Government
Trump Orders Agency Heads to Review and 'Terminate or Modify' Contracts
Executive order includes exemptions for military projects, such as this construction at the US Marine Corps Base Camp Blaz in Dededo, Guam, but it directs a broad review of federal contracts at most agencies.
Photo by Rachel Landers/Office in Charge of Construction Marine Corps Marianas
In a Feb. 26 executive order, President Donald Trump directed federal agency heads to review their contracts and grants, and to “terminate or modify” them where possible to reduce or reallocate spending. Attorneys say contractors working for the government should talk to their agency contracting officers to get ahead of the uncertainty.
The order also directs agency heads to work with team leads of the Trump initiative known as the Dept. of Government Efficiency (DOGE) to build a centralized system for recording all payments their agencies make with “written justification” from the employee who approved each payment, and to conduct a review of their contracting processes, including procedures and personnel. Agency heads have 30 days to conduct the reviews.
There are exemptions for law enforcement, U.S. Customs and Border Protection, U.S. Immigration and Customs Enforcement and the military included in the order. But it largely leaves “an uncertain situation for how this gets implemented,” says Alexander Canizares, a partner and firm-wide vice-chair of the government contracts practice at law firm Perkins Coie LLP.
“We’re trying to read the tea leaves a little bit to determine how agency heads are going to be making these kinds of decisions,” he says. “There’s very little in the executive order itself that would identify what the factors are, but I think it’s fair to expect that agencies are going to be mindful of this concept of efficiency, because this executive order is ostensibly implementing DOGE’s agenda.”
Contract reviews should focus on cutting or changing spending “to promote efficiency and advance the policies of my administration,” Trump’s order states. But it’s not clear how that might apply to many construction projects, or whether officials would seek to end or alter contracts signed during the Biden administration that include provisions dealing with items such as subcontracting with businesses owned by women or members of a minority group, the use of “cleaner” construction materials or having project labor agreements.
While the order sets 30 days for reviews, it does not specify a timeline for contract terminations or renegotiations.
“On the contract modification and termination, I would expect that we'll start seeing some results of that within the 30 days, because that review is supposed to be ongoing, and I would expect some level of communication to occur to the contracting community as that's ongoing,” says Joshua Mullen, a partner at law firm Womble Bond Dickinson who focuses on government contracts and business litigation.
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With just 30 days for the review, Mullen questions how in-depth agency analyses will be.
“There's not a lot of time to conduct the evaluation,” he says.
With so much uncertainty, the attorneys recommend that contractors working for the government review their contracts, particularly items like termination or change clauses and what compensation the firms may be entitled to.
“Contractors need to be ready to protect their rights and be able to engage in productive dialogue on all these issues,” Canizares says.
Attorneys also recommend that contractors start communication with agency contracting officers ahead of any possible changes. They may have a sense of what direction the agency is taking. Even if they don’t, “communication is key in all this,” he adds.
Contractors also may be able to advocate for why a project is one the government should continue.
“I would try to communicate with the agency professionals … why your particular project is an efficient, important project that does meet the administration’s priorities,” Mullen says.
