Preparing for the Administration Change: A Toolkit for Government Contractors and Grant Recipients

As the new administration embarks on its first 100 days, contractors and grant recipients face a pivotal moment. With a clear emphasis on reducing government spending and shifting resources toward energy independence and traditional defense infrastructure, the administration’s early actions set the tone for policy direction, budget priorities, and compliance requirements. The uncertainty surrounding when, where, and how these changes will take effect raises critical questions for the industry. For all contractors and grant recipients, but in particular those supporting essential infrastructure, advancing clean energy or cutting-edge technologies, proactive planning can be the key to mitigating risks and capitalizing on new opportunities. Below, we outline three strategic steps to help you position your organization for future growth.

I. Reviewing Contract and Grant Terms

In light of the incoming administration's focus on reducing government spending and reprioritizing resources, it is crucial for government contractors and government grant recipients to conduct a thorough review of their current agreements and potential opportunities. Understanding the specific terms and conditions of your contracts and grants, as well as the projects in your pipeline, is a critical first step toward mitigating potential risks and ensuring compliance with evolving policies. This review should focus on key provisions that may be impacted by funding shifts, policy changes, or administrative actions. Below are key areas to examine in your contracts and grants to prepare for potential disruptions and safeguard your business interests.

A. Relevant Termination Clauses FAR 49.401 / 2 CFR 200.240

All grants and contracts have termination mechanisms, and understanding which clauses are in your contracts and what types of events trigger them is one of the first steps an organization should do. Termination for default under FAR 49.401 or the parallel Uniform Guidance clause in 2 CFR 200.340 occurs when a contractor or grant recipient fails to perform its obligations or comply with the terms and conditions of the award. In the context of federal contracts—especially those supporting critical infrastructure or defense priorities—the consequences of a default termination can be severe. For example, if a contractor is developing a cybersecurity system for defense applications and fails to meet performance standards, the government may terminate the contract for default. Under the Uniform Guidance, noncompliance with federal statutes, regulations, or terms and conditions of the award can also lead to termination. Similarly, a grant recipient working on a public health initiative that fails to submit required progress reports or misallocates grant funds may face termination for cause. Organizations should have a clear understanding of what events would constitute default. If, however, these events have not been recently reviewed, or put into a comprehensive format, now is the time to develop a strategy or look at potential changes. It is essential to be vigilant about compliance and performance standards, even if they seem minor, to avoid claims by a government customer that a terminable event has occurred. The best way to insulate an organization from any such claim is to maintain clear documentation, conduct regular performance reviews, undertake any corrective actions if issues arise, and disclose any potential noncompliance to the government as soon as possible after identification.

B. Funding Contingency Provisions

In addition to understanding when the government has the right to terminate an agreement, a second critical variable is to understand how a particular contract or grant is funded and the funding status of each award. Below are examples of clauses that help identify applicable funding provisions:

• Congressional Appropriations (FAR 52.232-18): Projects tied to energy modernization, cybersecurity, or critical manufacturing may face heightened scrutiny under the clause addressing the availability of funds due to congressional appropriations. FAR 52.232-18, “Availability of Funds,” stipulates that the government’s obligation under the contract is contingent upon the availability of appropriated funds. This means that if Congress does not appropriate sufficient funds, the government is not obligated to continue the project. Given the political and economic climate, projects in areas such as energy modernization, cybersecurity, or critical manufacturing may be particularly vulnerable to changes in funding priorities. It is essential to review your contract’s funding terms to identify any vulnerabilities. For instance, energy projects aimed at reducing carbon emissions or enhancing grid security may face funding delays or cuts if there are shifts in legislative priorities; cybersecurity initiatives protecting critical infrastructure may be subjected to increased scrutiny and funding uncertainties;
• Contingency Clauses (FAR 52.232-22): Contingency clauses, such as FAR 52.232-22’s “Limitation of Funds,” may drastically alter how funding may be adjusted based on appropriations or changing priorities. This clause requires contractors to notify the government when they are approaching the limit of obligated funds. It allows for the adjustment of contract funding based on the availability of appropriations. Projects tied to national security or strategic energy needs are particularly susceptible to changes in funding priorities. For example, a project developing advanced cybersecurity measures for defense networks may be subject to funding fluctuations based on evolving national security threats or legislative changes. Similarly, initiatives focused on strategic energy needs, such as renewable energy projects or infrastructure improvements, may experience funding adjustments as federal priorities shift; and
• Revision of Budget and Program Plan (2 CFR §200.308): Under the Uniform Guidance, 2 CFR §200.308(d) and 2 CFR §200.344(a), grant recipients can determine which portions of a federal award have been obligated and funded. These provisions state that funds obligated by a federal agency through an executed notice of award are legally binding unless the grant is terminated. A termination, governed by 2 CFR §200.340 must align with specified justifications (e.g., mutual agreement, material noncompliance, or lack of funds). Additionally, 2 CFR §200.308(b) emphasizes the need for grant recipients to seek prior written approval for programmatic or budgetary changes, which may further clarify the portion of funding already committed and non-revocable. Each federal agency's supplement to the Uniform Guidance often includes more specific terms regarding the conditions under which obligated funds may remain available to the recipient, even during changes to program priorities or funding availability. These supplements are essential for understanding the limits of grant protections.

