Strategies for Persuading the Government to Resume or Reinstate Your Government Contract

Given the Trump Administration's emphasis on savings and efficiency, many contractors have or will receive a stop-work order or a termination for convenience. A previous Holland & Knight alert outlined the rights and obligations of contractors in these situations. In the present environment, contractors should consider proactive, novel strategies to make the business case for keeping their projects going. 

Writer Dale Carnegie famously advocated for "talking in terms of the other person's interests" in order to influence others. This advice is as true in government contracting as it is in interpersonal relationships. This Holland & Knight alert offers a strategy for responding to terminations for convenience and stop-work orders: convince the government to keep the project going.

Federal Contracts May be Reinstated Following a Termination

Within the Federal Acquisition Regulation (FAR) is a little-known provision – FAR 49.102(d), Reinstatement of Terminated Contracts. This clause provides as follows:

Upon written consent of the contractor, the contracting office may reinstate the terminated portion of a contract in whole or in part by amending the notice of termination if it has been determined in writing that:

(1) Circumstances clearly indicate a requirement for the terminated items; and

(2) Reinstatement is advantageous to the government.

In other words, if the government terminates a contract, it can subsequently reinstate it if 1) the contractor consents and 2) reinstatement is advantageous to the government. There is very little case law interpreting FAR 49.102(d), although tribunals agree that the decision to reinstate a terminated contract is "wholly within the discretion of the Contracting Officer."¹ Yet there are indicators that this clause may see more frequent use as contracting officers face pressure to reduce costs, while also obtaining the goods and services that government customers need.

With President Donald Trump's recent executive order explicitly directing agencies to modify contracts "through renegotiation" as described in a previous Holland & Knight blog post, the government is interested in obtaining a better deal for the American taxpayer. Though some programs have little chance of remaining viable, in other situations, the underlying project may not be the driving force of the termination. Agencies may be seeking cost savings either due to executive directives or budgetary constraints. In these situations, contractors should consider reaching out to the contracting officer or other relevant agency officials to inquire if a renegotiation could save the contract. No company likes to negotiate against itself, but a modified contract may be better than a terminated one. And the costs to make this offer are negligible. As the adage goes, "You miss 100 percent of the shots you don't take."

Proactively Responding to a Stop-Work Order

Similarly, contractors could be proactive when faced with a stop-work order. In recent weeks, there have been large-scale acquisition pauses and issuances of stop-work orders by many agencies as Trump Administration priorities are being assessed. On Jan. 24, 2025, the General Services Administration's (GSA) acting administrator issued an acquisition pause, directing contracting officers to "suspend the execution of any new GSA-funded obligations, including new awards, task and delivery orders, modifications, and options," aside from certain enumerated exceptions.

In the wake of this and similar directives, multitudes of contracts were put on hold. Yet, some contractors found a way to resume work by persuading the government of the importance of their work. Clients have obtained successful outcomes by speaking in terms of the government's interests such as demonstrating that the contract in question actually reduces the government's overall costs and generates efficiencies for agency operations. Some contracts naturally lend themselves to this justification such as energy savings performance contracts (ESPCs). For other contracts, the cost savings and efficiency argument may be more nuanced.

In addition, if a particular contract relates to a national security or law enforcement purpose, this may be a basis to resume work. GSA's acquisition pause excepted out "Actions to support the President, Vice-President and the Secret Service in ensuring security any dollar level," and "Actions in support of FEMA at any dollar level." If a stopped project has a national security, law enforcement or disaster response nexus, the contractor should highlight this to the contracting officer and other relevant agency officials. There have been instances where the contracting officer halted a contract with a stop-work order, but after the client provided a well-supported explanation as to the contract's benefits (speaking in terms of the government's priorities), the agency allowed work to resume.

Conclusion

When faced with a termination for convenience or a stop-work order, contractors should consider all of their options. In some instances, it may make sense to explore the possibility of litigation to challenge a termination. In other cases, the best path to pursue may be a proactive response that persuades the government to keep the project going. Whether through speaking in the government's interests or offering to renegotiate terms, it is possible for contractors to maintain their contracts where it makes financial and business sense to do so.

Please contact the authors if you have specific questions.

Notes

¹ International Foods Retort Co., ASBCA Nos. 34954 et al., 92-2 BCA ¶ 24,994 (1992); Hannon Elec. Co. v. United States, 31 Fed. Cl. 135, 150 (1994).

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.