Over the first month of the new administration, President Trump has directed the review or termination of certain types of contracts and grants, including equity-related agreements, awards under the Inflation Reduction Act and the Investment and Jobs Act, and foreign aid agreements awarded by USAID.  Those actions, while disruptive, have been limited to certain agreement types or agencies. 

On February 26, by an executive order (EO) titled “Implementing the President’s ‘Department of Government Efficiency’ Cost Efficiency Initiative,” the president ordered that each agency head, in coordination with each agency’s DOGE Team Lead, develop a centralized covered contract and grant payment tracking system, mandating a written justification for every payment, and a review and termination or modification of covered contracts and grants “where appropriate and consistent with applicable law,” among other features. 

The key elements of the EO, which will almost certainly result in significant terminations in the coming months, are summarized below.

What Agreements Are Covered?

First, it is important to note that this review does not apply to a large number of contracts and grants.  Rather, it is limited to “covered contracts and grants,” defined by the EO as:

discretionary spending through Federal contracts, grants, loans, and related instruments, but excludes direct assistance to individuals; expenditures related to immigration enforcement, law enforcement, the military, public safety, and the intelligence community; and other critical, acute, or emergency spending, as determined by the relevant Agency Head.  Notification shall be made to the agency’s DOGE Team Lead.

Key Elements of the EO 

The EO requires that each agency head take the following measures:

Centralized System and Written Justification

Each agency must create a “centralized technological system … to seamlessly record every payment issued by the agency pursuant to each of the agency’s covered contracts and grants ….”  In addition to this centralized system, the EO requires that each payment record include a “written justification for each payment submitted by the agency employee who approved the payment” that shall, to the maximum extent permitted by law and to the maximum extent deemed practicable, be posted publicly.  The centralized systems may be a heavy lift for some agencies, and the approval for every payment may slow the procurement process, particularly for very small transactions that are currently subject to few procedural requirements.

Review of Covered Contracts and Grants

The EO also requires each agency head, working with the DOGE agency lead, to review all existing covered contracts and grants and, “where appropriate and consistent with applicable law, terminate or modify (including through renegotiation) such [agreements] to reduce overall Federal spending or reallocate spending to promote efficiency and advanced the policies of [the Trump] Administration.”  Agencies are directed to “prioritize the review of funds disbursed under covered contracts and grants to educational institutions and foreign entities for waste, fraud, and abuse.”  We anticipate that this review, which is required to be completed within 30 days of the EO, will result in a significant number of terminations and renegotiations in the coming months.

Contract and Grant Process Review

Agencies are required by the EO to conduct “a comprehensive review of each agency’s contracting policies, procedures, and personnel” within 30 days of the EO, a remarkably short period for a comprehensive review.  In addition, agencies are prohibited from issuing or approving new contracting officer warrants during the review period, unless approval is deemed necessary by the agency head.

Covered Contract and Grant Approval

Once the comprehensive review is complete, agencies, in consultation with DOGE, are required to issue guidance on signing new contracts and modifying existing contracts “to promote Government efficiency and the policies of [the new] Administration.”  In a measure that will almost certainly slow the award of contracts over the next month or more, new contracts may only be approved by agency heads on a case-by-case basis.  Further, this section requires that each agency’s DOGE team lead to submit a monthly report on contracting activity to the Administrator of the United States DOGE Service, including, once the centralized system is in operation, written justification for each expenditure.

Non-Essential Travel Justification

In addition to the contract and grants system, the EO requires that each agency, working with DOGE, develop a technological system “that centrally records approval for federally funded travel for conferences and other non-essential purposes.”  Going forward, no non-essential travel will be approved unless it is supported by a written justification. 

Credit Card Freeze

To the maximum extent permissible by law, the EO freezes all credit cards held by agency employees for 30 days from the date of the EO.  Although the freeze exempts cards held by employees engaged in certain activities, such as disaster relief or other critical services, this measure will almost certainly be disruptive to agency personnel who regularly rely on credit cards to make small, required purchases.

Real Property Disposition

Finally, the EO requires that, within seven days of the order, each agency head must confirm to the GSA Administrator that the Federal Real Property Profile Management System accurately reflects the agency’s inventory or real property.  Within 30 days, agency heads must identify termination rights under existing leases, and within 60 days the GSA Administrator must submit to OMB a plan for the disposition of real property deemed as no longer needed.

Going Forward

The EO marks the beginning of a rapid and systematic review of each agency’s procurement and grant processes and implementation of control procedures to attempt to reduce and rationalize federal contract and grant spending.  Over the coming weeks and months, contractors and grant recipients performing “covered contracts and grants” should be prepared for payment delays, possible terminations, and possible renegotiation requests. 

We strongly recommend that holders of covered agreements be prepared to justify the need for the goods or services being provided, understand the government’s termination or suspension rights in your agreements, and be prepared for potential changes to your agreements.  Given that a recently released Office of Management and Budget memo pressed agencies to “maximally reduce the use of outside consultants and contractors,” government service contractors should be especially prepared to respond to potential contractual changes.  

For more information on how the recent executive order may affect the review and termination of covered contracts and grants, please contact the author of this post.