What Contractors Facing Terminations, Stop-Work Orders, and Suspension of Work Orders Directed by the Trump Administration Need to Know

Stephanie M. Harden, Jennifer A. Short, Justin A. Chiarodo, Shane M. Hannon, and Amanda C. DeLaPerriere ●

The Trump administration’s directives to “pause” grant funding and to terminate certain grants and contracts sent shock waves through the government contracts and non-profit sectors. Although the “pause” in grant funding has been temporarily halted by a federal court (as of January 28), other terminations and suspensions have not been blocked. We summarize below the steps entities can take to preserve their rights as they navigate these emerging directives.

But First: What Happened? 

Immediately after his inauguration on January 20, President Trump began ordering federal agencies to pause funding for certain projects or initiatives. A January 20 Executive Order (“EO”) titled “Unleashing American Energy” encouraged energy exploration and production and eliminated electric vehicle mandates. It directed agencies to “immediately pause” all disbursements under the Inflation Reduction Act of 2022 and the Infrastructure Investment and Jobs Act.

Another EO titled “Ending Radical and Wasteful Government DEI Programs and Preferencing” directed the Office of Management and Budget to terminate DEI programs (see our prior analysis of this EO here). Consequently, the new Department of Government Efficiency announced on January 24 that approximately $420 million in current or impending contracts, most of which related to DEI programs, were cancelled.

Consistent with these orders, the Office of Management and Budget (“OMB”) on January 27 directed federal agencies to pause, as of January 28 at 5:00 PM ET, all payments and obligations to disburse any federal financial assistance, including financial assistance for nongovernmental organizations. The two-page OMB policy memo stated that the paused programs will be assessed to determine whether they are consistent with the administration’s new policy objectives. This directive has led to widespread chaos, prompting the administration to issue additional guidance on January 28 regarding the scope and purpose of the January 27 funding freeze. The freeze on grant funding was then temporarily halted by a federal district court later in the day.

Federal contractors performing contracts or projects subject to these EOs or OMB instructions have or likely will soon receive stop work orders or, in some cases, notices that the government is terminating for convenience. A “suspension of work” or “stop-work” order pauses performance for a period of time, after which the government may decide either to resume performance or terminate the contract. A notice of termination for convenience, as its name suggests, is the mechanism by which the government unilaterally terminates the contract as of right.

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Understanding President Trump’s Executive Orders on DEI: Implications for Federal Contractors

Dominique L. Casimir ●

On January 21, 2025, President Trump signed two Executive Orders (“EOs”) taking aim at diversity, equity, and inclusion (“DEI”) within federal agencies and the federal contractor workforce: Ending Illegal Discrimination And Restoring Merit-Based Opportunity and Ending Radical and Wasteful Government DEI Programs and Preferencing. Accordingly, federal contractors must now re-familiarize themselves with the Trump administration’s view on workplace DEI initiatives. These EOs represent a sharp contrast in the new administration’s expectations regarding workplace DEI compared to the Biden administration.

The Trump administration regards DEI initiatives as suspect based on the belief that these initiatives involve lowering applicable professional standards and discrimination against those viewed as capable of advancing based on merit. As the president articulated in the EO titled “Ending Illegal Discrimination and Restoring Merit Based Opportunity,” DEI is “a pernicious identity-based spoils system.” President Trump stated in his inaugural address that he intends to “forge a society that is colorblind and merit-based.” In furtherance of this objective, the president revoked EO 11246, which for more than six decades has prohibited federal contractors from making employment decisions on the basis of race, color, religion, sex, or national origin. While racial discrimination in hiring remains illegal under the Title VII of the Civil Rights Act of 1964, the Trump administration also ordered the Civil Rights Division of the Department of Justice to immediately freeze much of its activity, including not pursuing any new discrimination cases.

What Do Contractors Need to Know About President Trump’s EO “Ending Illegal Discrimination and Restoring Merit-Based Opportunity”?

