A second federal judge indefinitely blocked the Trump administration’s blanket freeze on appropriated and obligated federal funds for government contractors, reinforcing Congress’s authority over government spending. This decision directly impacts government contractors who rely on federal funding for projects and operations.
Key Takeaways for Government Contractors
- Funding Pause Declared Unlawful
The court ruled that the executive branch cannot impose a blanket freeze on congressionally appropriated funds. Judge McConnell wrote, “the Executive put itself above Congress. It imposed a categorical mandate on the spending of congressionally appropriated and obligated funds without regard to Congress’s authority to control spending.”
- Court Orders for Immediate Action
- Agencies are permanently ordered to refrain from reissuing, adopting, or reinstating the funding freeze policies outlined in the now-rescinded OMB Directive (M-25-13) (Directive) or any materially similar order.
- Agencies must not pause, freeze, block, or otherwise impede the disbursement of federal funds based on the rescinded Directive or any executive orders previously associated with it.
- The government must provide written notice to all federal departments and agencies, instructing them not to implement or reinstate any aspect of the blanket funding freeze.
- Agencies must release and transmit all funds that were paused due to the Directive or related executive orders.
- Clarification on Executive Discretion
The court made clear that its decision does not limit the Executive’s ability to manage federal funds within the bounds of the law. As Judge McConnell stated, “[t]he Court is not limiting the Executive’s discretion or micromanaging the administration of federal funds. Rather, consistent with the Constitution, statutes, and caselaw, the Court is simply holding that the Executive’s discretion to impose its own policy preferences on appropriated funds can be exercised only if it is authorized by the congressionally approved appropriations statutes.”
- Potential Delays and Adjustments
While the ruling is intended to restore funding, contractors should anticipate potential delays as the Administration reacts and agencies analyze how to readjust their policies to comply with the court’s decision.
- Long-Term Stability for Contractors
The decision reaffirms the legal principle that executive actions cannot override funding laws, which should provide greater predictability for businesses dependent on federal contracts.
What’s Next?
Government contractors should stay informed on further legal developments and ensure that they are preserving their rights under contracts and grants impacted by the funding freeze. Engaging with contracting officers and legal advisors will be essential in navigating potential agency adjustments following this ruling.
