Regulatory Shifts in Government Contracts and Grants
A recent law bulletin from Taft Law Firm, authored by Barbara A. Duncombe, Suzanne Sumner, Brandon Dobyns, Erin R. Davis, Stephen G. Darby, Celeste M. Friel, and Alexander Gorelik, provides a critical analysis of how contractors and grantees should prepare for regulatory changes under the new administration. The report outlines essential contract clauses and regulatory considerations that impact federal agreements, particularly concerning stop-work orders, suspensions, terminations, payment delays, and tariff increases.
One of the primary concerns addressed in the bulletin is the government’s ability to issue stop-work orders or suspensions, which can significantly disrupt contract performance. The authors emphasize that contractors must carefully review FAR clauses such as 52.242-14 and 52.242-15, which outline the limits on how long the government can suspend work and the necessary actions contractors must take to seek adjustments or recovery. Additionally, even if an explicit stop-work or suspension order is not issued, contractors must be aware of the concept of “constructive suspension,” which occurs when government actions or inactions effectively halt contract performance. Notifying contracting officers within the required timeframe is critical to preserving claims for compensation.
The bulletin also details how terminations—whether for the government’s convenience (T4C) or default (T4D)—affect contract rights. In the case of T4C, contractors must submit a settlement proposal within a year of termination to secure cost recovery. Conversely, a T4D serves as a final contracting officer decision, requiring an appeal within 90 days to the Board of Contract Appeals or within one year to the Court of Federal Claims. The authors highlight the importance of reviewing the applicable FAR clauses (52.249-1 through 52.249-10) and ensuring compliance with notice requirements to avoid forfeiting potential claims.
For grantees, regulatory changes in Uniform Guidance (2 CFR §200.343) influence cost recovery in cases of suspension or termination. The guidance allows for cost reimbursement only if financial obligations were incurred before the effective date of the suspension or termination and not in anticipation of it. The authors stress that grantees should closely review federal award terms and program-specific guidelines to determine allowable costs.
Another pressing issue for contractors is the impact of payment delays and withholds. While FAR clauses generally require payment within 30 days, the government retains the right to withhold funds under certain conditions. If payment is delayed, contractors may be entitled to interest and penalties if they follow the proper submission process. Grantees face similar payment risks under 2 CFR §200.305, where payments can be withheld for noncompliance with federal awards or delinquent debts. The bulletin advises contractors and grantees to track costs separately and maintain meticulous documentation to substantiate claims for recovery.
Finally, the report discusses the implications of tariff increases under FAR 52.229-3. If new tariffs are imposed after contract execution, contractors may seek reimbursement, provided they did not include a contingency reserve in their initial pricing. The authors caution that contractors should proactively account for potential tariffs in bid pricing to minimize financial risk.
The bulletin underscores the necessity for contractors and grantees to understand their contractual rights and obligations amid regulatory shifts. By staying informed of key clauses and adhering to notification requirements, businesses can better position themselves to recover costs and mitigate financial disruptions. While this report provides an essential starting point, each agreement may contain agency-specific provisions that require further analysis. Contractors and grantees should consult legal counsel to evaluate the full scope of their rights.
Disclaimer: This blog is for informational purposes only and does not constitute legal advice. The accuracy of the information is not guaranteed, and readers should consult legal professionals for specific guidance on contract and grant matters.
