This episode of DevelopmentAid Dialogues examines the rising trend of USAID stop work orders and the difficulties they pose for implementing partners. These unexpected pauses in project activity have left organizations struggling with the urgent need to continue essential development work, financial uncertainty, and compliance challenges. Stop work orders (SWOs), which USAID has been using more frequently lately, have left partners juggling compliance, financial survival, and the urgent need to continue essential projects.
To discuss this pressing issue, our host Hisham Allam is joined by Katherine Gentic, an expert in USAID compliance and contract management. With over 20 years of experience and a track record of advising more than 50 USAID partners, Katherine provided critical insights into how organizations can navigate these disruptions while protecting their teams, subcontractors, and project continuity.
Download the transcript of this episode.
The episode begins with a breakdown of USAID’s stop work orders—what they entail, how they should be implemented under Federal Acquisition Regulation (FAR), and why recent instances deviate from best practices. According to Katherine, these orders have been issued hastily, often with vague language and little opportunity for contractors to seek clarification.
“USAID staff have largely been instructed not to discuss these orders outside the agency,” Katherine explained. “This has left contractors interpreting them on their own, with no clear guidance on what costs they can continue to incur.”
The financial repercussions are profound. Many USAID-funded partners, particularly small businesses and subcontractors, are struggling to stay afloat while waiting for clarity on cost reimbursement.
“Stop work orders are not terminations, but many partners expect the worst. “The financial burden of waiting for resolution is frequently unsustainable,” Katherine warned.
With uncertain timelines and delayed communication, how can organizations reduce expenses without jeopardizing future operations? Katherine outlined reasonable steps that partners can take to balance compliance with financial sustainability. She emphasizes that organizations must carefully assess staffing costs, as many field offices operate in countries where termination of employment comes with significant severance obligations.
“Organizations must weigh whether layoffs or retaining staff is the most cost-effective option. In some cases, it is cheaper to keep staff on payroll than to incur severance and rehiring costs later,” she says.
Reevaluating office leases is another major concern. Rent and utilities remain a fixed burden, and while some organizations may consider terminating leases, they must first secure USAID approval to dispose of government-funded assets.
“A stop work order is not a termination. If partners start liquidating assets without approval, they risk severe compliance violations,” Katherine cautioned.
Subcontractors, many of whom are small businesses, are particularly vulnerable when stop work orders take effect. Some prime contractors have refused to reimburse subcontractors for ongoing costs, a practice Katherine criticized as both unethical and non-compliant.
“Primes must advocate for their subs,” she insists. “The work these businesses do is integral to development efforts. They should not be left to shoulder the financial risk alone.”
As organizations prepare for the resumption of work, Katherine stressed the importance of meticulous record-keeping to support future claims for reimbursement.
“Creating separate charge codes is vital. Partners need a distinct cost category for stop work expenses so they can later file for an equitable adjustment,” she explains.
She also highlights the importance of building justification for costs.
“Detailed cost analyses can help partners demonstrate why certain expenses were unavoidable, strengthening their case for reimbursement.”
In extreme cases, legal action may be necessary.
“If USAID refuses to pay for pre-stop work costs, partners should seek counsel to protect their financial interests,” Katherine advised.
Diversification is key to weathering financial shocks. Katherine recommended that USAID partners consider expanding their donor base to include funders such as the World Bank, the Foreign, Commonwealth & Development Office (FCDO), and private sector partnerships. However, she warns that managing compliance across multiple funding sources requires careful financial and regulatory structuring.
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“Some organizations may need to create separate operational divisions to avoid compliance conflicts between different donors,” she notes.
As the episode wrapped up, Katherine emphasized that knowledge is the strongest tool for navigating the uncertainty of stop-work orders.
“Organizations that document everything, stay proactive, and advocate for their rights will be best positioned to recover.”
Listen to our latest podcast for expert insights into the growing trend of USAID stop work orders and their significant impact on implementing partners. Learn how organizations can manage financial uncertainty, stay compliant, and protect their operations while waiting for clarity.
