Stop-Work Order

A stop-work order is a formal written directive from the contracting officer requiring the contractor to halt all or a specified portion of contract work, typically issued when the government needs to resolve a technical, funding, or legal issue before performance can continue.

What is a Stop-Work Order?

Stop-work orders are authorized by FAR 52.242-15 (the Stop-Work Order clause, incorporated into most services contracts) and FAR 52.242-3 (for research and development contracts). Upon receiving a stop-work order, the contractor must immediately take all reasonable steps to minimize incurring costs during the suspension, notify subcontractors, and protect any work in progress or government property.

Stop-work orders are limited to 90 days under the standard FAR clause, though the contracting officer may extend the stop-work period by written order. If the government does not cancel the stop-work order or resume work within the stated period (or extended period), the contractor may demand a decision from the contracting officer within specified timeframes. If no decision is issued, the contractor may treat the stop-work order as a termination for convenience.

The allowable costs during a stop-work period include: costs already incurred before the stop-work that cannot be cancelled (materials ordered, subcontractor mobilization costs, facility costs); costs required to protect and preserve work in progress; and idle labor costs if the contractor cannot reassign workers to other projects. The contractor is not entitled to profit on work not performed during the stop-work period, but is entitled to recover an equitable adjustment reflecting the impact of the suspension when work resumes.

Common reasons for stop-work orders: funding gaps or continuing resolutions that temporarily limit obligations; protest automatic stays requiring work to halt while a bid protest is adjudicated; legal or regulatory review requirements; or technical issues discovered mid-performance that require redesign before work can continue.

Why Stop-Work Orders matter for government contractors

Stop-work orders can be financially devastating for contractors who cannot quickly redeploy specialized staff or dedicated facilities. The allowable cost recovery during the stop period is narrower than it appears, idle overhead and indirect costs must be carefully documented to be recovered. Contractors should immediately assess the financial impact upon receiving a stop-work order and document all costs incurred during the suspension period.

Example

A DoD cybersecurity contractor is directed to stop all work on a classified network assessment after a congressional inquiry into the program's scope requires review by the agency's legal counsel. The stop-work order is issued on March 1, covering 100% of work scope, for a period not to exceed 60 days. The contractor immediately suspends all billable work, notifies two subcontractors, and places hardware orders on hold where cancellation is feasible. Over the 60-day period, the contractor incurs $95,000 in allowable idle costs: retained cleared staff costs that could not be reassigned to other programs, facility costs for the cleared facility required to be maintained, and hardware orders past the cancellation window. At resume, the contractor submits a $95,000 equitable adjustment for stop-work costs and a 60-day schedule extension.

Frequently Asked Questions

Does a stop-work order entitle the contractor to profit on the stopped period?

No. Under the standard FAR stop-work clause, the contractor is entitled to an equitable adjustment covering allowable costs incurred during the suspension, but not profit on work not performed. Profit is earned only on work actually performed. The contractor does recover profit on any resumed work after the stop order is lifted.

What if the government extends the stop-work order beyond 90 days?

The FAR clause allows the contracting officer to extend the 90-day period by written notice. If the stop-work order is not cancelled or work is not resumed within the extended period, the contractor can demand a decision within 90 days. If no decision is given, the contractor may treat it as a termination for convenience and submit a termination settlement proposal.

Must the contractor lay off employees during a stop-work order?

Not necessarily. The contractor must take "reasonable steps to minimize" costs during the suspension. What is reasonable depends on the circumstances: if the stop-work is expected to be short (days to a few weeks), laying off cleared personnel (who may be difficult to rehire) may not be reasonable. If the stop-work extends for months, the contractor will need to reassign or release idle staff to minimize unallowable idle costs.

Can a stop-work order be issued for only part of the contract?

Yes. A partial stop-work order may suspend specific work areas, task orders, or contract line items while allowing other work to continue. The contractor must comply with the scope of the stop-work as issued and continue only the work not covered by the order.