On February 26, 2025, President Trump signed an Executive Order (EO) aimed at transforming federal spending on contracts, grants, and loans. The order emphasizes that it “commences a transformation in Federal spending on contracts, grants, and loans to ensure Government spending is transparent and Government employees are accountable to the American public.” Here’s what government contractors need to be aware of.
Who Does the EO Apply To?
The EO primarily targets Agency Heads and outlines that each Agency Head will collaborate closely with their Department of Government Efficiency (DOGE) Team Lead on various initiatives. These efforts aim to reduce federal spending and address issues of fraud, waste, and abuse. The DOGE, established by EO 14158 on January 20, 2025, is tasked with advising Agency Heads on implementing the President’s DOGE Agenda.
Are All Federal Contracts and Grants Covered by This New EO?
No, the EO applies only to “covered contracts and grants,” which are defined as “discretionary spending through Federal contracts, grants, loans, and related instruments.” However, the EO excludes direct assistance to individuals, spending related to immigration enforcement, law enforcement, military operations, public safety, and the intelligence community. Other types of critical or emergency spending may also be exempt as determined by the relevant Agency Head. Agencies are required to notify their DOGE Team Lead about any exclusions.
Notably, the EO excludes contracts and grants associated with federal criminal or immigration law enforcement, U.S. Customs and Border Protection, U.S. Immigration and Customs Enforcement, the Uniformed Services, classified information, and other areas that Agency Heads may exempt with written consent in consultation with the DOGE Team Lead and the Director of the Office of Management and Budget (OMB).
What Does the EO Require Agency Heads to Do?
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Build Centralized Systems to Track Payments
Agency Heads are directed to develop centralized systems to record payments to contractors and grantees. These systems must track every payment made by the agency and include brief justifications for each payment, signed off by the agency employee who approved it. The EO encourages these justifications to be posted publicly, “to the maximum extent permitted by law,” though some exemptions may apply. This directive requires considerable effort to integrate and make existing government software systems interoperable. DOGE Team Leads will report monthly to the DOGE Administrator about contracting activities, including payment justifications from each agency’s system. -
Review Existing Contracts and Grants
Agency Heads must review “covered contracts and grants” within 30 days in collaboration with the DOGE Team Lead. The goal is to identify opportunities to reduce overall federal spending or modify contracts and grants to promote efficiency and align with the policies of the Trump administration. -
Review Contracting Policies, Procedures, and Personnel
In the same 30-day period, Agency Heads must also review their contracting policies, procedures, and personnel. The EO does not specify what criteria should guide these reviews. Once completed, but before entering into new contracts, Agency Heads and DOGE Team Leads must issue guidance regarding new or modified contracts to enhance government efficiency and support the administration’s policies. -
Create New Systems for Non-Essential Travel Approval
Agency Heads are required to implement a new system for recording approvals for federally funded travel, particularly for conferences or other non-essential purposes. Employees will be prohibited from engaging in federally funded travel unless there is a written justification in the system from the official approving the travel. DOGE Team Leads must submit monthly reports detailing justifications for non-essential travel, and these justifications should be posted publicly unless prohibited by law or exempted by the Agency Head.
What Can Contractors Do?
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Check for Exclusions
Contractors should assess whether their contracts fall under the exclusions outlined in the EO. These exclusions may be broadly interpreted, such as the category for “the military,” which could encompass all Department of Defense contracts. Agency Heads have some discretion in determining whether a contract qualifies for an exclusion, using undefined terms like “critical” and “acute.” Contractors should consult with legal counsel to explore whether their contracts might be excluded from the EO’s provisions. -
Monitor Payment Obligations
Contractors should closely monitor the prompt payment requirements under existing contracts. According to the Prompt Payment Act, the government is required to pay contractors within 30 days of receiving a properly submitted invoice. For prime contractors working with small businesses, payments should be made within 15 days. The EO’s new requirements for payment tracking may necessitate even more coordination with contracting officers (CO) and contracting officer representatives (COR) to ensure timely payments and to comply with the new payment justification system once it is implemented.
This EO represents a significant shift in the way federal agencies manage and track their spending, and our DC Employment attorneys recommend government contractors to stay informed and prepared for potential changes to their contracts.