What To Think About As The Administration Changes The Federal Procurement Landscape: Preparation Tips

Through the first six months and beyond, the new administration continues to make its mark on the world of federal procurement law through the issuance of several executive orders (Orders) directing federal agencies to make sweeping changes to the landscape of government contracting.

From Order 14173, Ending Illegal Discrimination and Restoring Merit-based Opportunity, issued on January 21, 2025, to the more recent Order 14275, Restoring Common Sense to Federal Procurement, issued on April 14, 2025, contractors continue to face uncertainty as they await implementation of these Orders. This Article covers four things contractors should be thinking about as they navigate these changes.

1. False Claims Act

Order 14173 includes a certification requirement for federal contractors and grant recipients, requiring certification that their diversity, equity, and inclusion (DEI) programs comply with federal antidiscrimination laws as a condition of receiving federal funding. The certification includes an acknowledgement that compliance with antidiscrimination law is "material to the government's payment decisions" for the purpose of the False Claims Act (FCA). While the certification requirement is currently being litigated in the courts (see National Urban League et al. v. Trump, et al., 25-471), contractors should still take this opportunity to reinforce their FCA compliance practices. This is especially important given the recently announced U.S. Department of Justice Civil Rights Fraud Initiative that will use the FCA to investigate recipients of federal funds and their DEI practices. To anticipate and mitigate FCA risk, contractors should consider whether to take the following steps:

• Carefully review Order 14173 and other Orders bearing certification requirements.
• Ensure any decisions made with respect to compliance with Orders are well documented, so you are in the best position to defend those decisions, should the need arise.
• Ensure compliance with all obligations included in your contract or grant, as well as with any Orders or other compliance requirements included in your agreement.
• Engage with subcontractors and potential subcontractors to make sure they are reviewing their policies and thinking critically about future compliance.
• Maintain open lines of communication with your contracting officer(s) to stay up to date and get the earliest news on potential new policies.

2. Executive Order Implementation for Solicitations and Contracts

The administration has started to implement Orders, so contractors should remain vigilant as agencies move to terminate or modify existing contracts. For example, as directed by Order 14173, agencies have begun to remove certain principles from acquisition procedures in line with guidance from a February 15, 2025, memorandum by the chairperson of the Civilian Agency Acquisition Council (CAAC). Explicitly based on Order 14173, the CAAC Memo directs agencies to omit a number of Federal Acquisition Regulation (FAR) clauses (and revises others to remove references to those clauses) from all new solicitations and contracts.

Agencies have some discretion to determine how they will comply with Orders. This, in turn, creates compliance risks for contractors because they must pay close attention to the unique approach adopted by each agency. Using Order 14173 again as an example, the General Services Administration (GSA) became the first agency to issue a Class Deviation and also instructed its contracting activities to issue modifications to active contractsconsistent with the CAAC Memo for contracts "with remaining periods of performance of six months or more," while adopting the CAAC's approach for new solicitations and contracts. Other agencies have since issued their own class deviations. Contractors should review each agency's actions to remain compliant, despite the divergent paths agencies will likely take.

3. Terminations and Cost Recovery

Given these and other changes to the federal procurement landscape, coupled with the administration's focus on reducing government spending, contract termination remains a real risk to contractors given the government's right to terminate if the contracting officer determines that termination is in the government's best interest. See, e.g., FAR 52.249-2. These terminations for convenience (T4Cs) are generally uncommon and reserved for situations where a major event renders the procured services unnecessary, or where the government is not satisfied with performance but wants to avoid a dispute over a default termination. From a disputes perspective, the government's decision to terminate is effectively unreviewable, with the only recognized challenge being that the termination was in bad faith or a clear abuse of discretion—both of which are high standards.

Obviously, no contractor plans for a T4C, but if it happens, remember that contractors are entitled, at a minimum, to reimbursement of costs incurred as of the termination date. The reimbursement may include direct costs (labor and materials), indirect costs (overhead), settlement expenses, and profit on work performed. Ideally, contractors would submit a settlement proposal as soon as practicable and obtain final payment through a negotiated settlement. In such a situation, the contractor and the contracting officer generally agree on a payment amount, which may include profit, not more than the total contract price minus amounts already paid and the cost of unfinished work. If the parties cannot reach a negotiated settlement or a contractor misses the deadline, then recovery of termination costs may still be available based on a unilateral determination from the contracting officer, who determines the amount owed based on completed work, costs incurred, and reasonable settlement expenses. Note that additional rules apply for commercial item contracts, cost-reimbursement contracts, indefinite-delivery indefinite-quantity (IDIQ), and partial payments.

4. Changes to Contract Performance

In addition to terminations, contracting officers also are modifying contracts to ensure consistency with the Orders, which may include substantive revisions to the scope of work that the contractor already completed. Given the speed at which the administration is implementing changes in the realm of procurement law, remember that the FAR still provides for relief in some situations. To the extent any modification requires extra work and increased costs, clauses within the FAR entitle contractors to an equitable adjustment of the contract price, the period of performance, or both. See, e.g., FAR 52.243-1. Contractors should review all contract changes closely and consider whether the government provided appropriate compensation for the new work.

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As the administration continues to reshape federal procurement through a flurry of executive actions, contractors must stay informed, proactive, and prepared. When navigating new certification requirements and compliance regimes, monitoring agency implementation of Orders, and responding to contract modifications and terminations, government contractors should consider the growing web of legal and compliance risks, as well as available remedies for recovery and relief.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.