Executive Order Impacting Funding on Contract or Grant Work
The President issued an Executive Order (EO) on January 20, 2025, to immediately pause the disbursement of funds appropriated through the Inflation Reduction Act of 2022 (Public Law 117-169) or the Infrastructure Investment and Jobs Act (Public Law 117058). This relates to programs for issuing grants, loans, contracts, or any other financial disbursements of such appropriated funds. The Office of Management and Budget issued a guidance memo on January 28 and rescinded the memorandum on January 29.
US Agency for International Development (USAID) Programs
The President also issued an Executive Order on January 20, 2025, for a 90-day pause for new obligations and disbursements of development assistance funds to foreign countries pending reviews of such programs impacting USAID programs. It further states that department and agency heads and the Director of OMB will make determinations as to whether to continue, modify, or cease each foreign assistance program. Subsequent to the EO, the U.S. Department of State issued a stop work order on nearly all existing foreign assistance awards although some waivers have been issued.
What Does This Mean to Your Company or Organization?
You need to comply and stop work.
And yes, this will create issues for any employees you cannot simply reassign to another continuing effort.
FAR-Based Contracts
FAR-based contracts generally include FAR 52.242-15 Stop-Work Order or FAR 52.242-14 Suspension of Work clauses as well as a Termination for Convenience clause. These clauses contain the contractual requirements and include instructions for suspending or terminating contract work.
If a stop work order is received:
- Review the stop work order and stop all applicable work addressed in the order;
- Notify applicable subcontractors to stop work immediately;
- If there are costs that you cannot stop immediately, coordinate with the Contracting Officer;
- Maintain all documentation, accounting records, and correspondence; and
- Make sure you are ready to start work if the stop work order is removed.
It is important to have detailed accounting records to support all costs incurred as a result of the stop work order. If the stop work order is canceled, you may submit a request for equitable adjustment for the additional cost you incur. Additionally, if the contract is terminated, you will need to include these additional costs as part of your settlement proposal.
Government auditors question a substantial amount of cost based on FAR 31.201-2(d), which provides that “A contractor is responsible for accounting for costs appropriately and for maintaining records, including supporting documentation, adequate to demonstrate that costs claimed have been incurred, are allocable to the contract, and comply with applicable cost principles in this subpart and agency supplements.”
Grants
While 2 CFR 200 for grants does not have specific stop work and termination clauses, there is termination language in 2 CFR 200.340 Termination and 2 CFR 200.472 Termination and standard closeout costs.
A notification terminating or suspending work under a grant will also apply to any subawards and contracts. The 2 CFR 200 regulations flow down to all subawards under a grant. Contracts issued under a grant require the flow down of a termination for convenience requirement (see Appendix II to Part 200 Contract Provisions for Non-Federal Entity Contracts Under Federal Awards). Yes, even for contracts for transportation contracts or purchasing petri dishes.
2 CFR 200 does not use the term “stop-work order.” However, if the Contracting Officer issues a letter stating the funding is suspended or terminated, you should perform the following steps:
- Review the notification letter from the Granting Official and suspend all work immediately;
- There may be costs that cannot be suspended immediately, requiring you to document the cost and the reason;
- Notify subrecipients and contractors to stop their work as appropriate;
- Maintain all documentation, accounting records, and correspondence; and
- Make sure you are ready to start work if the funding is returned.
Documentation is important as you will be asked to support the additional costs resulting from the suspension or termination.
Takeaways
Since it is unclear how soon stop-work orders will be issued and whether they will impact your contracts or grants, it is important to get a head start. If you have contracts or grants with funds appropriated through the Inflation Reduction Act of 2022, the Infrastructure Investment and Jobs Act, and USAID programs that may be impacted by the EO, we recommend you:
- Timely submit any pending invoices for payment before a stop work order is issued;
- Review termination clauses in contracts, grants, and subawards; and
- Develop a plan for any potential stop work order or suspension of funding to include a list of all subcontractors under contracts and subrecipients and contractors under a grant.
It is important to be prepared. Make sure you maintain documentation and correspondence between Contracting/Granting Official and subcontractors/subrecipients/contractors.
Redstone GCI is here to help you navigate the complexities of contract and grant compliance. Whether you need guidance on FAR Part 52, 2 CFR 200, or developing a strategic response plan, our experts are ready to assist. Stay proactive, protect your organization, and ensure compliance—reach out to us today.
Lynne is a Director with Redstone Government Consulting, Inc. providing government contract consulting services to our clients primarily related to Commercial Item Determinations and support, Cost Accounting Standards, DFARS Business System Audits, Proposals, and Incurred Cost. Prior to joining Redstone Government Consulting, Lynne served in several capacities with DCAA and DCMA for over 35 years. Professional Experience Lynne began her career working with DCAA in the Honeywell Resident Office, Clearwater, FL in 1984. Lynne’s experience included various positions which involved conducting or reviewing forward proposals or rate audits, financial capability audits, progress payments, accounting and estimating systems, cost accounting standards, claims and disclosure statement reviews. She is an expert in FAR, DFARS, CAS and testified as an expert witness. Lynne assisted in drafting the commercial item guidance for DCAA Headquarters. Lynne was assigned as a Regional Technical Specialist where she provided guidance to 20 field offices on highly complex or technical issues relative to forward pricing, financial capability or progress payment issues. As an Assistant for Quality, she was involved in reviewing and ensuring audit reports were in compliance with policy and GAGAS as well as made NASBA certified presentations to the staff including but not limited to billing reviews, CAS, unallowable cost and progress payments. To enhance her experience in government contracting, Lynne accepted a position with DCMA in 2015 as part of the newly organized DCMA Cadre of Experts in the Commercial Item Group. This included performing reviews of prime contractor’s assertions and/or commercial item determinations as well as performing price analyses. Lynne was a project lead and later became a lead analyst where she engaged with the buying commands on requests and reviewed price analysis reviews performed by a team of 5 analysts. She also assisted the DCMA CPSR team relative to commercial items and co-instructed the Commercial Item Training presented to DCMA. Education Lynne earned a Bachelor of Science Degree in Accounting from the University of Central Florida. Certifications State of Florida Certified Public Accountant State of Alabama Certified Public Accountant Defense Acquisition Workforce Improvement Act (DAWIA) Level III- Auditing DAWIA Level III – Contracting