Gordon Rees Scully Mansukhani presents the latest insights from our Government Contracts group, offering a comprehensive overview of recent significant decisions, regulatory changes, and essential updates for businesses contracting with federal and state governments. Our team compiled the most pertinent legal developments to keep you informed in the dynamic landscape of government contracts.
Tune in to The Essential GovCon Brief podcast on Spotify or YouTube for an in-depth discussion of the issues highlighted here.
Planning for the End of the Shutdown: Practical Guide for Government Contractors
As the federal government shutdown continues into its second month, with potential signs of an agreement on the horizon, contractors are navigating widespread disruption. Many agencies remain closed or short-staffed, invoice processing has stalled, and project work has been delayed or suspended. Despite these challenges, several practical measures can help limit operational and financial exposure while preparing for the eventual resumption of work.
Understand Legal and Contractual Boundaries
Contractors must first determine the scope of work legally permissible during a lapse in appropriations. Federal law prohibits agencies from authorizing work or payments without available funding. Each contract should be reviewed to identify whether it is fully funded, incrementally funded, or “excepted” due to its connection with essential functions such as national security or safety. A clear understanding of these boundaries helps prevent the performance of work that may not be reimbursable once appropriations are restored.
Sort Contracts by Funding and Access Status
A comprehensive inventory of active contracts can clarify which projects may continue and which require suspension. Each contract should be assessed for (1) remaining obligated funds, (2) accessibility of government facilities, and (3) availability of oversight or approvals. Categorizing contracts in this manner supports consistent and defensible decisions about performance during the shutdown.
Secure Written Guidance From the Contracting Officer
Written communication from the contracting officer is essential before altering or continuing performance. Contractors should formally request confirmation regarding whether work should proceed, be suspended, or stop entirely. Retaining written correspondence provides a contemporaneous record of good-faith efforts to obtain direction and can serve as critical evidence in any later cost or performance dispute.
Build a Shutdown Cost and Impact Record
Accurate documentation of shutdown-related impacts will be vital for future cost recovery or internal accounting. Records should capture standby labor, demobilization and remobilization expenses, delayed approvals, and idle equipment costs. Assigning a dedicated accounting code for shutdown activity enables precise tracking and simplifies later analysis.
Manage Cash Flow, Workforce, and Subcontractors
Careful financial and personnel planning is necessary to mitigate the effects of suspended payments or halted performance. Contractors should review billing schedules, monitor available credit, and evaluate whether staff can be reassigned to funded projects. Communication with subcontractors regarding project status, payment timing, and access restrictions can help maintain relationships and avoid downstream disputes.
Maintain Strategic Communications
Transparent and consistent communication across all stakeholders supports stability during extended shutdowns. Regular updates to contracting officers, subcontractors, and employees can help manage expectations and demonstrate proactive management of contractual obligations. Well-documented communications will also assist in reconstructing timelines and decisions once government operations resume.
Plan for Restart and Future Resilience
When appropriations are restored, agencies often face significant backlogs in approvals, payments, and site coordination. Contractors that have prepared detailed restart plans, plans that include prioritizing personnel, deliverables, and logistical steps, will be best positioned to resume operations efficiently. Post-shutdown evaluations should capture lessons learned to improve resilience in the event of future funding interruptions.
New DFARS Rule: Restrictions on Consulting Services with Covered Foreign Entities
The Department of Defense (DoD) has issued a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to implement section 812 of the National Defense Authorization Act for Fiscal Year 2024. The new clause, DFARS 252.209-7012, “Prohibition Relating to Conflicts of Interest in Consulting Services—Certification,” establishes new restrictions for contractors providing consulting services to DoD.
Key Provisions
- The rule restricts DoD contracting officers in awarding contracts for consulting services under NAICS codes beginning with 5416 (e.g., management, scientific, and technical consulting services) to offerors who:
- Cannot certify that neither they nor their subsidiaries/affiliates have a contract or subcontract for consulting services with a covered foreign entity, and
- Do not have an auditable conflict-of-interest mitigation plan approved by the contracting officer.
- “Consulting services” are defined broadly as advisory and assistance services but exclude certain legal, audit, accounting, tax, reporting, or judicial dispute resolution services.
- The rule applies to both prime contracts and subcontracts, including acquisitions at or below the Simplified Acquisition Threshold, so long as the contract is for consulting services under NAICS 5416 and is with DoD.
- “Covered foreign entities” include foreign governments and entities associated with China, Russia, or other adversarial states, such as the People’s Republic of China, the Chinese Communist Party, the People’s Liberation Army, and the Russian Federation. Entities appearing on specified U.S. sanctions or control lists also qualify as covered foreign entities.
- Offerors unable to certify non-involvement must submit an auditable mitigation plan outlining procedures to prevent conflicts between consulting work for DoD and any covered foreign entity. The plan must also include internal reporting and notification protocols for identifying potential conflicts.
- A waiver mechanism allows contracting officers to approve an award when it is in the best interests of the United States, but such waivers must be reported to Congress.
- The rule took effect on October 24, 2025, and applies to solicitations and awards issued after that date.
Practical Implications for Contractors
Contractors providing management, scientific, or technical consulting services to DoD should review their global consulting activities, including those of subsidiaries and affiliates, to ensure compliance with the new certification and mitigation requirements.
Because the rule extends to both prime and subcontract relationships and applies even to commercial-item acquisitions under FAR Part 12, contractors should evaluate existing compliance programs, enhance due diligence procedures for affiliate relationships, and develop mitigation protocols in advance of upcoming solicitations.
Failure to provide the required certification or maintain an approved mitigation plan can result in ineligibility for award. Beyond immediate compliance obligations, the rule reflects a broader policy shift: national security and foreign-influence considerations are increasingly shaping acquisition policy across the consulting and professional services sectors, not only in defense manufacturing and technology.
GRSM Government Contracts Practice Group
GRSM’s Government Contracts team has considerable experience defending and enforcing the rights of our contractor clients in disputes against government entities and private businesses. In addition to litigating claims in state and federal courts, we routinely handle matters before administrative tribunals, such as the Government Accountability Office, the Small Business Administration, and the Armed Services Board of Contract Appeals.
Our team of attorneys is located throughout the United States, which allows the firm to represent contractors, regardless of size, in a wide variety of industries, including defense, information technology, construction, and aerospace, among others.
Please contact Patrick Burns, Meredith Thielbahr, and Quyen Dang for further information or with any questions.