Authors
Authors
Bradley J. Myrthil
Key takeaways
- Executive Order 14219 empowers DOGE to exercise management oversight and control over federal contract and grant activity
- EO instructs agencies to review existing contracts and grants for efficiency and report activity, and to provide payment justifications
- Federal contractors and grant recipients should review contracts and grants that could be scrutinized and develop contingency plans as needed
Transformation in federal spending
On February 26, 2025, President Trump signed into law Executive Order (EO) 14219, titled “Implementing the President’s ‘Department of Government Efficiency’ Cost Efficiency Initiative,” directing the newly created Department of Government Efficiency (DOGE) to review government spending under federal contracts and grants with the goal of reducing inefficiencies to save taxpayers money. Broadly defining “covered contacts and grants” to include all “discretionary spending through Federal contracts, grants, loans, and related instruments,” the EO’s key provisions include:
- Tracking payments. The EO directs federal agencies to build a centralized information technology (IT) system that tracks payments made under covered contracts and grants. Additionally, each proposed payment must be supported by a “brief, written justification” from the approving agency, which must be made publicly available. This “payment tracking system” must also “include a mechanism for the Agency Head to pause and rapidly review any payment for which the approving employee has not submitted a brief, written justification.”
- Reviewing contracts, grants and related policies. In consultation with the agency’s DOGE team lead, agency heads must – within 30 days of the Order – “review all existing covered contracts and grants” and either terminate or modify them “to reduce overall Federal spending to promote efficiency” as appropriate and consistent with applicable law. Agencies must also “conduct a comprehensive review of...contracting policies, procedures, and personnel” and issue revised guidance on the execution or modification of any contracts going forward.
- Agency travel expenditures. The EO also halts funding for any “conferences and other non-essential purposes” absent public written justification. It also imposes a 30-day freeze on government employees’ credit cards except for those engaged in critical services such as disaster response or relief. The EO further instructs agencies to develop a plan for the disposition of government-owned real property that is no longer needed.
Contracts and grants supporting law enforcement, customs, border protection, and the military are exempted from the EO’s mandates. Agencies can also seek waivers in consultation with DOGE and the Office of Management and Budget.
Implications and guidance for contractors and grantees
This EO marks yet another significant shift in how federal spending oversight takes place within the executive branch. Although the stated intent of EO 14219 is to increase efficiency, the new requirements will likely result in increased inefficiency. This includes the possibility of payment delays as agencies with increasingly limited resources must now prepare written justifications for payments that are presumably already justified given their nexus to executed contracts and assistance agreements. Agency personnel may also need to expend additional time ensuring that public written justifications do not run afoul of any confidentiality protections afforded to government contractors and grantees. This is of course in addition to the burden of not only developing a new IT system but also undertaking an exhaustive review of all covered agreements and associated policies and procedures.
Nevertheless, given the looming possibility of sweeping terminations and modifications of existing agreements, federal contractors and grantees should closely review the terms of their agreements, particularly the termination provisions, to assess their rights and obligations. They should also begin contingency planning to deal with any related disruption to their operations. It will be important to thoroughly document any costs incurred as a result of an agreement being modified or terminated for purposes of preparing either a request for equitable adjustment or a termination settlement proposal, or potentially filing a claim or appeal.
The net effect of this EO – to the extent it is not enjoined like others before it – will largely depend on how agencies approach implementation, which will, no doubt, vary from agency to agency. While there are still many unknowns and uncertainties about how EO 14219 may impact federal contractors and grantees, that doesn’t negate the need to prepare for what is yet to come.
Reed Smith’s Government Contracts and Grants team is available to advise on this and any other administration policies, as well as contractor and grantee rights and obligations in the event their agreements and operations are impacted. We will continue to monitor developments and provide timely updates on executive actions that affect organizations doing business with the federal government.
Client Alert 2025-075
Authors
Authors
Bradley J. Myrthil