How should contractors respond to GAO findings that stopgap funding causes program delays and cost growth? 2026

According to GSA guidelines, contractors must maintain contemporaneous records that tie labor, materials, and schedule changes directly to stopgap funding periods. GAO’s reissued Feb. 4, 2026 review of defense programs shows CRs interrupt milestone payments, delay testing windows, and raise overhead. Contractors should record daily logs, purchase-order holds, labor reassignments, and communications with contracting officers to preserve cost-recovery and schedule-change claims under FAR Part 33 and the Changes clause. Documented evidence should include dates when obligated funding was unavailable, notices from the government, and any constructive changes experienced. This recordkeeping protects contractor entitlement and aligns with audit expectations from DCAA and the contracting officer’s adjudication timeline, and supports potential equitable adjustments or termination-for-convenience settlements.

Per FAR 19.502, small businesses can and must use subcontracting and teaming strategies to hedge production and labor risk during funding uncertainties. GAO’s FY2026 budget assessments found that smaller primes and subcontractors are disproportionately affected by CR-driven cash-flow interruptions, which can force workforce layoffs or stop-work actions. Under FAR requirements, primes should flow down relevant contract funding- and suspension-language to subs, maintain documentation of pass-through impacts, and use progress payments or accelerated invoicing where permissible. Joint-venture agreements and 8(a)/HUBZone/WOSB/SDVOSB certifications should be leveraged to maintain deliverables while protecting small-business status and claim rights.

The SBA reports that 78% of small-government contractors surveyed face cash-flow pressure during funding gaps, increasing the risk of missed milestones and higher unit costs. GAO’s reports in January–February 2026 highlight similar contractor-reported effects: administrative burden, increased re-procurement cost, and schedule growth. Contractors should use SBA resources and GSA guidance to document subcontractor impacts and mitigate risk through negotiated suspension-of-work terms. Engage SBA officials for counseling on financial resilience programs and certify eligibility for accelerated payments or surety support when contracts exceed $100,000 and stopgap measures threaten performance.

Under OMB M-25-21, agencies will include stronger fiscal transparency and reporting requirements that affect how contracting officers document stopgap periods and notify contractors. GAO’s 2026 High‑Risk List and related budget assessments call for agencies to improve contract-level funding visibility. Contractors must therefore align their internal cost-accounting and project-management systems to produce OMB-compliant reports, support earned value management where applicable, and deliver required snapshots of work accomplished during CRs. Maintain automated audit trails for labor charging, material receipts, and change requests so agency funding officers can reconcile obligations post-CR and so claims adjudicators have clear, auditable linkage between the funding gap and incurred costs.

DoD's CMMC framework requires contractors handling Controlled Unclassified Information (CUI) to maintain cybersecurity continuity planning during funding interruptions. GAO noted that cyber and sustainment activities suffer when stopgap funding delays occur, increasing risk to program schedules. Contractors should budget for cyber sustainment costs ($50K–$250K depending on system size) during CR exposure and document any inability to complete testing or patching due to funding constraints. Coordinate with DoD program offices and Contracting Officers to ensure that cybersecurity work stoppages and their cost impacts are captured as potential claim elements under DFARS change and termination provisions.

According to GSA guidelines, proactive contract governance reduces exposure to CR-driven cost growth: update risk registers monthly, run schedule re-baselines tied to funding milestones, and hold formal funding-impact reviews after each CR. GAO’s Feb. 2026 analysis tied repeated stopgap funding to cumulative schedule slips and compounding overhead. Use GSA-approved templates for funding-impact notices and include quantified cost-per-day and cost-per-task metrics. Where feasible, negotiate Contracting Officer Agreement (COA) language for temporary funding contingency actions (e.g., phased mobilization, prioritized tasking) and document government direction to avoid constructive-change disputes.

Per FAR 19.502, small businesses can leverage subcontract flexibility and teaming arrangements to spread CR risk; GSA and SBA resources provide templates for flow-down clauses and interim financing programs. GAO’s High‑Risk List for 2025–2026 urges agencies to streamline CR impacts and reduce administrative burden; contractors that align with these agency expectations and flow down clear notification processes to subs reduce disputes and preserve performance. Work with your financial institution and surety to secure short-term liquidity—documented in writing—and keep the CO informed to demonstrate good-faith performance and mitigate termination or default risk.

Under OMB M-25-21 and GAO’s FY2026 budget review, agencies are expected to improve funding transparency and to provide clearer guidance to contractors on CR impacts. Contractors should map contract line-item funding to appropriation line items and track when obligations lapse or resume. Coordinate with agency budget officers and use FedRAMP-authorized tools for secure submission of financial impact analyses when transmitting sensitive procurement data. This alignment with OMB and agency expectations increases the likelihood that claims will be accepted and reimbursed.