Broken Contracts, Broken Businesses: The Ripple Effect of Terminations

Multiple small businesses with recently terminated contracts are telling me today they’re getting stiffed by the U.S. Government for work these small businesses have already done. Smalls are being told they cannot get any relief—the usual final negotiated costs (for costs not yet invoiced, for example) or equitable adjustments, etc.

A few months ago, I wrote an article on how you can’t just defund contracts. Well, you can’t just defund a contract if you’re a Government of laws.  You can’t just stiff contractors.  That’s not how the Government works, but it is how it works for some businessmen who never pay small suppliers and have more money to defend legal action than the victims do, and they may not employ the same rules as the Government does when it comes to binding agreements.  

Meanwhile, not getting paid or paid on time could mean you can’t repay your loans and end up losing your business. And that affects other businesses that you buy from, and that affects whole communities.  

Normally if a Contracting Officer told you that you weren’t getting paid for work you’ve already done and money you’ve already spent to buy supplies and hire personnel, you’d have a few options:  

•  T for C settlement proposal: You’re entitled under FAR Part 49 to submit a termination settlement proposal to recover costs incurred before termination. This is the most common, in my personal experience, though there’s a less cumbersome way to do this, too. This will be different if it’s a commercial buy under Part 12, so do check your contract for the appropriate termination clause.
• Request for Equitable Adjustment (REA): If you have costs related to ongoing task orders that were issued before termination, you may still be able to negotiate an REA to recover those costs.
• Legal Support: If the Contracting Officer refuses to consider an REA, you could—politely please—suggest they may want to consult their government contracts attorney.  They may simply not know or understand as terminations are not that common, but be careful not to offend them in how you ask about a legal read on the matter.
• Contract Disputes Act (CDA) Appeal:  You may consider filing a claim under the Contract Disputes Act (CDA), which could lead to an appeal with the Civilian Board of Contract Appeals (CBCA), Armed Services Board of Contract Appeals (ASBCA) or the U.S. Court of Federal Claims.
• Congressional Inquiries:  You should definitely contact your Congressman, and then you should continue to follow up—often. Sometimes, congressional inquiries can push agencies to reconsider their position, especially regarding small business impacts.
• SBA Advocacy: Consider reaching out to the SBA Office of Government Contracting & Business Development (GCBD), who can assist small businesses with federal contract disputes. Also submit a complaint to the SBA Office of National Ombudsman, which helps small businesses facing unfair treatment by federal agencies. If cash flow issues persist, you could explore SBA-backed loans for businesses impacted by Government contract terminations.
• GAO or IG Complaint: If you believe the agency has acted improperly in how it has handled the termination, which might have led to unnecessary financial harm, you could consider filing a Government Accountability Office (GAO) protest or a complaint with the agency’s IG. Granted, I’m not sure an IG is still available for your agency, considering multiple removals of IGs in 2025. As for GAO protests, this would be abnormal for the termination unless it was somehow tied to an improper award.  Maybe if the contract was terminated for convenience and then the work given sole source to a favored contractor who influenced the termination, but I can’t think of any other situations that would apply.
• PTAC (APEX) Consultation: Procurement Technical Assistance Centers (PTACs) provide free or low-cost help to small businesses navigating Government contracts. PTACs were rebranded in December 2022 as APEX Accelerators.

The options I’ve listed above are the norm, and since we are in unprecedented times, I can’t tell you if any of these will benefit you now. Delays in payment could be because the Contracting Officers are so overwhelmed with personnel cuts and their own terminations that they can’t get to your questions on time. But the terminations resulting from DOGE review in January and February 2025 have not been the norm. I also welcome any contract attorneys to weigh in on best options for small businesses with contracts being terminated.  I’m not an attorney—just a retired Contracting Officer volunteering my time and insights.

I realize that none of the normal avenues may give you results in the time frame needed to keep your business afloat.  “Move fast and break things” may be a catchy motto, but when you look long-term as I do, you know that things can’t be un-broken and that many things cannot be mended.

But here’s what I’d do immediately and why, if I were a small business who couldn’t get paid for my work, couldn’t get paid on time, or just had issue with these terminations, especially since so many are presented as “it’s fraud” vs “we didn’t like the purpose of contracts that were legitimately awarded with Congressionally-appropriated funds.” 

I might also do this as a terminated Federal employee.

I would jump on every social media platform I’m on personally and that my company is on and I’d put out a message—today.  Then I might put out regular messages at whatever intervals decreases my blood pressure. I’d tell a story. This is what people crave:  either sound bites or stories that incite emotion. 

I’d explain that the U.S. Government is refusing to pay my small business (or late or terminating work unfairly) for work they contracted me for and that it’s a financial blow to my business—that it means I’ll have to cut back on planned purchases or that I won’t be able to hire additional employees as planned or that I might have to shutter my business entirely.  I’d tell that story initially of how it affects me, my family, my employees, their families.   

Then, like concentric circles rippling out from original wound, I’d expand to those indirectly affected.   

And I’d tag them.  

The local research organization that handles clinical trial management. The local company that services lab equipment.  The small IT/Cybersecurity firm that manages research data. I’d list every local and/or small business whose products or services will show up on my tax return this year, whether as 1099’s or receipts.  

Tag ‘em.  Tag ‘em all, so they know they’ll be affected by this, too.

And then tag your Congressman. And their staffers and anyone related to their office. Tag your local SBA.  Tag the Agency.  Tag ‘em all.

Does this seem nonsensical to post your story on social media?  Maybe, under normal conditions.  But we’re not doing normal this year, are we?  We are living in a time when contracts are being broken by the Government acting in its sovereign position.  

We are also living in a time when marketing emotional responses is the new standard.  Does it play well on TV?  Did footage get picked up by all the podcasters?  Does it stir you to rage or tears on social media?  How does a one-line factual plea for help compete with all the big, flashy made-for-the-screen events?   After all, if you try carrying a chainsaw into an event to make a point, and it ain’t gonna end well.

But what you do have is your story, and an explanation of how your personal story and financial pain ripples out to your community.  It doesn’t trickle down.  It ripples outward, sometimes in tsunami waves.  

Tell your story in ways that your community and your Congressman cannot ignore.  Make those representatives earn their pay. If they don’t have your back, then why should you have theirs?

Don’t expect people to understand the ramifications of your termination when you speak in your usual quiet, rational manner.  You are now competing to be heard and seen amid the noise and flash of people who are far more gifted at audio and visual effects than you are and have a bigger platform than you do.  You can’t be heard if you’re quiet.  Tell your story, and show how you are woven into the larger community.  What affects you today will affect others in your community tomorrow.