Projects that are still being negotiated or that are still in a proposal phase will not have as much certainty as those that are already finalized, contractors and grantees should ensure that potential projects in the pipeline are reviewed for similar terms and conditions. This will help in assessing the viability and any potential risk associated with future opportunities based upon changing in funding priorities.

II. Building a Comprehensive Response Plan

In the context of an evolving federal landscape, building a comprehensive response plan based on funding and termination provisions for existing and future work is essential to navigating the complexities introduced by a new administration. Such a plan is essential for not only addressing immediate challenges or pivots but also positioning organizations to adapt effectively to future shifts and opportunities. A well-structured response plan encompasses several critical components, including budget analysis, stakeholder engagement, and easily accessible documentation. Additionally, it should account for both current projects and those in the pipeline; ensuring that your organization is prepared to adapt to potential funding shifts and policy changes. Some key elements to consider when crafting a robust response plan that safeguards your operations and underscores your commitment to US strategic interests include:

A. Budget Analysis

Assess Funding Levels of Existing Work: To ensure financial stability in the face of potential government spending cuts, it is essential for contractors and grant recipients to assess the funding levels of their existing projects. Companies should confirm committed funds by reviewing the specific sections of their contract or grant documentation, such as the funding and payment clauses, appendices, and schedules. Additionally, they should consult with their contracting officers or grant administrators to verify the current status of obligated funds. This proactive approach helps identify any discrepancies or potential shortfalls in funding, allowing for timely adjustments and strategic planning.

Assess Impact of Funding Cuts: Evaluating the potential impact of funding cuts or terminations on critical projects involves several key steps. First, review the specific clauses in your contracts or grants that pertain to funding adjustments, such as FAR 31.205-42 and 2 CFR 200.344, which outline allowable costs and closeout procedures. Next, conduct a detailed financial analysis to determine the current and projected expenditures for each project, focusing on those supporting initiatives that could be areas of investment or possible budgetary cuts given the incoming administration’s evolving priorities such as energy independence, cybersecurity, or critical infrastructure.

Identify critical milestones and deliverables that may be affected by funding reductions and prioritize these elements to understand the potential operational impacts. Additionally, assess the financial health of subcontractors and suppliers to gauge their ability to withstand funding fluctuations.

It is important to engage with your program managers and financial officers to develop contingency plans, which may include reallocating resources, scaling back project scopes, or identifying alternative funding sources. Consult regularly with contracting officers or grant administrators to stay informed about any anticipated changes in funding levels. By performing this thorough evaluation and having an open dialogue, you can better understand the implications of funding cuts and take proactive measures to mitigate risks, ensuring the continuity and success of your strategically important projects. Depending on an organization’s reliance on a particular government award or awards, it may be necessary to develop contingency budgets to sustain operations, or even identify alternative funding sources, especially for projects that are deemed to be at risk.

B. Stakeholder Engagement:

Keeping open channels with contracting officers and grant administrators is crucial for staying ahead of potential changes in funding or priorities. Establish a regular communication schedule to discuss current project status and any anticipated changes in government policies or funding allocations. 

It will be critical during the early days of the administration to stay informed of any legislative and policy changes that could affect contract or grant terms by monitoring Federal Register notices, grant guidance documents, and agency-specific regulations. One of the best and most effective ways to accomplish this is to engage regularly with contracting officers or grant administrators to learn of any evolving considerations that could impact a project, these communications can also clarify terms or resolve issues early, thereby solidifying a strong working relationship that can further assist in ensuring a successful completion of, and compliance with, any contract or grant terms.