In this second presidential term, the Trump administration demonstrates greater awareness and sophistication in leveraging existing legal frameworks to enforce its view of DEI initiatives and principles. Accordingly, contractors should expect heightened government scrutiny and legal challenges as the Trump administration seeks to demonstrate its ability to force contractors to align with its viewpoint that explicit efforts to achieve workplace diversity constitute unacceptable racial discrimination.    

  1. Agreement Regarding to Materiality Under the False Claims Act: One of the biggest takeaways for federal contractors is that this EO requires the head of each agency to include a contract term in which the contractor agrees that its “compliance in all respects with all applicable Federal anti-discrimination laws” is material to the government’s payment decisions for purposes of the False Claims Act (“FCA”) (section 3729(b)(4) of title 31).
  2. Certification:  The EO also requires an award recipient to certify that it does not operate any programs “promoting DEI that violate any applicable Federal anti-discrimination laws.” This certification, if viewed as false by the Trump administration’s Justice Department, could become the basis for an allegation of an FCA violation.
  3. Expected Government Investigations: The EO directs the Attorney General to identify “up to nine potential civil compliance investigations of publicly traded corporations, large non-profit corporations or associations, foundations with assets of 500 million dollars or more, state and local bar and medical associations, and institutions of higher education with endowments over one billion dollars.” This demonstrates the Trump administration’s willingness to invest government resources into challenging the DEI programs of large organizations.
  4. Expected Litigation: The EO directs the Attorney General to report on ways in which the private sector can be encouraged “to end illegal DEI discrimination and preferences and comply with all federal civil-rights laws” and to identify opportunities for the Trump administration to engage in lawsuits.

What Do Contractors Need to Know About President Trump’s EO “Ending Radical and Wasteful Government DEI Programs and Preferencing”?

While this executive order is directed to federal agencies, it demonstrates the sweeping nature of the Trump administration’s efforts to eradicate DEI principles from the workplace.

  1. Termination of DEI Programs: The EO mandates the termination of all DEI programs within federal agencies. This includes any initiatives, training, or policies that are specifically designed to promote DEI within the federal workforce, which the EO describes as “radical and wasteful.” Relatedly, the Trump administration issued a memo directing all federal agencies to place any DEI professionals within their ranks on paid leave as of January 22, 2025. The Trump administration also provided agency heads with a directive warning of “adverse consequences” for anyone who fails to report any of their colleagues (to a specified email address created for this this purpose) who try to circumvent orders to immediately cease DEI-related activities.   
  2. Prohibition of Preferences Based on Identity: Consistent with EO 11246 (which the president revoked), the new Trump EO explicitly prohibits federal agencies from giving preferential treatment to individuals based on race, color, religion, sex, or national origin in hiring, promotion, or any other employment decisions.
  3. Review and Rescission of Existing Policies: Federal agencies are required to conduct a comprehensive review of their existing policies, programs, and practices to identify any that are inconsistent with the new directive. Any policies or programs that are found to be in violation of the order must be rescinded or modified to comply with the new guidelines. This includes reviewing training materials, hiring practices, and any other initiatives that may have been implemented to promote DEI within the agency.

What Should Contractors Do to Comply with the New EOs?

  1. Contractors should conduct a privileged review of their existing DEI programs to identify any potentially problematic features such as race- or gender-based quotas, or to consider adding a mission statement to clarify that the contractor’s diversity efforts seek to identify and cultivate all existing talent and do not have the effect of lowering any applicable standards or commitment to excellence.
  2. Contractors should also consider a privileged review of their documented merit-based criteria for hiring, promotions, and other employment actions. This may involve updating job descriptions, performance evaluation processes, and training programs to focus on skills, experience, and performance.
  3. Contractors should consider developing consistent guidance for employees, as they may have questions about the organization’s continued commitment to diversity and inclusion, and whether such a commitment is lawful, or where to go if they have concerns.

We will continue to closely monitor the implementation of these executive orders and will report on any new developments.

