If Contractors incur costs (at their risk) under a FFP type contract with a stop work to preserve delivery schedule/production shut-down, are the costs considered allowable (to the extent they would have been allowable before a stop work) if and when the stop work is released? Are they considered pre-contract costs that would normally be allowed in FFP contracting? We are considering ways to avoid a production gap and will consider going out at risk using company funding - but only to the extent those costs are allowable when we resume.
The decision to stop-work is a contracting officer decision, as would also be the decision to allow payment of costs associated with restarting work. The contractor can submit a request for equitable adjustment to request payment of any costs that are considered reasonable, allowable and allocable, but the decision to pay those costs is a contracting officers decision. I would recommend reviewing the contracts terms and conditions, particularly paying attention to whether or not the contract includes FAR clause 52.242-15 which address stop work orders. This clause provides for the suspension, delay or interruption of the work for the Government's convenience.
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If the Government wants to stop work for a period of time, such as 90 days, they should issue a Stop work order and make an adjustment to compensate the contractor for the increased costs caused by the delay. The decision to operate at risk during the timeframe when the stop-work order is in place is an internal business decision made by the contractor, hence term “at risk”. There can be no guarantee, unless agreed to ahead of time with the contracting officer through bilateral agreement, to cover any costs incurred during that timeframe because there is no guarantee that the government will resume work and could in fact terminate for convenience the remainder of the work to be performed. FAR 52.242-15 goes on to say:
If a stop-work order issued under this clause is canceled or the period of the order or any extension thereof expires, the Contractor shall resume work. The Contracting Officer shall make an equitable adjustment in the delivery schedule or contract price, or both, and the contract shall be modified, in writing, accordingly,
(1) The stop-work order results in an increase in the time required for, or in the Contractors cost properly allocable to, the performance of any part of this contract; and
(2) The Contractor asserts its right to the adjustment within 30 days after the end of the period of work stoppage; provided, that, if the Contracting Officer decides the facts justify the action, the Contracting Officer may receive and act upon the claim submitted at any time before final payment under this contract.