A new executive order is set to reshape federal contracting by implementing more stringent transparency measures, but it may also create significant challenges for both government agencies and contractors.

In a recent Law360 article, I discussed the implications of a new executive order aimed at increasing transparency and efficiency in federal contracting. While the order, titled “Implementing the President’s ‘Department of Government Efficiency’ Cost Efficiency Initiative,” has noble intentions, it could inadvertently introduce complexities that undermine its effectiveness.

The order mandates that federal agencies track and justify contract, grant, and loan payments more rigorously. The goal is to reduce waste, fraud, and abuse, ultimately making federal spending more transparent and efficient. However, this new tracking system will likely place significant additional burdens on the federal acquisition workforce, which is already understaffed and set to shrink further under the current administration.

One of the main challenges highlighted in the article is the need for agencies to develop centralized technological systems to track these payments. Given the lack of in-house expertise, agencies will likely have to turn to expensive outside contractors, leading to potentially years-long delays and substantial costs. This irony, where efforts to create efficiency could end up being costly and time-consuming, is something contractors should be aware of.

Another concern is the potential impact on competition. The order requires payment details to be made public, which could deter contractors from bidding on government contracts if they fear their pricing information will be exposed. For contractors, this could raise prices and discourage participation, ultimately reducing the competitiveness of the process.

Additionally, the executive order places pressure on federal acquisition staff to justify every payment thoroughly, potentially delaying payments to contractors, especially smaller ones who rely on prompt reimbursements. Given the already strained workforce, this could exacerbate the issue and create further delays in government transactions.

For contractors, understanding how this order might affect their operations is crucial. As agencies begin to implement the order, contractors should ensure they are tracking costs that could be recovered if contracts are terminated. They should also consider providing draft justifications with their invoices to streamline the process and avoid delays.

To dive deeper into these points and understand how this executive order could affect federal contracting, I encourage you to read the full article, “Strict Mandates in Contracting Order May Undercut Efficiency,” published on Law360.