60-Second Sustains: The Mission Essential Group

Elizabeth N. Jochum and David L. Bodner ●

The Mission Essential Group
B-422698.2

  • Mission Essential challenged a task order solicitation issued by the Air Force, alleging the lowest price, technically acceptable (“LPTA”) evaluation scheme violated DFARS 215.101-2-70.
  • The DFARS provision establishes eight criteria, each of which must be met in order for a solicitation to employ an LPTA methodology.
  • It also requires that agencies “avoid, to the maximum extent practicable,” the use of LPTA procedures for procurements of “knowledge-based professional services.”
  • Mission Essential alleged the Air Force failed to meet at least three of the eight criteria allowing for LPTA and that LPTA procedures must be avoided given the type of services sought.
  • GAO sustained the protest, recommending the Air Force revise the solicitation to comply with DFARS 215.101-2-70 and request revised proposals.

GAO Rejects Notion of a Pre-FPR “Continuous Registration Requirement” for SAM

Luke W. Meier and Amanda C. DeLaPerriere ●

The last week saw GAO sustain two protests that should put the nail in the SAM “continuous registration” coffin.

The Federal Acquisition Regulatory (“FAR”) Council recently revised the standard System for Award Management (“SAM”) registration clause (FAR 52.204-7) to make clear there is no “continuous registration requirement”—contractors need to be registered in SAM only at the time they submit their final, legally-binding proposal.

In two recent decisions, GAO has confirmed that the same was (and is) true under the prior version of FAR 52.204-7 as well. That is, if an agency allows an offeror to submit a revised proposal, and the offeror is properly registered in SAM when that final proposal is submitted, it does not matter if there was some SAM registration failure at an earlier stage of the procurement.  The offeror is eligible, and it would be unreasonable for an agency to eliminate an offeror or terminate an award based on a pre-FPR SAM flaw.

In UNICA-BPA JV, LLC, B-422580.3, the protester (“UNICA”) had an active SAM registration when it submitted its final revised proposal, but the Agency later eliminated UNICA from the competition based on the fact that UNICA was not registered in SAM at the time of its initial proposal. That was unreasonable, GAO found, because UNICA had in fact met the stated requirement to be registered in SAM “when submitting an offer,” as the FAR defines “offer” as a proposal that can form a binding contract, and that definition applied only to UNICA’s final, legally-binding proposal, which was compliant. GAO thus found the Agency acted unreasonably by eliminating UNICA from the competition and sustained UNICA’s protest.

In Metris LLC, B-422996.2, the Agency proposed to take corrective action to terminate the award to Metris for having a break in its SAM registration between the time of the initial proposal submission and its final proposal submission. GAO found that Metris’s initial proposal was extinguished when Metris submitted – and the Agency accepted – Metris’s final proposal revision. Because Metris was registered in SAM at the time of the final proposal revision, Metris had an active SAM registration when it submitted its offer, in accordance with FAR 52.204-7. GAO thus recommended that the agency abandon its plans to terminate Metris’s contract award, and instead “maintain its existing award to Metris.”

These cases follow the legal reasoning of Hanford Tank Disposition Alliance, LLC v. United States, 173 Fed. Cl. 269, 312-319 (2024), and should deter agencies from eliminating any more offerors over pre-FPR SAM issues.

Also published in National Law Review at GAO Confirms No Continuous SAM Registration Requirement, January 17, 2025.

The FAR Council Publishes Long-Awaited CUI Rule

Michael Joseph Montalbano ●

On January 15, 2025, the Federal Acquisition Regulation (“FAR”) Council issued its long-awaited “CUI Rule.” CUI, or Controlled Unclassified Information, is information that the government creates or possesses, or that an entity creates or possesses for or on behalf of the government, that a law, regulation, or governmentwide policy requires or permits an agency to handle using safeguarding or dissemination controls. For nearly 15 years, contractors have struggled to determine what information meets this definition. The CUI rule is an opportunity for the federal government to finally provide contractors with the guidance needed to better identify and safeguard the CUI they receive in connection with their federal contracts.

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Three Major Features of the New Final Rule on Suspension and Debarment

Dominique L. Casimir ●


Introduction

On January 3, 2025, the Federal Acquisition Regulatory Council (“FAR Council”) published a long-awaited final rule to update suspension and debarment procedures. 90 Fed. Reg. 507. The final rule takes effect January 17, 2025.

