Hi there,
It's not much but I hope this helps.....
A contract is a contract at the end of the day. Contracts are put in place to 'protect' both parties, if they are done right.
What has happened here is your customer is in breech of the contract. However, you are prepared to compromise/negotiate to sort out something that is reasonable to both parties.
This is the angle I would take and yes. you are entitled to something out of it. However, you are prepared to give something in return, so they don't pay for 'no service'.
Try taking this position and I think you'll get somewhere, afterall, it's compromise you are looking for.
It's not much but I hope it helps. I wish you the best of luck. Just remember, the person you are dealing with may work for the local authorities but is probably untrained in business law. Take a deep breath, be confident and try to get something out of it. Your customer is confident because he works for a bigger organisation and he just feels you need the work more than he needs you as a supplier.
Listen, consider, offer and close.
I hope this helps.
Neil