As government contractors are well aware, the Trump administration issued a host of executive orders (E.O.s) over the past month that may impact their contractual obligations and costs. While agency implementation of the E.O.s' directives is ongoing, contractors are already beginning to receive contract modifications putting the policies of these orders into effect. Example modifications contractors are likely to see include those:

• Requiring contractors to certify "that it does not operate any programs promoting diversity, equity, and inclusion (DEI) that violate any applicable Federal anti-discrimination laws" and "that its compliance in all respects with all applicable Federal anti-discrimination laws is material to the government's payment decisions" pursuant to the directives of "Ending Illegal Discrimination and Restoring Merit-Based Opportunity" E.O.
• Removing contractor compliance with the requirements of Federal Acquisition Regulation (FAR) 22.8 Equal Employment Opportunity, pursuant to "Ending Illegal Discrimination and Restoring Merit-Based Opportunity" E.O.
• Terminating "equity-related" contracts in accordance with "Ending Radical and Wasteful Government DEI Programs and Preferencing" E.O.

Beyond E.O. implementation, federal agencies have undertaken certain actions, in furtherance of the broader goals of the administration, that are also likely to result in modifications to federal contracts. Earlier this week, the Department of Defense (DoD), Office of Acquisition and Sustainment issued a memorandum titled, "Review and Validation of Contracts for Consulting Services" instructing DoD components to terminate and descope consulting services contracts that are deemed "non-essential." The above examples are only a sampling of modifications that contractors can expect as the Trump administration continues to re-shape federal procurement. 

What Should Contractors Do?

Each proposed modification should be carefully reviewed for what is being asked of the contractor and what impacts it may have on contract performance and cost. In particular, contractors should begin the following actions. Do not sign a bilateral modification before completing these steps.

• Track and document all conversations with contracting officials. Where direction is ambiguous, seek clarification in writing from the contracting officer (CO).
• Track costs associated with complying with any new requirements mandated by the modification or otherwise responding to the modification. 
  • For modifications that concern DEI initiatives, any resulting legal costs should also be captured. 
  • For full- or partial- termination modifications (which are likely to be terminations for convenience), comprehensively tracking costs is particularly important in ensuring full recovery of all reasonable, allocable, and allowable termination costs as prescribed by the FAR. 
• Circulate the proposed modification to relevant parties, including in-house counsel, capture teams, and employees performing the work. For modifications that concern DEI initiatives and affirmative action obligations, Human Resources and labor and employment counsel should be consulted to ensure all relevant parties have the ability to comment before submitting a response or signing the modification.
• Review the modification for any required certifications, such as the certification language described in "Ending Illegal Discrimination and Restoring Merit-Based Opportunity" E.O. Certifications have consequences, including the potential for creating a false claim. Consult legal counsel before providing a certification in response to a proposed bilateral modification. 
• Review the modification for any release or waiver language and reserve your right in writing to submit a request for equitable adjustment (REA) or a claim for any costs incurred as a result of the proposed modification and/or propose pricing to cover such costs. 

If you have any questions about how best to respond to a contract modification, contact one of the Miller & Chevalier attorneys listed below. 

Scott N. Flesch, sflesch@milchev.com, 202-626-1584

Connor W. Farrell, cfarrell@milchev.com, 202-626-5925

Alex L. Sarria, asarria@milchev.com, 202-626-5822 

Jason N. Workmaster, jworkmaster@milchev.com, 202-626-5893

Ashley Powers, apowers@milchev.com, 202-626-5564

Elissa B. Harwood, eharwood@milchev.com, 202-626-5890

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