Proactive responses to termination for convenience or stop-work orders

In today’s environment, many contractors have or will receive a termination for convenience or stop-work-order. Conventional wisdom says to respond to these in one of two ways: (1) challenge the termination through litigation, or (2) document one’s costs and submit a termination settlement proposal. But I suggest a third option to attempt first: make the business case for keeping the project going.  Dale Carnegie would describe it as "talking in terms of the other person's interests." This advice is as true in government contracting as it is in interpersonal relationships.

1. Consider Renegotiation Following a Notice of Termination

FAR 49.102(d), Reinstatement of Terminated Contracts, provides that if the government terminates a contract, it can subsequently reinstate it if 1) the contractor consents and 2) reinstatement is advantageous to the government. While used sparingly in the past, this clause may see more frequent use as contracting officers face pressure to reduce costs, while also obtaining the goods and services that government customers need.

In fact, President Trump has explicitly directed agencies to modify contracts "through renegotiation." The government is focused on obtaining a better deal for the American taxpayer. While some programs have little chance of remaining viable, in other situations, the underlying project may not be the driving force of the termination. Agencies may simply be seeking cost savings, and in these situations, contractors should consider reaching out to the Contracting Officer or other relevant agency officials to inquire if a renegotiation could save the contract. No company likes to negotiate against itself, but a modified contract is likely better than a terminated one. And the costs to make this offer are negligible. As the adage goes, "you miss 100 percent of the shots you don't take."

2. Persuasive Methods for Responding to a Stop-Work Order

Similarly, contractors should be proactive when faced with a stop-work order. In recent weeks, there have been large-scale acquisition pauses and issuances of stop-work orders by many agencies as Trump Administration priorities are being assessed. On Jan. 24, 2025, the General Services Administration's (GSA) acting administrator issued an acquisition pause, directing contracting officers to "suspend the execution of any new GSA-funded obligations, including new awards, task and delivery orders, modifications, and options," aside from certain enumerated exceptions.

In the wake of this and similar directives, a multitude of contracts were put on hold. Yet some contractors found a way to resume work by persuading the government of the importance of their work and speaking in terms of the government's interests such as demonstrating that the contract in question actually reduces the government's overall costs and generates efficiencies for agency operations. Some contracts naturally lend itself to this justification such as energy savings performance contracts (ESPCs). For others, the cost savings and efficiency argument may be more nuanced.

In addition, if a particular contract relates to a national security or law enforcement purpose, or achieves some other priority of the new administration, the contractor should highlight this to persuade agency officials to resume work. For instance, GSA's Acquisition Pause excepted out "Actions to support the President, Vice-President and the Secret Service in ensuring security any dollar level," and "Actions in support of FEMA at any dollar level." If a stopped project has a national security, law enforcement or disaster response nexus, the contractor should highlight this to agency officials. We have seen instances where the contracting officer halted a contract with a stop-work order, but after the client provided a well-supported explanation as to the contract's benefits (speaking in terms of the government's priorities), the agency allowed work to resume.

Conclusion

When faced with a termination for convenience or a stop-work order, contractors should consider responding proactively to persuade the government to keep the project going. This option requires minimal time investment, but could pay off big. Whether through speaking in the government's interests or offering to renegotiate terms, it is possible for a contractor to maintain their contracts.