In shutdown, what contractors should do

Tuesday - 9/27/2011, 5:57pm EDT

Rich Wilkinson, Director on the Government Contracting & Technology team, Watkins Meegan LLC

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Congress narrowly avoided a government shutdown for now. But chances are we will be back to this same place next month, as the continuing resolution passed by Senate on Monday night lasts through Nov. 18.

If a shutdown does occur, what should a government contractor do?

First, contractors must determine which contracts will and will not continue in a shutdown, said Rich Wilkinson, director on the Government Contracting & Technology team at Watkins Meegan LLC. (See the flow chart from Watkins.)

Some contractors will receive a stop-work order. "What it doesn't say is all the steps you should go through," Wilkinson said.

Watkins has a cost recovery check-off list for contractors after receiving a stop-work order:

Items commonly associated with stop work equitable adjustments include:
  • Management costs to implement the stop work, including an orderly cessation of the work, redeployment of resources, and coordination with the government:
  • Idle time for staff who were working on the project;
  • Severance pay if stop work is of long duration and necessitates layoffs;
  • Idle facility costs;
  • Startup and remobilization costs when the Stop Work Order is lifted and work resumes;
  • Recruiting additional staff to replace staff no longer available;
  • Inflation adjustments for labor and materials if the performance period is extended as a result of the stop work;
  • Unabsorbed overhead to relieve other contracts of the added burdens they bore during the stop work period;
  • Cost of preparing, submitting, and negotiating the equitable adjustment, including costs associated with outside accountants or consultants; and
  • Profit on the above items.