Government contractors should proactively prepare for potential SWOs and contract terminations. Even if you haven’t received an SWO or termination notice, preparation is critical. Consider some of these best practices to safeguard your business:

 

1. Review Your Contracts for Key Federal Acquisition Regulation (FAR) clauses, such as:

• • FAR 52.242-14 (Suspension of Work)
  • FAR 52.242-15 (Stop-Work Order)
  • FAR 52.249-2 (Termination for Convenience)
• Understand what costs are recoverable, notification requirements, and procedures for disputes or claims.

 

2. Financial Preparedness

• Maintain cash reserves to cover operating costs during contract disruptions.
• Keep accounts receivable up to date to avoid delays in receiving payments.
• Assess the impact of potential SWOs on indirect rates and adjust budget projections.

 

3. Operational Readiness

• Identify possible cost mitigation efforts that may be effective should a contract be terminated
• Review insurance policies to see if you have coverage
• Develop a stop-work response plan that includes:
  • Employee reassignment strategies
  • Communication plans with subcontractors and vendors
• Employee Notifications & Reassignments:
  • Determine which employees are affected and consider alternative billable work.
  • Have clear HR policies for furloughs or temporary reassignments.

 

4. Documentation & Compliance

• Create distinct cost codes in the accounting system to track labor, materials, overhead, and indirect costs directly related to the SWO. Proper documentation is essential for potentially requesting an equitable adjustment later.
• If you receive an SWO, communicate with your contracting officer (CO). Get clarification and rationale for the SWO and potential next steps. Maintain email correspondences with the CO.

 

5. Legal and Contractual Considerations

• Connect with your government contract or legal advisors on potential next steps and risks associated with those steps.
• Have legal guidance ready for disputes, settlement negotiations, or claims against the government.

 

6. Communicate: In addition to communicating with the CO or Prime contract representatives:

• Notify internal stakeholders: Ensure executives, project managers, HR, and finance teams are aligned.
• Communicate with subcontractors and vendors to pause or modify orders as necessary. Coordinate with supply chain members and establish protocols and expectations to achieve a consolidated settlement process.
• Keep Employees Informed: Transparent communication prevents unnecessary attrition or morale issues.

 

Thompson Greenspon is available to assist contractors with addressing the unique concerns and responsibilities that will present themselves during this time.