Executive Order on DOGE Cost Efficiency: Major Changes in Federal Contracts and Grants

The Trump Administration issued an executive order (EO) on Feb. 26, 2025, implementing the U.S. Department of Government Efficiency's (DOGE) "cost efficiency initiative" that seeks to transform federal spending on contracts, grants and loans by mandating federal agencies implement new mechanisms for recording, justifying and approving agency payments; conduct comprehensive reviews of contracts, grants, contracting policies, procedures and personnel; and issue new guidance on signing or modifying contracts.

Importantly, the EO does not apply to law enforcement officers;¹ covered contracts and grants directly related to the enforcement of federal criminal or immigration law; U.S. Customs and Border Protection (CBP) and U.S. Immigration and Customs Enforcement (ICE) in the U.S. Department of Homeland Security (DHS); the uniformed services;² any other covered grant or contract; agency component or real property that the relevant agency head exempts in writing from all or part of this order, in consultation with the agency's DOGE team lead and the director of the U.S. Office of Management and Budget (OMB); or classified information or classified information systems.

Below is a summary of key takeaways from the EO, as well as important considerations for government contractors in this new era of rapid change and expanded government oversight.

Federal Government Contracts, Grants and Loans Are Covered by This EO Unless an Exclusion Applies

The EO is applicable to "covered contracts and grants," which are defined as "discretionary spending through Federal contracts, grants, loans, and related instruments." Importantly, it excludes "direct assistance to individuals; expenditures related to immigration enforcement, law enforcement, the military, public safety and the intelligence community.

Agency Heads Are Required to Review All Existing Covered Contracts and Grants By March 26, 2025, and to Terminate or Modify These Agreements Where Appropriate and Consistent with Applicable Law

Each "Agency Head"³ is required to consult with the agency's "DOGE Team Lead" to review all existing covered contracts and grants and to terminate or modify (including through renegotiation) such covered contracts and grants where appropriate and consistent with applicable law to "reduce overall Federal spending or reallocate spending to promote efficiency and advance the policies of [the Trump] Administration." Agencies have 30 days to complete this review. Agencies are directed to start the process "immediately" and prioritize the review of covered contracts and grants to "educational institutions and foreign entities" for "waste, fraud, and abuse."

The EO does not provide any guidance or identify any other standard regarding how agencies will determine whether it is "appropriate" to terminate a contract in order to "reduce overall Federal spending" or to "reallocate spending to promote efficiency and advance [Trump administration policies]." The EO does not address limitations imposed by the Impoundment Control Act or the Spending Clause of the U.S. Constitution that may limit the reallocation of appropriated funds. There is no guidance on what factors or issues agencies should or must consider to make reasonable determinations.

Agency Heads Are Required to Review Contracting Procedures, Policies and Personnel by March 26, 2025, and Cannot Issue or Approve New Contracting Officer Warrants During This 30-Day Review Period

Agency Heads are required to conduct comprehensive reviews of the agency's contracting policies, procedures and personnel within 30 days of the executive order. Notably, Agency Heads are required to complete this review with the agency's DOGE Team Lead. Additionally, Agency Heads are unable to issue or approve new contracting officer warrants during this review period (unless an Agency Head "determines such approval is necessary").

The EO is unclear about the purpose or focus of the review of contracting policies, procedures and personnel, or the fact that the bulk of contracting policies and procedures are established by the Federal Acquisition Regulatory Council (FAR Council) and Federal Acquisition Regulation (FAR). The EO does not address what an Agency Head should do if it is determined that revisions to policies and procedures are appropriate. No mention is made of the FAR or procedures for amending agency supplements to the FAR. The EO provides no standard for reviewing "contracting personnel."

Agency Heads Are Required to Build a Centralized Contract and Grant "Written Justification" System for Every Payment Issued by the Agency for a Covered Contract or Grant

Each Agency Head is required to build a centralized technological system within the agency to "seamlessly record every payment issued by the agency pursuant to each of the agency's covered contracts and grants, along with a brief, written justification for each payment submitted by the agency employee who approved the payment." The system is required to 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 within the technological system."

Once the new written justification system is in place, the Agency Head is required to issue guidance created in consultation with the agency's DOGE Team Lead. The guidance must require the relevant agency employee to submit a brief, written justification for payment prior to that employee's approval of a payment under a covered grant or grant. The EO also directs Agency Heads to post the payment justifications publicly "to the maximum extent permitted by law."

The EO does not acknowledge the presence of other well-established information technology (IT) systems that compile and centralize information about contracts and grants, such as the System for Award Management (SAM) or Federal Procurement Data System (FPDS). The EO does not address how this new IT system to track payments could interact with SAM or FPDS or how the creation of a third major system for the input of data regarding federal contracts would be more "efficient."