During these discussions, ask specific questions to gain valuable insights. Actively monitor legislative updates and federal agency communications to remain informed about potential shifts in funding priorities or regulatory changes:

1. Agency Priorities or Legislative Changes: “Can you provide any guidance on upcoming policy shifts that might impact our current or future projects, particularly those related to energy independence, cybersecurity, or critical infrastructure?”
2. Funding Status: “Are there any expected changes or updates to the funding status of our existing contracts or grants?”
3. Policy Shifts: “Can you provide any guidance on upcoming policy shifts that might impact our current or future projects, particularly those related to energy independence, cybersecurity, or critical infrastructure?”
4. Priority Changes: “Have there been any recent changes in agency priorities that we should be aware of, and how might these affect our projects?”
5. Compliance Requirements: “Are there any new compliance requirements or standards, such as updated CMMC or Buy American provisions, that we need to prepare for?”
6. Risk Mitigation: “What steps can we take to better align our projects with the agency's strategic goals and mitigate the risk of funding cuts or terminations?”

Document the outcomes of these communications and share the information with internal teams to ensure everyone is aligned and prepared for potential changes. Request written confirmation of any and all critical updates or decisions to maintain a clear record of communications and agreements. Proactively engage with contracting officers and grant administrators and asking pertinent questions enables an organization to better anticipate changes, adapt strategies accordingly, and ensure projects remain aligned with evolving government priorities and funding landscapes.

III. Understanding Legal Remedies

Once you have gathered detailed information about each project and developed a corresponding response plan, the next step is understanding what legal remedies are available if the government takes actions that may violate the terms of an award. This section highlights key provisions and strategies for managing termination costs, pursuing equitable adjustments, and resolving disputes. Taking these steps will not only help mitigate risks but also position your organization to adapt effectively to shifting priorities and maintain stability amid potential changes.

A. Claims for Termination Costs

Termination clauses in federal contracts and grants provide specific remedies when agreements end prematurely. Familiarity with these provisions, since they differ based on the contract or grant language, can allow organizations to recover eligible costs and minimize financial impacts.

• For Federal Contracts: Under FAR 52.249-2 (Termination for Convenience of the Government), contractors terminated for convenience are entitled to recover: (i) Costs incurred for completed work; (ii) Costs reasonably incurred for preparation and cessation of the terminated work; and (iii) A reasonable profit on work performed prior to termination. And, if applicable, ensure detailed documentation of all project costs, including subcontractor expenses and other allowable costs under FAR Part 31 (Contract Cost Principles and Procedures).
• For Grant Recipients: 2 CFR §200.344(b) allows grant recipients to claim allowable costs up to the termination date. This includes obligations properly incurred and costs that cannot be canceled without undue burden. Review your award agreement and agency-specific supplements to understand the procedures for claiming termination costs, particularly under program-specific funding rules.

B. Seeking Equitable Adjustments

Changes to contract or grant terms, funding allocations, or project scope may entitle an organization to an equitable adjustment to recover additional costs incurred. Of note, it is important to communicate with the contract or grant administrator who has the authority to bind the federal government, in writing, regarding any changes in scope related to the contract or grant terms. While changes routinely occur, there is often confusion as to the specific scope of the changes and who will bear any costs associated with a change to the scope of performance. 

• For Federal Contracts: FAR 52.243-1 , provides contractors the right to request adjustments for changes initiated by the government that increase costs or time to perform. Equitable adjustments can cover labor, materials, subcontractor costs, and extended project timelines. Contractors must promptly notify the contracting officer to preserve their rights under the clause. Proactively track costs and maintain contemporaneous records to strengthen your adjustment requests.
• For Grant Recipients: Under 2 CFR §200.308, grant recipients may request prior approval for changes to project scope or budget that impact performance. Ensure compliance with agency-specific guidelines for submitting and documenting adjustment requests.

C. Disputes and Notice Requirements

Lastly, contractors and grant recipients must have a clear understanding of the dispute process that would apply if a particular conflict cannot be resolved through routine contract negotiation. These requirements vary between contractors and grant recipients and can even vary by Federal Agency.

