Government contractors play a vital role in carrying out federal objectives and building our communities. From construction and infrastructure to research and specialized consulting, these contractors keep key agencies running.
Government contractors play a vital role in carrying out federal objectives and building our communities. From construction and infrastructure to research and specialized consulting, these contractors keep key agencies running.
But, with the current administration's ongoing directive to cut costs and reshape federal spending, those who rely on government work need to reassess their agreements, compliance processes, and future strategy. President Donald Trump focused the goals of the “Department of Government Efficiency” with an executive order in February, “Implementing the President’s ‘Department of Government Efficiency’ Cost Efficiency Initiative.” This provided clarity on how the administration plans to implement ongoing changes within the federal government, which have wide-ranging impacts, including changes to the way the government handles ongoing contracts.
If your company works with federal contracts or grants, it’s important to understand how new oversight and budget constraints may affect your operations.
Executive Order Redefines Government Contracting
This executive order, among others, has laid the groundwork for significant reforms to federal spending. Agencies across the board are now required to follow tighter procedures and submit detailed records before spending federal funds under “covered” contracts and grants. While these changes don’t affect every contract, the vast majority of discretionary funding is now under stricter scrutiny.
One major shift involves the rollout of centralized payment systems at each federal agency. Employees must now submit written justifications for all contract and grant-related payments. These justifications will allegedly be publicly posted and reviewed by agency leadership before funds are released. If no justification is provided, payments may be paused. Once a system is in place, each agency must formalize these procedures in official policy.
Agencies were also given a short window to assess all existing contracts and grants which has resulted in a significant reduction of these contracts. Moving forward, all new contracts and modifications to existing agreements must follow fresh guidance developed by each agency in coordination with its Department of Government Efficiency (DOGE) team lead. Each DOGE lead must also report on contracting activity monthly, including the justifications for every payment approved.
Additionally, each agency must compile and submit a real estate inventory to the General Services Administration. Once completed, agency leaders must identify lease termination rights and create a plan to offload government-owned properties no longer deemed essential. This aspect of the order highlights the administration’s interest in reducing physical infrastructure costs and repurposing unused assets.
Despite these strict new rules, some contract categories remain exempt. Enforcement efforts, intelligence services, military operations, and other high-priority or classified activities are not bound by these new directives.
There Will Always Be a Need for Government Contractors
While the federal government continues to trim costs and tighten oversight, the need for trusted contractors will not disappear. Infrastructure projects (especially marine projects) still need engineers and construction crews. Specialized technology still requires outside talent to develop and maintain systems. These changes may slow the flow of funds, but they will not eliminate the work. Contractors who adapt quickly and stay informed will remain valuable partners to federal agencies under this new framework.
Legal Support for Tennessee Government Contractors
Arnold, Willis & Conway helps government contractors protect their interests, structure agreements, and respond to new compliance requirements. If your company needs guidance on how to respond to this Executive Order, we’re here to support your goals. Secure the legal solutions you need to stay competitive in the changing federal landscape. Contact our team in Dyersburg to protect the important work you do every day for our great state and country.