Federal Shutdown Survival
Cash Flow, Claims, and Equitable Adjustments for GovCons
When Washington goes dark, your invoices don’t stop burning cash.
Federal contractors are familiar with the rule: no appropriation, no new obligations. But the gray zone between “work continues” and “work stops” is where companies lose money—quietly, through idle staff, delayed invoices, and unrecovered costs.
This article breaks down how to survive a funding lapse with your margins and sanity intact.
1. The 60-Minute Shutdown Exposure Check
Before the panic sets in, take an hour to map your financial exposure:
This gives you a realistic timeline for liquidity and workload under a continuing lapse.
2. Two Shutdown Playbooks: Continue or Stop
A. Work Continues (Funded Work)
Continue operating within the amount already obligated under your contract.
Limit discretionary spending and avoid purchasing long-lead materials.
Maintain minimal communication with your CO to ensure the agency still recognizes your right to invoice.
B. Work Stops (Unfunded or Stop-Work Ordered)
Immediately cease all affected work when the CO issues a written order under FAR 52.242-15 (Stop-Work) or FAR 52.242-14 (Suspension of Work).
Secure property, equipment, and data.
Record every direct and indirect cost tied to the shutdown—including idle labor, storage, demobilization, and standby vendor charges.
3. Capture Every Cost for a Future REA
When work halts, your cost logs become gold. You’ll need them for a Request for Equitable Adjustment (REA) once the government reopens.
Track:
Idle Labor: Document timecards, payroll records, and which employees were affected.
Demobilization: Transportation, secure storage, cancellation fees.
Overhead Impacts: Facility costs, rent, utilities, and insurance tied to paused operations.
Subcontractor Costs: Forward written notifications; their costs can become part of your claim.
Don’t assume everything is recoverable—profit is usually excluded under these FAR clauses. What matters is reasonableness, mitigation, and documentation.
4. When Suspension Turns Into a Claim
If the shutdown drags on and your costs escalate, the REA can evolve into a Certified Claim under the Contract Disputes Act.
To qualify:
Your cost documentation must be auditable.
You must show that you acted promptly to mitigate losses.
The CO must have directed or caused the delay.
This is where precision beats volume—clean records and dated communications carry more weight than a 50-page complaint.
5. Keeping Cash Flow Alive
While Washington argues, keep your company liquid.
Short-term tactics:
Invoice early for all work completed before the lapse.
Negotiate temporary payment delays with subs (transparency builds trust).
Discuss with your bank the option of extending your line of credit or advancing against receivables.
Pause nonessential spending. This isn’t the time to renew software seats or marketing campaigns.
Mid-term tactics:
Consolidate staff on funded projects.
Reallocate bench time to proposal development, data cleanup, or mandatory training.
6. Equitable Adjustment 101
FAR 52.242-14. Government suspends work. Idle labor, storage, re-mobilization (no profit)
FAR 52.242-15. Stop-work order issued Costs of stopping and restarting work
FAR 52.242-17. Government delay of work. Similar to above, caused by CO inaction
Key: You must show causation—that the delay or cost increase resulted directly from government direction or inaction, not your own business choices.
7. Communicate Early, Record Everything
Save all CO emails, calls, and memos.
Document internal decisions (who told whom to stop, when, and why).
Keep a single timeline from “pre-lapse” to “resumption.”
After the shutdown, this becomes your evidence trail. Agencies are more likely to grant REAs when they see disciplined recordkeeping.
8. Post-Shutdown Game Plan
When appropriations resume:
Notify the CO you’re ready to restart work.
Submit your REA or cost summary within 30 days.
Resume invoicing immediately—don’t wait for formal processing to “catch up.”
Update your subcontractors and vendors in writing.
9. Lessons for Next Time
Include a funding analysis in your contract kickoff. Don’t wait for a crisis.
Negotiate stronger stop-work language. Some primes include subcontractor protections and pre-defined cost recovery formulas.
Use shutdowns as REA training. They reveal every weak point in cost tracking and communication.
Bottom Line
Shutdowns aren’t the end of the world—but they expose how disciplined your business really is.
Funded work can continue.
Unfunded work must stop.
Only documented work gets reimbursed.