As a refresher, suspension and debarment are non-punitive administrative actions by which the federal government excludes non-responsible contractors from eligibility to receive new government contracts and other federal awards. Suspension is a temporary measure, often imposed pending the outcome of an investigation or legal proceedings, when immediate exclusion is necessary to protect the government’s interests. Debarment is a longer-term exclusion, typically lasting up to three years, imposed when, after due process, the Suspending and Debarring Official (“SDO”) finds the contractor non-responsible. Both actions aim to ensure that the government only engages with responsible and reliable contractors.

Suspension and debarment procedures are codified in two distinct regulatory regimes: the Federal Acquisition Regulation (“FAR”), codified in 48 CFR, applies to procurement transactions, which involve the federal government’s acquisition of goods and services; and the Nonprocurement Common Rule (“NCR”), found in 2 CFR part 180, which applies to transactions such as grants, cooperative agreements, and other forms of federal assistance. While both regulatory frameworks aim to protect the government’s interests by excluding unreliable contractors, they differ in their specific procedures and immediate effects.

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Fiscal Year 2024 GAO Protest Statistics: Course Correction from Fiscal Year 2023 Shows Continued Slow Decline in GAO Protests

Luke W. Meier and Shane M. Hannon ●

The Government Accountability Office (“GAO”) released its Annual Report to Congress for Fiscal Year 2024 (B-158766), summarizing bid protest activity during the 2024 fiscal year. The FY24 bid protest statistics reflect a continuation of recent trends, and course correction after the FY23 statistics were skewed by the 100+ protests challenging the Department of Health and Human Services’ government-wide acquisition contract, the Chief Information Officer-Solutions and Partners 4 (“CIO-SP4”).

Overall, the number of protests is fairly steady, the effectiveness rate remains high (over 50 percent), and hearings are increasingly rare (just one in the last year).

Continue reading “Fiscal Year 2024 GAO Protest Statistics: Course Correction from Fiscal Year 2023 Shows Continued Slow Decline in GAO Protests”

Department of Defense Issues Final CMMC Rule

Michael Joseph Montalbano ●

On October 11, 2024, the Department of Defense (“DoD”) issued the first part of its final rule establishing the Cybersecurity Maturity Model Certification (“CMMC”) program. As expected, the final rule requires companies entrusted with national security information to implement cybersecurity standards at progressively advanced levels, (CMMC level 1, CMMC level 2, and CMMC level 3) depending on the type and sensitivity of the information. While the final rule largely tracks the proposed rule issued in December 2023, we outline below several notable updates DoD included in the final rule and their potential impacts on DoD contractors.

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Blank Rome Attorneys Appointed to American Bar Association’s Public Contract Law Section Leadership for the 2024–2025 Term

Blank Rome LLP is pleased to announce that eight attorneys from the firm’s nationally recognized Government Contracts group have been appointed to leadership roles in the American Bar Association’s Public Contract Law Section for the 2024–2025 term.

Visit our website to learn more about their roles and the Section of Public Contract Law.

BIS Issues New Export Controls Targeting GAAFET, Quantum, and Additive Manufacturing, and Ushers in New Age of Plurilateral Export Controls: 5 Key Takeaways

Anthony Rapa, Alan G. Kashdan, and Brendan S. Saslow ●

The U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) recently issued an interim final rule (“IFR”) under the Export Administration Regulations (“EAR”) imposing licensing requirements for exports to all destinations worldwide of certain gate all-around field effect transistor (“GAAFET”) technology, quantum computing items, advanced semiconductor manufacturing equipment (“SME”), additive manufacturing equipment, and aerospace coating systems technology.

The new measures are notable not only for their restrictive application to all destinations in the world—an unusual type of control under the EAR—but also for their institution of a new license exception, “Implemented Export Controls” (“IEC”), that allows for exports of the newly controlled items to specified “like-minded” countries that have instituted comparable export controls that are harmonized with U.S. controls.

The new controls are effective immediately as of September 6, 2024, with the exception of controls over certain quantum items, which take effect November 5, 2024, the cutoff date for public comment on the IFR.

Read the full client alert on our website.

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