• For Federal Contracts: Disputes are governed by the Contract Disputes Act (41 U.S.C. §7101 et seq.), which establishes a framework for contractors to file claims and appeal adverse decisions. Contractors should:
  • Submit a detailed written claim to the contracting officer within six years of the dispute's occurrence;
  • If denied, appeal to the appropriate Board of Contract Appeals (e.g., the Armed Services Board of Contract Appeals or the Civilian Board of Contract Appeals); and
  • Consider alternative dispute resolution options, such as mediation, to resolve conflicts efficiently.
• For Grant Recipients: 2 CFR §200.341 provides opportunities for grant recipients to object to government decisions, often through written submissions and hearings. Agency-specific supplements, such as HHS 45 CFR Part 75, offer additional guidance on appeals processes and grievance mechanisms. Typical steps include submitting a formal request for reconsideration, escalating to the agency’s designated appeals authority, and, in cases of significant federal interest, seeking review by the Office of Management and Budget.

One key component to any of these legal remedies is maintaining meticulous records of all project activities, costs, and communications—thorough documentation is critical for seeking termination costs, equitable adjustments, or resolving disputes. Consult experienced government contracts or grants counsel to navigate complex disputes, prepare claims, pursue appeals, or identify additional remedies under common law or statutory frameworks. By understanding the legal frameworks governing termination, adjustment, and dispute resolution, organizations can effectively manage challenges, protect their projects, and continue contributing to national security and other critical priorities. Proactive planning and informed decision-making are the cornerstones of resilience in times of change.

Conclusion

Every change of administration is different, and in order to successfully navigate the opening months of the new administration, organizations must combine a clear understanding of their government project terms with a well-developed action plan. Strategic planning, paired with active engagement through monitoring legislative developments and maintaining open communication with federal agencies, is essential to ensuring a smooth and successful transition. Once developed, consolidating this information into a single, regularly updated document that can be shared with key stakeholders helps maintain preparedness and focus across the organization. By remaining proactive and adaptable, organizations can address emerging challenges, protect their projects, and stay responsive to evolving national security and strategic priorities. This holistic approach safeguards current operations while strengthening long-term partnerships with government customers in a rapidly changing landscape.

White & Case means the international legal practice comprising White & Case LLP, a New York State registered limited liability partnership, White & Case LLP, a limited liability partnership incorporated under English law and all other affiliated partnerships, companies and entities.

This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.

Client Checklist: Preparing for the Administration Change

1. Review Contract and Grant Terms

• Termination Clauses
  • Identify termination provisions: FAR 49.401 (Default) / 2 CFR 200.340 (Noncompliance).
  • Confirm events that trigger termination and ensure compliance with performance standards.
  • Maintain clear documentation and conduct regular performance reviews.
• Funding Provisions
  • Review funding terms:
    • FAR 52.232-18 (Availability of Funds)
    • FAR 52.232-22 (Limitation of Funds)
    • 2 CFR 200.308 (Budget Revision Rules)
  • Confirm funding status for all active projects.
  • Assess risks for projects tied to energy, defense, or infrastructure.
• Pipeline Projects
  • Evaluate terms in pending proposals for vulnerabilities.
  • Prioritize projects most aligned with shifting federal priorities.

2. Build a Comprehensive Response Plan

• Budget Analysis
  • Confirm committed funds for current projects.
  • Assess potential impacts of funding cuts (FAR 31.205-42 / 2 CFR 200.344).
  • Develop contingency budgets and identify alternative funding sources.
• Stakeholder Engagement
  • Establish regular communication with contracting officers/grant administrators.
  • Discuss:
    • Funding status and agency priorities
    • Compliance requirements (e.g., Buy American, CMMC)
    • Risk mitigation strategies
  • Document outcomes and maintain clear records.

3. Understand Legal Remedies

• Termination Costs
  • For Federal Contracts: Review FAR 52.249-2 (Termination for Convenience).
  • For Grants: Confirm allowable costs under 2 CFR 200.344(b).
• Equitable Adjustments
  • For Contracts: Utilize FAR 52.243-1 (Changes Clause) for scope/funding changes.
  • For Grants: Seek approval for changes under 2 CFR 200.308.
• Dispute Processes
  • Federal Contracts: Follow the Contract Disputes Act process (41 U.S.C. §7101 et seq.).
  • Grants: Pursue appeals under 2 CFR 200.341 and agency-specific guidance.
  • Maintain meticulous records to support claims or disputes.

4. Strategic Next Steps

• Consolidate findings into a single, regularly updated document.
• Monitor legislative updates, Federal Register notices, and agency guidance.
• Engage legal counsel to address complex issues and protect your organization’s interests.

_{White & Case means the international legal practice comprising White & Case LLP, a New York State registered limited liability partnership, White & Case LLP, a limited liability partnership incorporated under English law and all other affiliated partnerships, companies and entities.}

_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}

_{© 2025 White & Case LLP}