On February 26, 2025, President Trump issued Executive Order 14222, Implementing the President’s “Department of Government Efficiency” Cost Efficiency Initiative (Feb. 26, 2025) (“EO 14222”). EO 14222’s purpose is to commence “a transformation in Federal spending on contracts, grants, and loans to ensure Government spending is transparent and Government employees are accountable to the American public.” EO 14222 includes several significant provisions that government contractors need to be prepared to address. Many of those are highlighted in this alert.

1. Which Agencies and Contractors are Impacted by EO 14222?

Under Executive Order 14158 - Establishing and Implementing the President's "Department of Government Efficiency” (Jan. 20, 2025), the President established the United States DOGE Service and required that each “Agency Head” of each Government “Agency” establish within that Agency a “DOGE Team.” An “Agency”, with a few exceptions, generally means any executive department, military department, Government corporation, Government controlled corporation, or other establishment in the executive branch. However, President Trump exempted his own office from any of the DOGE requirements by declaring that “the Executive Office of the President and any components thereof” is not an Agency. The “Agency Head” means the highest-ranking official of an Agency, such as the Secretary, Administrator, Chairman, or Director.

EO 14158 confirms that the DOGE Team for each Agency “will typically include one DOGE Team Lead, one engineer, one human resources specialist, and one attorney.” Once the DOGE Team is established for an Agency, it is required to work with the Agency Head and the United States DOGE Service to modernize federal technology and software to maximize governmental efficiency and productivity.

While EO 14158 implemented DOGE generally across the entire Federal Government, the recently issued EO 14222 directs DOGE Teams in only certain Agencies to review and implement changes to federal spending on particular contracts and grants. Only “covered contracts and grants” are impacted by EO 14222, which does not include “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.” 

EO 14222 also does not apply to:

• Law enforcement officers, as defined in 5 U.S.C. 5541(3) and 5 CFR 550.103, or covered contracts and grants directly related to the enforcement of Federal criminal or immigration law; 
• U.S. Customs and Border Protection and U.S. Immigration and Customs Enforcement in the Department of Homeland Security; 
• Uniformed Services, as defined in 20 CFR 404.1330 (Air Force, Army, Navy, Coast Guard, or Marine Corps); 
• 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 OMB; and
• Classified information or classified information systems.

Therefore, government contracts related to law enforcement, national defense, immigration and customs enforcement, public safety, and the intelligence community are all exempt from the requirements of EO 14222. However, government contractors working outside of these categories, including covered contracts issued by the Departments of Agriculture, Energy, Health and Human Services (though excluding individual assistance like Medicare), Interior, Labor, Transportation, Treasury, and Veterans Affairs are all subject to the requirements of EO 14222, unless exempted by the Agency Head. Similarly, covered contracts issued by the General Services Administration, Environmental Protection Agency, and the Small Business Administration are also subject to EO 14222 unless the Agency Head excludes them or unless they relate to one of the exempted categories of funding (i.e., military, law enforcement, etc.). Accordingly, a significant number of government contractors need to be aware of EO 14222 and should take immediate steps to prepare for its impacts. 

2. What New Regulatory Mandates Does EO 14222 Impose?

a. New Public Database to Record Every Government Payment Issued by the Agency for Each of the Agency’s Covered Contracts and Grants, Along With a Written Justification For Each Payment.

EO 14222 issues new requirements for the establishment of a public payment approval database, which will require approvals for every Government payment made under covered contracts and grants, and will publicly post the amount of those Government payments, along with a Government employee’s written approval justifying the payment: 

Each Agency Head shall, with assistance as requested from the agency’s DOGE Team Lead, 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. 

Once this payment system is implemented in accordance with EO 14222, the Agency Head (in consultation with the agency’s DOGE Team Lead) is then required to issue guidance for the Agency that will require every Government payment under any covered federal contract or grant to have a written justification and approval from an authorized Government employee. Furthermore, this payment system “shall 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.”

Notably, EO 14222 does not include any minimum acquisition threshold that would limit its application to payments above a certain amount. By noting that “every payment” must be posted in this system with a brief written justification from an approving employee, it appears that it will apply to even the most routine payments of the smallest amounts, which raises interesting and potentially concerning questions. For example, what will constitute a sufficient written justification from a Government employee? While the justification is required to be made by the Government employee, will the Government nonetheless flow down that requirement so that contractors are required to prepare a written justification for each request for payment even if the contract does not require it? If so, who will pay for the contractor to develop these written justifications for every single payment made under a covered government contract? Time will tell with each of these questions. 

