excusable delay entitles the contractor to more time but not necessarily to additional money. It can protect the contractor from receiving negative CPARS, being assessed liquidated damages, and/or being terminated for default.
2. Recovering Shutdown-Related Costs
Although excusable delays do not automatically entitle contractors to money, there are some circumstances where cost recovery may be possible, which include but are not limited to the following:
- Stop-Work Orders (FAR 52.242-15)
If the government issues a formal stop-work order during the shutdown, contractors may recover reasonable costs incurred as a result of the order (such as demobilization and remobilization expenses).
- Suspension of Work (FAR 52.242-14)
For construction contracts, the suspension of work clause may allow cost recovery if the government directs the contractor to stop performance.
- Changes Clause (FAR 52.243 series)
In some cases, shutdown impacts could constitute a constructive change. For example, if the government later requires acceleration to meet the original deadline, contractors may be entitled to recover costs of that acceleration.
- Equitable Adjustments and Claims
If a contractor incurs additional, demonstrable costs directly attributable to government actions during or after the shutdown, it may be possible to seek an equitable adjustment under the contract. If the contractor is unable to recover costs under a contract clause and/or via an equitable adjustment, the contractor may be able to recover costs via the claims process under the Contract Disputes Act (FAR 33.2).
3. Best Practices for Contractors During a Shutdown
- Document everything – Keep detailed records of delays, communications with the government, idle labor/equipment costs, demobilization and remobilization costs, and any actions taken to mitigate impacts.
- Provide timely notice – Most FAR clauses require contractors to notify the contracting officer of delays or increased costs within a specified period. Failure to provide notice could forfeit recovery rights.
- Engage proactively – Even during a shutdown, maintain written communication with the contracting officer (or document attempts to do so).
- Mitigate damages – Contractors are generally expected to minimize additional costs where feasible. Documenting good faith mitigation strengthens later claims.
Conclusion
Government shutdowns are disruptive and burdensome, but contractors are not without remedies. While recovery of additional costs may depend on the specific contract clauses at play and whether formal orders are issued, contractors almost always can — and should — seek schedule relief for excusable delays. With proper documentation and timely notice, contractors can protect their rights and position themselves to recover costs or obtain schedule extensions once the government reopens.
