Key Details: As the federal government shutdown continues, many agencies remain closed or are operating with limited staff, creating widespread uncertainty for contractors. Work has been paused, payments delayed, and communication with contracting officers slowed. While contractors have focused on documenting impacts and halting unauthorized work, it is equally important to understand what comes next. Once operations resume, many contractors may be eligible to recover costs or time lost due to government-caused interruptions. These recovery efforts take the form of equitable adjustments, a key mechanism that ensures contractors are not financially disadvantaged by circumstances beyond their control.
Understanding Equitable Adjustments
An equitable adjustment (EA) is a contract modification that compensates contractors for increased costs, schedule delays, or other performance impacts resulting from government-directed actions. The goal is not to generate profit, but to restore the contractor to the financial position they would have been in if the event had not occurred.
During a shutdown, events such as stop-work orders, delayed access to facilities, or postponed approvals can all lead to situations where an equitable adjustment may be appropriate. Common triggers include formal stop-work orders issued under FAR 52.242-15, suspension of work under FAR 52.242-14, or directed contract changes under FAR 52.243-1. Each of these clauses provides a pathway for contractors to seek compensation or schedule relief when performance is interrupted through no fault of their own.
What Is a Request for Equitable Adjustment (REA)?
A Request for Equitable Adjustment (REA) is the formal submission a contractor provides to the contracting officer to request financial compensation or a time extension. The REA outlines what government action caused the impact, the resulting delay or cost increase, and the contractual basis for recovery.
A strong REA is built on clarity and documentation. It should explain the nature of the government’s action, reference relevant FAR clauses, and include evidence such as written orders, emails, cost data, and work logs. The contracting officer will use this information to evaluate whether the request meets eligibility requirements and determine if a contract modification is warranted.
Unlike a formal claim, an REA is intended as a negotiation tool rather than a legal demand. It encourages collaboration between the contractor and the government to resolve the matter without triggering a dispute under the Contract Disputes Act. However, if the REA is denied or ignored, contractors may later convert it into a formal claim to preserve their rights.
REA vs. Formal Claim: Key Distinctions
The difference between an REA and a claim lies in formality and legal status. An REA is a written request for contract modification that seeks equitable relief, typically handled through negotiation. A claim, on the other hand, is a certified demand for payment or time that falls under the Contract Disputes Act (CDA).
If an REA is not resolved, a contractor may elevate it to a claim, but doing so begins a more formal process involving certification requirements and the potential for appeal to the Boards of Contract Appeals or the Court of Federal Claims. For most contractors, starting with an REA provides a more practical and less adversarial path to resolution.
Relevant FAR Clauses
Several FAR clauses form the basis for equitable adjustments and are particularly relevant during the current shutdown.
- FAR 52.242-15 – Stop-Work Order: This clause allows the contracting officer to suspend work for up to 90 days. If the order increases costs or delays performance, the contractor may request an equitable adjustment within 30 days of the work resuming.
- FAR 52.242-14 – Suspension of Work: Commonly used in construction and supply contracts, this clause provides for cost recovery when the government unreasonably delays work or prevents access to the site.
- FAR 52.243-1 – Changes Clause: This provision applies when the government modifies specifications, delivery schedules, or methods of performance. If such changes increase cost or time, contractors are entitled to an equitable adjustment.
Each clause includes specific deadlines and documentation requirements. Failing to meet those notice periods can jeopardize eligibility, so contractors should carefully review the language in each contract.
When Can Contractors Submit an REA?
Contractors may submit an REA after experiencing measurable cost or schedule impacts caused by government action. In the context of the 2025 shutdown, this could include receiving a stop-work or suspension order, incurring idle labor costs due to closed facilities, paying rent or overhead for inactive projects, or demobilizing equipment. The key is establishing a direct connection between the government’s direction and the contractor’s incurred costs.
Contractors are generally not eligible for an equitable adjustment if costs stem from voluntary decisions, internal inefficiencies, or unauthorized work performed during the shutdown. All claimed costs must be documented, reasonable, and allocable to the affected contract.
Preparing a Request
To strengthen the likelihood of approval, contractors should take several practical steps before submitting an REA. First, review all relevant contract clauses and identify applicable deadlines. Next, organize all documentation, including stop-work notices, communications, time records, and cost data. Be sure to quantify the financial impact and describe how the shutdown directly caused increased costs or delays.
The REA should be concise, factual, and well-supported. Submissions should avoid emotional language or assumptions and instead rely on contemporaneous records. Once operations resume, the REA should be submitted through the contracting officer for review and negotiation.
The Importance of Documentation
Comprehensive documentation is the foundation of every equitable adjustment. Contractors should maintain centralized records of when work stopped, what communications were exchanged, and which costs were incurred during the shutdown. Payroll reports, overhead calculations, and subcontractor correspondence can all help substantiate the claim. These records will also be critical if the REA later transitions into a formal claim or is audited by the government.
Conclusion
The ongoing 2025 government shutdown continues to disrupt contract performance across the federal marketplace. For many contractors, the ability to recover costs through an equitable adjustment will be essential to long-term stability. Understanding what an REA is, when it applies, and how to prepare one ensures you are positioned for success once operations resume.
Ryan & Wetmore is here to help contractors navigate this process with precision and confidence. Contact our team today to review your contract terms, evaluate shutdown-related costs, and begin preparing a Request for Equitable Adjustment tailored to your organization’s needs.
FAQs: Equitable Adjustments During A Government Shutdown
- What is an equitable adjustment in government contracting?
An equitable adjustment is a contract modification that compensates a contractor for increased costs or schedule delays caused by government actions such as stop-work orders, suspensions, or directed changes. Its goal is to restore the contractor to the same financial position they would have been in if the event had not occurred. - What is the difference between an equitable adjustment and a Request for Equitable Adjustment (REA)?
An equitable adjustment refers to the actual change in contract price or schedule that results from negotiation. A Request for Equitable Adjustment (REA) is the formal document a contractor submits to the government to request that adjustment. The REA includes supporting documentation, cost data, and references to the applicable FAR clauses. - How is an REA different from a formal claim under the Contract Disputes Act?
An REA is typically a negotiation tool, allowing contractors and contracting officers to resolve issues collaboratively. A claim is a certified legal demand for payment or time that falls under the Contract Disputes Act and can be appealed to the Boards of Contract Appeals or the Court of Federal Claims. Contractors often file an REA first to avoid formal disputes.
- Which FAR clauses apply to equitable adjustments during a shutdown?
Three clauses are most relevant:- FAR 52.242-15 (Stop-Work Order) – authorizes the government to suspend work and allows contractors to seek compensation or time extensions.
- FAR 52.242-14 (Suspension of Work) – provides recovery for unreasonable government-caused delays.
- FAR 52.243-1 (Changes) – covers directed changes to specifications, delivery, or performance that increase cost or time.
- When can a contractor submit a Request for Equitable Adjustment?
Contractors can submit an REA after they experience measurable cost or time impacts directly tied to government direction—such as a stop-work order, facility closure, or delay in approvals. REAs must be supported by clear documentation and submitted within the time limits specified in the contract, often within 30 days after work resumes.
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About Samad Arouna
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Samad Arouna is the Marketing Coordinator at Ryan & Wetmore, bringing a wealth of knowledge in digital marketing strategy and analytics. Before joining Ryan & Wetmore, Samad honed his skills working as a loan specialist for the Small Business Administration. He holds a Bachelor of Business Administration and a Master of Science in Marketing. Samad is dedicated to devising innovative marketing solutions that drive growth and success for the firm.