Agency Heads Are Instructed to Issue Guidance on Signing New Contracts or Modifying Existing Contracts Prior to Entering into Any New Contracts or Modifying Existing Contracts

Prior to entering into new contracts, Agency Heads are required to consult with the agency's DOGE Team Lead to issue guidance on signing new contracts or modifying existing contracts "to promote Government efficiency and the policies of [the Trump] Administration." Notably, this guidance cannot be completed until the agency completes its 30-day review period of contracting procedures, policies and personnel. Practically speaking, without the ability to modify a covered contract or grant, agencies are at a standstill with these programs until Agency Heads complete the required review of contracting procedures, policies and personnel.

DOGE Team Leaders are also required to provide the DOGE Administrator with a monthly information report on contracting activities. The report is required to include all payment justifications once the written justification system for each agency is implemented.

The EO does not address how this new approval procedure for the issuance and modification of contracts would interact with delegations of contracting authority under FAR Subpart 1.6. While authority and responsibility to contract for supplies and services vests in agency heads, such authority has been delegated to warranted contracting officers, who have authority to enter into, administer or terminate contracts. It is not clear whether these delegated authorities can be modified via "guidance" issued by the Agency Head rather than by agency supplement to the FAR or modification of previously issued delegations of authority.

All Agency Employee Credit Cards Are Frozen Until March 26, 2025, Unless an Exception Applies

The EO mandates an immediate halt to micropurchases using government purchase cards. The EO states that all credit cards held by agency employees are required to be frozen for 30 days from issuance of the EO. The only exceptions are credit cards held by employees engaged in or charges related to employees utilizing such credit cards for disaster relief or natural disaster response benefits or operations, or other critical services as determined by the Agency Head. Agency Heads are also able to add individualized or categorical exceptions in consultation with the agency's DOGE Team Lead.

All Agencies Must Create a Centralized Technological System to Record Federally Funded Travel Approvals for Conferences and Other Non-Essential Purposes

Each Agency Head is required to build a technological system within each agency that centrally records approval for federally funded travel for conferences and other non-essential purposes. Once an agency's system is in place, the Agency Head is required to prohibit agency employees from engaging in federally funded travel for conferences or other non-essential purposes unless the travel-approving official has submitted a brief, written justification for the federally funded travel within such system.

The EO requires the DOGE Team Lead to provide the DOGE Administrator with a monthly information report listing each agency's justifications for non-essential travel. The agency justifications are also required to be posted publicly unless prohibited by law or unless an Agency Head grants an exemption.

All Agencies Are Required to Take Actions Related to Real Property Disposition

By March 5, 2025 (or seven days from issuance of the EO), each Agency Head is required to confirm to the Administrator of General Services or their designee that the Agency Head has submitted updates to the Federal Real Property Profile Management System (FRPP MS) to ensure the system reflects a complete and accurate inventory of real property subject to the agency's administration.

By March 26, 2025 (or 30 days from the issuance of the EO), each Agency Head is required to identify all termination rights the Agency Head may have under existing leases of government-owned real property. Each Agency Head is also required to consult with the agency DOGE Team Lead and the Administrator of General Services or their designee to determine whether to exercise such rights.

By April 27, 2025 (or 60 days from the issuance of the EO), the Administrator of General Services is required to submit a plan to the director of OMB for the disposition of government-owned real property, which has been deemed by the agency as no longer needed.

Takeaways For Government Contractors and Grant Recipients for Covered Contracts and Grants

1. The DOGE Administrator and Agency DOGE Team Leads Are Highly Involved in These Reviews and Decisions. The EO makes clear the weight and influence DOGE has on agency actions moving forward. Each agency has been assigned a DOGE Team Lead with whom Agency Heads (or their designees) are required to collaborate in making decisions and implementing systems required under the EO. Advocacy efforts may assist in rebranding programs as aligning with the Trump Administration's goals.
2. Anticipate More Programs Receiving Stop Work Orders or Being Terminated for the Government's Convenience. Given the express directive to terminate or modify contracts, the industry should be prepared for receipt of additional terminations for convenience or efforts by agencies to renegotiate covered contracts or grants for program viability. During the program review periods, contractors and grantees should advocate for program viability. Further, continued documentation and preparation of capturing costs is particularly important to recoup costs in likely termination settlements. Notably, preparation of termination settlements are allowable costs under FAR, and contactors and grantees should reach out to legal counsel for assistance to ensure the best negotiation posturing in this rapidly revolving landscape.
3. Anticipate Further Payment Delays. Contractors and grantees should anticipate a potential bottleneck with payment delays due to the new written system implementation and the number of reviews and administrative hurdles to receive payment.
4. Anticipate Further Delays in Contract Awards and Modifications. Given the review periods and new system implementation requirements, contractors and grantees should anticipate delays in receipt of new contract awards and modifications to existing awards. Industry should communicate for guidance and direction from their respective agency contacts and engage legal counsel early on in the process to ensure contractors and grantees understand their rights and obligations under prime contracts, subcontracts and grants.

Notes

¹ As defined in 5 U.S.C. 5541(3) and 5 C.F.R. 550.103.

² as defined in 20 C.F.R. 404.1330

³ The executive order defines "Agency Head" to mean "the highest-ranking official of an agency, such as the Secretary, Administrator, Chairman, or Director" and provides that "Agency Heads may select designees within their agencies to carry out the responsibilities specified in this order."