While there are now scant details related to how this new software system will exactly work or when it will be implemented, once the system is in place, it will certainly have a direct impact on how (or if) payments will be made under covered contracts and grants. As guidance is released in the future, government contractors would be wise to track closely any additional imposed requirements that are not written in their contracts. To the extent that new obligations are imposed, contractors should also closely track expenses caused by these new requirements so that they can submit claims and requests for equitable adjustment in appropriate circumstances.

b. Government’s Immediate Review of Covered Contracts and Grants, Which Can Result in the Government’s Termination or Modification of Those Contracts and Grants.

EO 14222 also provides direction to each Agency Head to review, modify, and potentially terminate all covered contracts and grants “to reduce overall Federal spending or reallocate spending to promote efficiency and advance the policies of [the Trump] administration[:]”

Each Agency Head, in consultation with the agency's DOGE Team Lead, shall review all existing covered contracts and grants and, where appropriate and consistent with applicable law, terminate or modify (including through renegotiation) such covered contracts and grants to reduce overall Federal spending or reallocate spending to promote efficiency and advance the policies of [the Trump] Administration. This process shall commence immediately and shall prioritize the review of funds disbursed under covered contracts and grants to educational institutions and foreign entities for waste, fraud, and abuse. Each Agency Head shall complete this review within 30 days of the date of this order.

Therefore, by Friday, March 28, 2025, each Agency Head is required to review each existing covered contract and grant, and then is encouraged to terminate or modify such covered contracts and grants to reduce overall Federal spending or reallocate spending to promote efficiency and advance the policies of the Trump administration. This direction will have immediate impacts on government contractors with covered contracts, which requires immediate preparation.

c. Government’s Immediate Review of Contracting Policies and Procedures and Contracting Personnel.

EO 14222 also imposes on Agency Heads with covered contracts an obligation to comprehensively review all of the Agency’s contracting policies, procedure, and personnel by March 28, 2025:

Each Agency Head, in consultation with the agency's DOGE Team Lead, shall conduct a comprehensive review of each agency's contracting policies, procedures, and personnel. Each Agency Head shall complete this process within 30 days of the date of this order and shall not issue or approve new contracting officer warrants during the review period, unless the Agency Head determines such approval is necessary.

While EO 14222 does not expressly state that new contract actions will be entirely eliminated, contractors competing for covered contracts should be aware of the possibility of cancelled solicitations. Contractors also should know that Agencies do not have unlimited discretion to cancel a pending solicitation. Seventh Dimension, LLC v. United States, 160 Fed. Cl. 1, on reconsideration in part, 161 Fed. Cl. 110 (2022) (finding that the cancellation of a solicitation violated procurement regulations and was arbitrary and capricious); see also Parcel 49C Ltd. P'ship v. United States, 31 F.3d 1147 (Fed. Cir. 1994) (holding that cancellation of solicitation by General Services Administration had no rational basis).

Therefore, to the extent that a contractor has submitted a proposal in response to a solicitation that appears to be arbitrarily canceled as part of the EO 14222 review process, the contractor should closely review its protest rights and talk with a bid protest attorney about protest opportunities.

3. How Should Government Contractors Prepare for The Impacts of EO 14222 and Similar Executive Orders?

The impacts of EO 14222 are far-reaching and yet to be fully determined. However, because EO 14222 directs Agencies to modify and terminate covered government contracts, any contractor with one of those contracts should take immediate steps to prepare.

a. Closely Review The Changes Clause and Suspension of Work Clause In Your Covered Government Contract to Understand the Notice Requirements Along With Your Potential Entitlement to Compensation for Changes or Suspensions.

Contractors with covered contracts should closely review FAR Part 43 – Contract Modifications and should be prepared to take appropriate action if modifications are sought to a covered contract. For example, pursuant to FAR 43.104, contractors should be prepared to provide quick written notification of contract changes to the contracting officer if they are impacted by any provisions of EO 14222, including potential requests by the Agency to perform work that is not required by the covered contract.

