On February 26, 2025, President Trump signed an Executive Order (“EO”) that states that it “commences 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.” Here’s what government contractors need to know.

Who Does the EO Apply To?

The EO is primarily directed at Agency Heads and contemplates that each Agency Head will work closely with its Department of Government Efficiency (“DOGE”) Team Lead on a number of activities intended to reduce federal spending and root out fraud, waste, and abuse. (On January 20, 2025, President Trump signed EO 14158 establishing DOGE and requiring each agency to have a DOGE Team Lead to “advise their respective Agency Heads on implementing the President’s DOGE Agenda.”).

Are All Federal Contracts and Grants Covered by This New EO?

No. The EO only applies to “covered contracts and grants,” which is defined 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.”

The EO specifically excludes 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; the Uniformed Services, as defined in 20 C.F.R. 404.1330; classified information or classified systems; and “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.”

What Does the EO Require Agency Heads to Do?

1. Build agency-specific centralized systems to record payments to all contractors and grantees. The EO does not direct how this must be done or set a deadline for completion. Presumably building these systems will require the issuance of new contracts, and the EO notes that “implementation is subject to the availability of appropriations.” The EO contemplates that these systems will “seamlessly record every payment issued by the agency” and include brief, written justifications for each payment, submitted by the agency employee who approved the payment. The EO also contemplates that “[t]o the maximum extent permitted by law, and to the maximum extent deemed practicable by the Agency Head,” these payment justifications “shall be posted publicly.” The planned systems will seemingly differ from existing databases such as the Federal Procurement Data System (“FPDS”), which tracks contract actions (e.g., modifications and awards), in that the new systems will track individual payments. Making this directive a reality, even assuming the availability of appropriations, will be a complex undertaking to connect and achieve interoperability among existing government software systems. The EO states that DOGE Team Leads will submit monthly reports to the DOGE Administrator about contracting activities, including “all payment justifications” reported in each agency’s centralized payment system.

    

2. Review, with the DOGE Team Lead, all existing “covered contracts and grants” within 30 days to identify opportunities to terminate or modify covered contracts and grants “to reduce overall Federal spending or reallocate spending to promote efficiency and advance the policies of [the Trump] Administration.”

    

3. Review, with the DOGE Team Lead, contracting policies, procedures, and personnel within 30 days. The EO does not specify criteria to guide these reviews. Once these reviews are completed, but prior to entering into new contracts, Agency Heads and their DOGE Team Leads must issue guidance on signing new contracts or modifying existing contracts—topics already covered in existing acquisition regulations—“to promote Government efficiency and the policies of [the Trump] Administration.” Prior to issuing such guidance, agency heads may approve new contracts on a case-by-case basis.

    

4. Build a new technological system—seemingly distinct from the system mentioned above that will track payments—within each agency to centrally record approval for federally funded travel for conferences and other non-essential purposes. Once each agency’s new system is in place, agency employees will be prohibited from federally funded travel for conferences or other non-essential purposes unless the system contains a brief, written justification from the travel approving official. DOGE Team Leads will submit monthly reports to the DOGE Administrator detailing each agency’s justifications for non-essential travel, and these justifications “shall be posted publicly unless prohibited by law or unless the Agency Head grants an exemption from this requirement.”

What Can Contractors Do?

1. Assess whether your contract arguably falls within any of the stated exclusions, which could be interpreted broadly. For instance, the exclusion for “the military” could arguably cover all Department of Defense contracts. Agency Heads appear to have some degree of discretion to decide whether a contract falls within the stated exclusions. They could leverage the fact that key terms in the exclusion such as “critical” and “acute” are undefined. Moreover, Agency Heads can exempt particular contracts from this EO’s coverage. Confer with counsel regarding planning to request or confirm that relevant Agency Heads will exclude your contract(s) from coverage of this EO.

    

2. Carefully monitor prompt payment obligations under existing contracts. Under the Prompt Payment Act, the government is required to pay contractors within 30 days of a properly submitted invoice. For prime contractors that subcontract with small businesses and small business primes, the government should pay within 15 days to “the fullest extent permitted by law.” This is implemented into federal contracts via FAR 52.232-25, FAR 52.232-40, and FAR 52.212-4(i). While interest should accrue and be paid automatically, working with the contracting officer (“CO”) and contracting officer representative (“COR”) can facilitate timely payment without the Prompt Payment Act. This coordination may be even more important to facilitate written payment justifications under the new EO once the new payment system is implemented.