Alejandro (Alex) Sarria Discusses Federal Contract Terminations and Loss Mitigation in Bloomberg Law
Subtitle
"Federal Contractors Focus on Limiting Losses as DOGE Cuts Arrive"
Bloomberg Law
Alex Sarria discussed the practical steps federal contractors and grantees should take to prepare for contract and agreement terminations and modifications resulting from Executive Order 14222 (Implementing the President's "Department of Government Efficiency" Cost Efficiency Initiative). With potentially thousands of contracts and grants on the chopping block, many companies are focusing on limiting losses rather than challenging the legality of terminations given the government's broad authority to terminate and modify federally funded agreements. Sarria advises contractors to meticulously document their costs in two key areas: (1) unpaid costs of performance incurred prior to any termination, and (2) costs incurred as a result of a termination. He recommends that every terminated entity first ask: "What are the costs that we have incurred that are unpaid as yet?" And next, to identify all termination-related expenses, such as severance payments or lease-breaking fees. Sarria emphasizes, "You are always entitled to be made whole" after a termination, highlighting the importance of clear documentation. He also warns companies to carefully review contract modifications, cautioning, "Be very careful about what you sign, because the fine print matters."