Contractors should also review closely the applicable changes clause included in their covered contracts. For example, FAR 52.243-1 Changes—Fixed-Price makes clear that, if any Government-directed change causes an increase or decrease in the cost of, or the time required for, performance of any part of the work under a contract, the contracting officer shall make an equitable adjustment in the contract price, the delivery schedule, or both, and shall modify the contract. Similarly, FAR 52.243-2 Changes—Cost-Reimbursement (Aug. 1987), states that when a Government-directed change causes an increase or decrease in the estimated cost of, or the time required for, performance of any part of the work under a cost reimbursement contract, the Contracting Officer shall make an equitable adjustment in the (1) estimated cost, delivery or completion schedule, or both; (2) amount of any fixed fee; and (3) other affected terms and shall modify the contract accordingly. Contractors need to track closely any changes made to their covered contracts by the Government and need to provide quick written notice to the Agency that describes those changes.

Similarly, contractors also should review FAR 52.242-14 Suspension of Work to understand how to respond if the Agency orders the contractor to suspend, delay, or interrupt all or any part of the work under the covered contract as a result of EO 14222. “Under FAR 52.242-14, a contractor is entitled to an equitable adjustment when the government constructively suspends work by delaying work for an unreasonable amount of time.” Nassar Grp. Int’l, ASBCA No. 58451, 19-1 BCA ¶ 37,405 (citing CATH-dr/Balti Joint Venture, ASBCA Nos. 53581, 54239, 05-2 BCA 133,046 at 163,793 and other cases). In order to preserve these rights to an equitable adjustment, contractors should provide quick written notice to the Agency when the suspension occurs.

b. Closely Review the Termination for Convenience Clauses In Your Covered Government Contracts To Understand Your Rights and Opportunity to Submit a Termination Settlement Proposal.

So long as it is not done in bad faith, the Government has broad authority to terminate contracts for convenience.

To the extent that a covered contract is terminated under the direction of EO 14222, contractors should closely review FAR Part 49-Termination of Contracts and the relevant termination for convenience clauses included in their covered contracts (e.g. FAR 52.249-2, FAR 52.249-3, etc.) to evaluate the deadlines and requirements for submitting a termination settlement proposal to the Agency.

While the Government unfortunately has broad authority to terminate contracts for the Government’s own convenience, contractors are entitled to submit termination settlement proposals to the Government to obtain payment for certain costs incurred because of the termination. See FAR 49.206-1; FAR 49.602-1. Contractors should review these FAR provisions and speak with a government contracts attorney to prepare those termination settlement proposals. 

c. Maintain Detailed Documentation of the Cost and Time Impacts Associated With Any Modification or Termination.

Contractors with covered contracts will need to support their requests for equitable adjustment, claims, and/or termination settlement proposals with detailed documentation of the costs incurred as a result of the direction from the Government. Therefore, contractors should be very careful to ensure that they are documenting closely the communications that they are receiving from the Government that could be construed as a change and also should document the impacts of those changes on the performance time and costs associated with the covered contract. Contractors should engage their performance personnel, accounting departments, and their contract management departments to all collectively maintain this detailed documentation.

d. Communicate With a Legal Professional Before Accepting Any Modification or Signing Any Waiver of Future Rights.

As noted above, EO 14222 directs each Agency Head, in consultation with the Agency’s DOGE Team Lead, to modify or terminate covered contracts to reduce overall federal spending or to reallocate spending to promote efficiency and advance the policies of the Trump Administration.

Before agreeing to change the terms of an existing covered contract and certainly before signing any waivers or releases related to those changes, contractors should speak with a government contracts legal professional who can guide the contractor on the clauses and provisions noted above. For example, since FAR 52.243-1 discussed above entitles a contractor to an equitable adjustment in certain circumstances, the contractor needs to be cautious to avoid waiving that right through signing a modification that fails to provide adequate compensation or time to address the change. 

e. Communicate With Your Subcontractors And Suppliers About EO 14222 and the Potential Impacts From Similar Executive Orders.

Prime contractors should ideally already have flow-down provisions in their subcontracts and supplier agreements that allow the contractor to terminate for convenience any subcontract and/or supply agreement to the extent that the Government terminates the prime contract. Prime contractors that do not have these flow down provisions in their subcontracts should immediately talk with their subcontractors and suppliers about including them.

However, even if those flow-down provisions are included, prime contractors with covered contracts should also maintain open communication with their suppliers and subcontractors to ensure that they are aware of any modifications, changes, suspensions, or terminations that might impact the subcontract or supply agreement. As further guidance is issued about EO 14222 and similar executive orders, prime contractors are going to be in the best position if they make sure everyone in the supply chain is aware of the potential risk.

Conclusion

Contractors with covered contracts should closely review EO 14222 and should take the steps outlined in this client alert to prepare for its impacts.