Shutdown Best Practices: Advice from Government Contracting Lawyers

In my last shutdown article, "2025 Shutdown: Contract Activity Update", I noted some lessons learned from the FY 2019 shutdown, including how many contractors emerged with more refined strategies for dealing with future shutdowns. I wanted to dive deeper into what those strategies looked like. What are the best practices for setting up your organization to recover on the other side of a shutdown?

I am many things, but a government contracting lawyer I am not, so I did what I do best – research. The themes in legal guidance was fairly clear, so I’ve provided them here as a centralized “tip list” for contractors. This is a summary of my takeaways for tactical shutdown best practices; please consult your lawyer for customized guidance.

Contract Review

• Map all contract funding status (fully funded, incremental, no-year, multi-year)
• Identify which contracts are “excepted” or essential under shutdown rules
• Flag contracts approaching funding limits
• Review your contract’s clauses on equitable adjustments, excusable delays, changes, termination for convenience
• File timely notice of delay/disruption to CO as required by contract
• Meet all deadlines. Proposal, compliance, administrative, audit, claims and other deadlines often remain in force even in shutdowns.
• Consult legal counsel early to evaluate exposure and recovery strategies

Trigger or Wait for Formal Direction

• Immediately comply with stop-work orders
• In the absence of formal direction, assess whether continuing work is lawful (does your contract allow excepted activity or use prior funds?)
• DO NOT volunteer work in hopes of future pay. The Anti-Deficiency Act prohibits government officials from spending or obligating federal funds more than or in advance of an appropriation so continuing work is a risk.

Stakeholder Communication

• Send written notices to COs/CORs to confirm work status, requests for guidance, and impact of inability to perform. You may not get an answer if they are furloughed or overwhelmed as part of a “skeleton” crew, but your written documentation will prove that you tried.
• Engage with subcontractors to align on suspensions, work stoppage rights, shared risks. If your subcontracts lack stop-work rights or flow-down clauses, you may get claims from subs or get exposed to risks you can’t control.
• Maintain minimal ongoing communication (status updates, readiness statements) even if you receive no response.

Documentation and Cost Tracking

• DOCUMENT EVERYTHING. Log every delay, loss of access, facility closure, extra costs to demobilize/remobilize.
• Record efforts to mitigate costs, such as reassigning staff to other work, reducing operational costs and scaling back operations.
• Isolate “shutdown-caused costs” from normal operating costs (such as with a unique shutdown charge code in your accounting system). This will make it easier to inform any future claims for entitlement to equitable adjustments, delay damages, or cost recovery.
• Maintain a ledger of the costs of inactivity (e.g. idle labor, standby costs, storage, repurchasing, etc.).
• Maintain contemporaneous communications, memos, emails, etc.

Expense and Cash Management

• Evaluate cost structure to see what can be scaled back temporarily (facilities, travel, contractor usage).
• Ration cash reserves (e.g., payroll, critical suppliers and revenue-generating investments).
• Accelerate billing/invoicing through to the CO or relevant agency before shutdown.
• Investigate alternate financing or lines of credit if necessary.

Workforce Planning

• Determine how many pay cycles your organization can float.
• Temporarily reassign or cross-train staff to maintain productivity and preserve institutional knowledge.
• Retain “core” staff needed for immediate rebound
• If layoffs or furloughs are unavoidable, plan them to minimize disruption and preserve critical capabilities.
• Ensure compliance with labor law (e.g. wages, benefits, notice) if workforce reductions become necessary.

Scenario Planning and Post-Shutdown Readiness

• Develop plans for multiple shutdown duration scenarios: short (e.g. <7 days), medium (2–4 weeks), long (>1 month).
• Monitor public signals (Congress, appropriations bills, OMB memos, GovWin analysis) for advance notice. Establish a shutdown “watch team” to monitor developments and cascade information as it develops.
• Set internal thresholds (cash burn buffer, contract suspension triggers).
• Develop pre-defined “restart” playbooks: which contracts to resume first, communications, staffing and technical remobilization strategies.
• Prepare proposal templates, cost models and transition plans for when procurement cycles resume.
• Be ready to pursue newly funding opportunities and agencies quickly; agencies will prioritize clearly procurement backlogs.
• Ensure your systems, compliance, and audits are ready (e.g. DCAA, financial, reporting).
• Prepare “reopening readiness” insights to employees, partners, clients and prospects.

The best strategies for shutdowns involve planning for multiple scenarios across all impacted parts of the business, while also planning to hit the ground running when the shutdown is over.