Recent developments in government contracting include a new executive order focused on procurement discipline, two federal court decisions addressing agency discretion and grant conditions, and additional updates under the ongoing FAR Overhaul initiative. Together, these developments signal continued emphasis on cost control, performance accountability, and policy-driven procurement, with practical implications for contractors across the federal marketplace.
Executive Order Targets Efficiency, Accountability, and Performance in Federal Contracting
A new executive order titled “Promoting Efficiency, Accountability, and Performance in Federal Contracting” directs agencies to take a more disciplined approach to procurement, with a particular focus on cost control, performance outcomes, and contractor accountability.
Most notably, the order establishes a default for fixed-price contracting. Use of other types of contracts, including cost-reimbursement and time and material contracts, will need to be justified in writing by the contracting officer to the agency head. Although many contractors already use fixed-price contracts, those who do not may need to reassess their approaches to contracting, including pricing strategies, as fixed-price structures tend to shift responsibility for cost overruns, particularly on less defined projects, to the contractor.
Contractors could expect a significant increase in firm-fixed-price contracts, including in situations where other contract types were more commonly used. This shift may affect risk allocation, proposal development, and contract performance planning.
Court Upholds Marine Corps Solicitation Cancellation
In a recent bid protest decision, Metrostar Systems LLC v. United States, the US Court of Federal Claims upheld the US Marine Corps’s cancellation of a solicitation after submission of proposals, concluding that the agency had a rational basis for its decision. The protester failed to demonstrate that the cancellation was arbitrary or made in bad faith.
The decision underscores the significant discretion agencies possess in canceling procurements when their requirements change or when other reasonable justifications arise. It also reinforces that challenging a solicitation cancellation remains an uphill battle, even after proposals are submitted.
Contractors should account for this risk in their bid strategies and recognize that agencies retain broad authority to reassess procurement needs, even during later stages of the procurement process.
Court Extends Block on Certain Dot Grant Conditions
A federal judge in the Northern District of California has extended a preliminary injunction preventing the US Department of Transportation from enforcing certain contested grant conditions, finding that the requirements may be impermissibly vague and potentially beyond the agency’s statutory authority. The challenged provisions would require compliance with broadly framed policy objectives that were not clearly grounded in statute, including certifications related to diversity, equity, and inclusion (DEI), gender-related policies, abortion, and cooperation with federal immigration enforcement.
The injunction also applies to the Department of Housing and Urban Development and the Department of Health and Human Services. A prior version of the injunction included the Environmental Protection Agency, but the court subsequently excluded that agency after it revised its certification language to require only compliance with antidiscrimination laws.
Contractors and grant recipients should carefully evaluate the specific grant conditions they agree to and closely track litigation developments. The ruling suggests the potential for continued appeals and interim revisions to grant condition language as agencies seek to address the court’s concerns.
Proposed Far Overhaul Incorporates DEI and Executive Order Requirements
As part of the ongoing “Revolutionary FAR Overhaul” initiative, regulators are working to incorporate recent executive order requirements into the FAR framework, including efforts to encourage and streamline commercial procurement and address DEI-related restrictions.
On April 20, another tranche of updates was announced, affecting FAR Parts 9, 12, 22, and 52. For Part 52, deviations were incorporated directly into the FAR, while updates to the other parts were issued as agency-specific deviations.
Part 12 introduced new solicitation procedures and requirements for certain agencies aimed at making contracting for commercial products and services easier. Changes to Parts 9 and 22 were largely administrative and intended to streamline those sections, although some minor substantive changes were included.
These updates build on the new DEI-related clause that is being incorporated into contracts in response to Executive Order 14398. Contractors should carefully review any deviations incorporated into their contracts as well as new acquisition procedures used by purchasing agencies.
As a practical matter, FAR clauses are generally not incorporated into existing contracts until a modification is issued. Contractors should therefore expect to see contract modifications, particularly with respect to new DEI-related language, and should assess the operational and compliance implications of those changes.
Looking Ahead
These developments reflect a continued shift toward more structured and policy-driven procurement, with increased emphasis on fixed-price contracting, agency discretion, and alignment of procurement with broader executive priorities. Contractors should closely monitor these changes and assess how evolving requirements may affect contract strategy, risk allocation, and compliance obligations in the near term.