Breaking News: President Trump signed a new executive order on February 26, 2025, implementing significant reforms to federal spending practices. While military services are generally exempted, DoD contractors should pay attention to several critical provisions that could affect their operations.
Immediate Concerns for DoD Contractors
30-Day Contract Review
The executive order mandates that agency heads review all covered contracts within 30 days, with authority to terminate or modify them. Even though uniformed services are exempted, your DoD contracts administered through civilian agencies could be subject to review.
Contracting Process Freeze
Agencies cannot issue new contracting officer warrants during the 30-day review period, potentially delaying new contract approvals unless specifically deemed necessary by agency heads.
Payment Justification Requirements
A new centralized system will require government employees to provide written justifications for each payment approval. This could delay payments as agencies implement these new systems and processes.
Credit Card Freeze
Government-issued credit cards (commonly known as P Cards) are frozen for 30 days (with limited exceptions), which might impact a program manager’s ability to make small purchases from your business.
For insights on maintaining financial stability during payment delays, read our article on Cash Flow – Plan Ahead, Stay Informed!.What Small Business DoD Contractors Should Do Now
- Review your contract portfolio to identify which contracts might fall under civilian agency administration versus direct military oversight, or which contracts are currently scheduled to be paid using a P Card.
- Prepare for potential payment delays as agencies implement new justification procedures. This means reaching out to your banking relationships and making sure your lines of credit are appropriate for an extended payment wait time.
- Contact your contracting officers to determine if your contracts are considered exempt under the military/uniformed services exclusion, and keep close contact with them during this awkward period.
- Document current contract performance thoroughly to help justify continued funding during the review process, and in the unlikely event of contract termination, this will help you recover as much cost as possible.
The executive order’s focus on review and justification processes may create administrative burdens that could temporarily slow procurement and payment workflows, even for contracts that ultimately continue without modification. While payment and contract delays are often the cost of doing business with the government, it’s a good time to make sure your team is prepared to hunker down.
Ensure the stability of your business relationships by reading Evaluating the Health of Your Key Relationships and Partners.
