DOGE has become a staple term in the news lately—the Trump Administration recently released an Executive Order (EO) implementing the Department of Government Efficiency (DOGE) Cost Efficiency Initiative. The order seeks to transform federal spending on contracts, grants, and loans to ensure there’s transparency and accountability. This EO further establishes and adds structure to the first order published for DOGE, “Establishing and Implementing the President’s “Department of Government Efficiency”, as well as proposes significant changes to the federal grant and contracting processes.
As a contractor, you’re probably wondering what this EO is about and how it may impact you. We’ll outline some of the key provisions affecting contractors below.
What is the DOGE Cost Efficiency Initiative?
The Executive Order on DOGE Cost Efficiency was created with the purpose of transforming federal spending on contracts, grants, and loans. What does this mean for federal agencies? Under this directive, agency heads are required to promote efficiency and work with DOGE team leads to identify places where spending can be reduced, or funds can be reallocated. Several reporting revisions will also be made available to increase accountability and transparency.
There are some exemptions to this order. The EO applies to discretionary spending, 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.” Agency heads are also allowed to exempt any other covered grant or contract in writing from all or part of the order. Classified information and systems are also excluded from this order.
Key Highlights of the DOGE Cost Efficiency Initiative
Let’s review some of the key parts of this order that are most relevant to contractors.
Reevaluating Current Contracts and Grants
Within 30 days of this order, federal agencies must conduct a review of existing contracts and grants to terminate or modify/renegotiate them, or reduce spending and reallocate funds. Grants related to educational institutions and foreign authorities will be prioritized. We have seen some actions in this area already, with contract terminations or stop work orders. Remember, if this happens to you, you are always encouraged to send a settlement proposal. You could be entitled to some or all of the contract dollars if they are already obligated.
Contract and Grant Process Review
Agencies have 30 days to review their existing policies, procedures, and personnel. During this time, agencies cannot issue or approve new Contracting Officer warrants so we can expect to see some procurement delays in the next month.
Contract Payment Review and Approval
This EO encourages agencies to work with DOGE on creating a system that records agency payments made under covered contracts and grants moving forward. To get payments approved, agencies must write a brief justification which will be posted publicly. This will be completed following the 30-day contracts and grants review period.
Signing or Modifying New Contracts
After the other reviews are completed, agencies are required to issue guidance on signing new contracts or modifying existing ones. Exceptions will be approved on a case-by-case basis.
Credit Card Spending Freeze for Non-Critical Solutions
All agency credit cards are treated as frozen unless the charges are related to disaster relief, emergency response operations, or other critical areas as identified by agency heads. This also goes hand in hand with the payment review and approval above, as future spending will need to be approved first. Additionally, agency heads are encouraged to build a system that centrally approves records for federally funded non-essential travel. Agencies are required to provide monthly reports to DOGE on non-essential travel justifications. These reports will be posted publicly.
How Will the DOGE Cost Efficiency Initiative Impact Contractors?
We’re hoping for more details to evolve and provide clarity on these directives, but we can already anticipate how some of the key provisions above will impact the world of federal procurement. The order aims to build a system of checks and balances for government spending, but the review and approval process will likely slow down the procurement process. Since there’s a push to reevaluate contracts, grants, and loans, some contractors may see their contracts terminated or reallocated. If this happens to you, we suggest you check out our blog on contract settlements.
There could also be opportunities for business within this EO. The EO talks about agencies building IT support systems, specifically a “centralized technological system” that tracks every payment related to a contract or grant. Some agencies may have access to a federal payment system, but they will need to make modifications to ensure it meets qualifications, or they’ll need to start from scratch. They’ll most likely need to solicit work from IT and software contractors to help them create the solution they need, so if your company fits the bill, you should keep an eye out for this opportunity.
Adapting to the New Administration
This order will certainly influence contracting processes and regulations, but we don’t know the extent of its effects until more information becomes available. Some EOs take time to come to fruition and edits are made along the way (such as this EO further adding structure to the previous EO). That means it’s crucial you keep up with all news related to the govcon world, so you are prepared for anything that affects your contract. It’s also important you are learning how you can adapt your contract to fit the mission of the new administration and maximize your opportunities. Learn more in one of our recent blogs on how you can prepare your contract for a new administration.
If you need help managing your contract to stay competitive in this new landscape, reach out of one of our consultants. To stay updated on future changes in the new administration, check out our blog and our monthly newsletter.
