What Government Contractors Should Know Before Filing a Claim for Government Shutdown Related Costs

Now that the longest federal government shutdown is over, government contractors should carefully analyze whether or not they can recover any of their shutdown-related costs.  While the 2025 shutdown most certainly disrupted contract performance, delayed payments, and increased costs for many federal contractors, not all of those losses are recoverable.  Before submitting a claim to your contracting officer, it is important to understand which costs may be reimbursed, the relevant FAR provisions, and the procedural steps involved.

1. Was Performance Actually Stopped or Suspended?

• Did the government customer issue a written stop work order in accordance with FAR 52.242-15 (Stop-Work Order)?
• Alternatively, did the contracting officer direct or cause a delay or suspension of the work per FAR 52.242-14 (Suspension of Work) or FAR 52.242-17 (Government Delay of Work)?
• Or was the impact on the contract simply the result of lack of access to the government facilities or systems or due to the lack of funding?

2. What Shutdown Costs Are Recoverable?

Contractors can potentially recover reasonable costs from government action (or inaction), but cannot recover costs related to general business risks.  Examples of potentially recoverable costs include:

• Idle labor or equipment caused by a stop-work order;
• Costs of demobilization or remobilization;
• Extended overhead costs due to performance delays; and
• Additional security, storage, or standby expenses.

The types of costs typically not recoverable include:

• Lost profits or anticipated future work;
• Costs incurred solely due to lack of appropriations, absent a government directive; and
• Costs voluntarily incurred when work was not authorized.

3. Relevant FAR Clauses

• FAR Part 12 (Acquisiton of Commercial Products and Commercial Services). Recovery under these clauses may be subject to streamlined procedures, and contractors may rely upon their standard accounting systems rather than formal cost principles.  The Government’s audit rights are also limited and the efficient resolution of claims is encouraged.
• FAR Subpart 33.2 (Disputes and Appeals). Governs the submission, certification, and appeals process for contract claims under the Contract Disputes Act (CDA).
• FAR 52.232-18 (Availability of Funds). Signals that a contract is contingent on future appropriations, making it vulnerable to a lapse in those appropriations.
• FAR 52.232-22 (Limitation of Funds). Indicates a contract is incrementally funded and the Government is generally not obligated to pay more than the funding currently allotted.
• FAR 52.242-14 (Suspension of Work) Allows recovery of increased costs (including profit) for unreasonable suspension, delay, or interruption by the Government.  Applies to fixed-price construction and architect-engineer contracts.
• FAR 52.242-15 (Stop-Work Order). Authorizes the contracting officer to order work stopped and provides a mechanism for equitable adjustment.
• FAR 52.242-17 (Government Delay of Work). Allows for equitable adjustment for unreasonable Government-caused delays. Applies to fixed-price supply/service contracts.
• FAR 52.243 (Changes Clauses). May provide basis for recovery if performance changes were required as a result of shutdown effects.
• FAR 52.249-14 (Excusable Delays). Excuses default for delays beyond contractor’s control (e.g., Government shutdown), but does not allow recovery of costs.

4. Procedural Steps Before Filing a Claim

• Review Records. Contractors need to review communications with their contracting officers and all other records (i.e., timesheets, invoices, costs incurred) to ensure that any potential claim will be adequately supported.  Ideally, separate cost codes would have been established for shutdown expenses, all dates and events of disruption and ramp down and ramp up expenses would have been recorded, appropriate notifications would have been made to subcontractors, and all mitigation efforts would have been documented.
• Provide Timely Notice. Most clauses will require written notice to the contracting officer within a specific time frame following the event (e.g., 30 days).
• Attempt Informal Resolution. Many government agencies encourage the submission of a Request for Equitable Adjustment (REA) before filing formal CDA claim.
• Certify When Required. Claims over $100,000 must be certified in accordance with 41 U.S.C. § 7103(b).
• Get Legal Review. A properly supported claim needs to identify the operative clause, specify the amount sought, and include adequate and appropriate factual and legal justification.

5. Strategic Considerations

• Assess the Contract Type. Cost-type, fixed-price, and time-and-materials contracts each allocate shutdown risks differently.
• Coordinate With Subcontractors. Flow-down clauses and back-to-back REAs are critical to ensure consistency in claims.
• The Clock is Ticking. A claim must be filed within six (6) years of accrual, but earlier notice is almost always required.
• Prepare for Audit. Expect the Government to scrutinize claimed costs for reasonableness, allocability, and allowability under FAR Part 31.

Note that a government shutdown does not automatically entitle federal contractors to reimbursement for idle time or lost revenues.  Each situation needs to be evaluated individually depending on the type of contract involved and the specific facts and circumstances.  In order for a timely claim for recoverable costs to be successful , the contractor at a minimum must (1) have relied upon a government directive, (2) demonstrate a clear causal link between that directive and its increased costs, and (3) provide adequate documentation in support of its claim.  Unless the federal contractor relied upon an express or implied order by the Government, any claim to recover shutdown-related costs or obtain an equitable adjustment of work schedule for shutdown-related delays will not be successful.

If you have further questions about this issue, please contact RLG Partner Peter Fish or any of our other GovCon lawyers.

DISCLAIMER. This client alert does not provide legal advice. We are providing it for general informational purposes only.