A wave of executive orders from the Trump administration is rapidly reshaping the landscape for federal contractors, with sweeping changes to U.S. foreign aid, diversity initiatives, and gender policy. These orders have already triggered the suspension and termination of thousands of contracts, introduced new certification risks tied to DEI compliance, and created a patchwork of agency-level implementation rules that contractors must now navigate with caution.
In a recent Venable webinar, panelists examined how these policy shifts are affecting government contractors. Venable attorneys focused on the implications of new executive orders related to foreign aid, DEI programs, and the evolving enforcement environment around stop work orders and contract terminations.
Foreign Aid Freeze Leaves Contractors in Limbo
Diz Locaria, a partner in Venable’s Government Contracts Group, detailed the impact of the administration’s January 20 executive order that paused all U.S. foreign development assistance pending a 90-day review. “Thousands of contracts and grants were suspended,” Locaria said, noting that USAID may become “a much smaller agency, if one at all.”
The review is guided by three principles: whether a program makes America safer, stronger, and more prosperous. Contractors have also received questionnaires probing program alignment with administration priorities—including questions on DEI practices and partner vetting. Locaria cautioned organizations’ completion of these as they were formal representations that needed to be accurate, but also noted the pressure contractors were facing to respond in hopes of continuing their work.
Ambiguity Around “Illegal DEI” Certification Raises Compliance Risks
Another executive order, Ending Illegal Discrimination and Restoring Merit-Based Opportunity, requires contractors to certify they are not promoting “illegal DEI”—a term the administration has not defined. This uncertainty presents significant legal risk, particularly under the False Claims Act. Partner Paul Debolt stressed that these certifications are considered “material to [the government’s] decision to pay,” meaning even good-faith misunderstandings could result in liability. “You simply can’t blindly certify that you comply,” he said.
Contractor Strategy: Stop Work Orders, Terminations, and Settlement Best Practices
Associate Lindsay Reed addressed the rise in stop work orders and advised contractors to carefully track and segregate associated costs. “You want to make sure that the REA [Request for Equitable Adjustment] you’re submitting is detailed and well developed,” she said.
Counsel Chris Griesedieck elaborated on the government’s wide authority to terminate contracts for convenience, noting that while contractors can recover incurred costs, proving a wrongful termination is nearly impossible. “If you want to show that the government didn’t terminate for its own interest or at its sole convenience, and instead the termination was a breach of the contract,” he explained, “you need to show that the breach was motivated by bad faith or that it constituted an abuse of discretion.
As various federal agencies issue their own interpretations and class deviations to implement these orders, the panel urged contractors to stay vigilant. We “talk to any number of people who are just worn out on the day-to-day basis and tend to check out,” Debolt said. “But this is an area, with all the changes occurring that you can’t. It’s going to require you to think through what adjustments you need to make to how you perform work, how you bid work, and the tools you use within your company.
