Where can GovCon find clarity in the Trump transition turbulence?
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Contractors, their government customers, and pretty much everyone across the public sector ecosystem is trying their best. But here are some steps and action items that companies can follow.
One point of clarity for government contractors is worth a reminder in a period of turbulence stemming from the volume and pace of executive orders out of the new Trump administration.
Talk to your contracting officer.
That piece of advice comes from a Wednesday media call hosted by the Professional Services Council, one of the main trade associations representing GovCon companies, and is an item that CEO David Berteau said PSC tells its of members constantly.
The only real guidance that can affect a federal contract comes from the contracting officer associated with it, Berteau told reporters. Whether that be the administrative contracting officer involved in a program or another person with equivalent authority.
“If an executive order says stop work, if a memorandum from the secretary of cabinet department says stop work, that has no contractual effect,” Berteau said. “Under the Federal Acquisition Regulation, the only guidance that can be issued to stop work is a written stop-work order issued by a cognizant contracting officer. We certainly suggest to our members that they pay close attention to that and have good communications with their contracting officers across-the-board.”
Contracting officers and other acquisition professionals inside government are almost certainly trying to sort through all the confusion themselves, just like their partners in industry are.
The Defense Department tried to clarify on Tuesday that contracting activity continues to go on after reports emerged that Defense Secretary Pete Hegseth had called for a review of active contracts and forthcoming solicitations to remove diversity, equity, and inclusion language required by one Trump executive order.
Then there is the General Services Administration memo sent Thursday that pauses “new GSA-funded obligations” without much detail or explanation of what it covers.
Here we have another point of confusion for contractor and government customer alike, especially with the Monday proposal submission deadline nearing for GSA’s Alliant 3 IT solutions contract vehicle.
Stephanie Kostro, PSC’s executive vice president for policy, told reporters that one member company has not been able to obtain certain past performance information from contracting officers to include in the Alliant 3 bid.
“They are not getting those letters from contracting officers, contracting officers have gone silent on this, and so this could complicate things like Alliant,” Kostro said.
But a second major point of clarity is emerging in the forms of stop-work orders on some contracts and terminations of others. At the U.S. Agency for International Development, Berteau said “hundreds of stop-work orders” have gone to member companies in light of a since-lifted foreign aid spending freeze.
PSC has also been told that contract terminations for convenience “across the board” are happening at other agencies, according to Berteau. He said the vast majority of those are to comply with Trump’s executive order to end diversity, equity and inclusion initiatives across the government.
So what does a contractor do upon the receipt of a valid stop-work order from their customer, or notice of termination for convenience?
Dan Russell, a GovCon attorney at the law firm Covington, told WT the vast majority of situations they are hearing about from clients (so far) have to do with stop-work orders and not (yet) terminations.
The first step in any stop-work order situation is to fully understand the scope of it, Russell said.
For FAR-based contracts, Russell said contractors have to carefully consider what costs they should continue to incur in the event they receive a stop-work order.
Companies are entitled to recover reasonable costs that result from the order, as long as they do what Russell called the “right kind of paperwork” and are deliberate in how they develop the record.
“They should be considering how best to document and build a record memorializing the decisions they're making, in the event that they are scrutinized for incurring costs that might later be viewed as unreasonable,” Russell said.
On the matter of terminations, Russell cautioned that those “tend to be uphill battles” in terms of challenging those moves.
Absent that, contractors could encounter disputes over what are allowable costs and what they are entitled to recover for the period predating the termination. Costs incurred in the aftermath of the termination could be in dispute as well, Russell added.
“There may be disagreements over cost allowability maybe in conjunction with disputes over the right to terminate, but I certainly can see scenarios where that's going to result in litigation,” Russell said.
With all of that said, we can actually provide a third major point of clarity in this period of turbulence. This point also comes from Berteau and is another reminder PSC gives to its member companies.
“In any agency, when a stop-work order is issued to a contractor, it does not relieve the contractor of the affirmative responsibility to be prepared to resume work and perform that contract when the stop-work order is lifted,” Berteau said.