Navigating Cost Adjustments Post-Government Shutdown

This article was co-authored with associate, Alexander Chase.

The 43-day government shutdown that began on October 1, 2025, forced Contracting Officers to delay or suspend performance, leaving contractors to shoulder the burden of increased costs to meet their obligations. This analysis outlines the five essential things contractors must know to recover those costs, breaking down the specific FAR clauses, strict notice deadlines, and documentation strategies required to secure an equitable adjustment. GovSpring is available to help contractors and companies understand how the shutdown affects their right to payment and navigate the claims process. Click here to schedule a consultation or fill out our online contact form to be contacted by our Managing Attorney.

Contracting Officer Actions Trigger Adjustments

Different contract types allow for different FAR clauses covering delays, but a contracting officer’s actions (or inaction) in response to a shutdown may allow for a cost adjustment under each of these clauses.  FAR delay, suspension, and stop work clauses vary by procurement method and work type, dictating different rules for cost recovery and asserting rights under the clause. A sample of these clauses include the following:

The Suspension of Work (FAR 52.242-14) and the Government Delay of Work (FAR 52.242-17) clauses both specifically require that the clauses apply where the contractor’s performance is suspended, delayed, or interrupted by “an act of the Contracting Officer in the administration of [the] contract.” This includes a CO’s failure to act. The Stop-Work Order clause (FAR 52.242-15) similarly applies where a CO’s stop work order “results in an increase in the time required for, or in the Contractor’s cost properly allocable to, the performance of any part of this contract.”

For that reason, the key to any successful compensable delay claim will be demonstrating a connection between increased costs of performance and the Contracting Officer’s actions.

Profit Availability Depends on the Clause

While the Suspension of Work and Government Delay of Work clauses allow for cost adjustments but explicitly exclude profit, the Stop-Work Order clause permits an equitable adjustment that includes profit. The Stop-Work Order clause provides for an equitable adjustment, and an equitable adjustment is designed to make contractors “whole” for the increased costs that they face, including an allowance for profit tied to those costs.

Timely Notice Is a Prerequisite to Recovery

Deadlines for asserting rights to cost adjustments vary by FAR clause and can be as short as 20 days. Research and development, supply, and services contractors who receive a formal stop-work order must assert their right to an equitable adjustment within 30 days of the end of the period of work stoppage. The Contracting Officer may then make a determination about entitlement to that adjustment at any time before final payment under the contract.

Construction or architect-engineer contractors who receive an order to suspend, delay, or interrupt work must assert their claim for a cost adjustment as soon as practicable after the end of the suspension, delay, or interruption, but before the date of final payment. Because this claim must be asserted “in an amount stated,” contractors must be ready to seek specific costs; they cannot simply assert to the contracting officer that they are due some vague amount of additional compensation.

Contractors delayed by a Contracting Officer’s action (or inaction) other than a direct stop-work order must navigate a strict “20-day rule” to protect their right to payment. Under both the Suspension of Work and Government Delay of Work clauses, you must notify the Contracting Officer within 20 days of the event that caused the delay. This deadline is critical because these clauses prohibit recovery for any costs incurred more than 20 days before you provide notice. While notifying the government late does not invalidate your entire claim, it will prevent you from recovering those early expenses. Once notice is given, you must submit a written claim for a specific amount as soon as practicable after the delay ends, but no later than the date of final payment.

An Agency’s Insistence on the Original Deadline may Constitute “Constructive Acceleration”

Not all cost increases that are attributable to the shutdown will be properly classified as “delay” claims. Certain contractors who have faced delays, interruptions, or suspensions during the shutdown and have since incurred additional costs after being required to meet their original contractual deadline may be able to assert a claim for a “constructive acceleration.” These claims can be brought through a contract’s Changes clause; for example, a construction contractor may be able to bring a claim under FAR 52.243-4(d). In those cases, preventing the contractor from working while maintaining the same date of completion has the same effect as moving the date of completion forward, and contracting officers are required to issue an equitable adjustment.

Prevent Claim Denials Through Careful Review and Documentation

While standard contract terms define compensable costs, your actions during the shutdown are equally critical to protecting your recovery rights. Reviewing published decisions reveals two specific risks that contractors can avoid through effective planning and documentation.

First, be wary of waivers. In BES Construction, LLC, the Armed Services Board of Contract Appeals denied a shutdown-related claim because the contractor had agreed to a bilateral modification explicitly labeled as a “no cost modification.” See BES Construction, LLC, ASBCA 62175, Nov. 9, 2021, 2021-1 BCA ¶ 37,968.  When executing changes with the government, you must verify that you are not inadvertently waiving your right to future compensation.

Second, scrutinize non-standard clauses. In L&L Excavating & Land Clearing, LLC v. Department of Agriculture, the Civilian Board of Contract Appeals denied a claim for lost earnings because the contract included a bespoke “out of pocket expense” clause that expressly disallowed anticipatory profits. L&L Excavating & Land Clearing, LLC v. Department of Agriculture, CBCA 3911, Sept. 4, 2014, 2014-1 BCA ¶ 35,723.  Contractors must identify and understand these unique solicitation clauses before performance extends into a lapse in appropriations.

GovSpring is available to help contractors and companies understand how both the 2025 government shutdown and any future appropriations lapses might affect their obligations and their right to payment during contract performance. Click here to schedule a consultation or fill out our online contact form if you are in need of legal services.