Among a bevy of executive orders issued by President Trump on the day of his inauguration (January 20, 2025) was the executive order (EO) Reevaluating and Realigning United States Foreign Aid. Most notably this EO required:
All department and agency heads with responsibility for United States foreign development assistance programs [to] immediately pause new obligations and disbursements of development assistance funds to foreign countries and implementing non-governmental organizations, international organizations, and contractors pending reviews of such programs for programmatic efficiency and consistency with United States foreign policy, to be conducted within 90 days of this order.
(Emphasis added.) This EO not only appears to place all new contract and grant awards that include foreign assistance on pause, but suggests that "disbursements" or payments under existing contracts and grant awards will be halted, absent a waiver from the secretary of state.
Not surprisingly, this EO and its ambiguity regarding its application and implications have caused a flurry of uncertainty among contractors and grant recipients that have faithfully delivered foreign aid and assistance, in some cases for decades, to allies and communities in need around the globe.
On Friday (January 24, 2025), the U.S. State Department provided additional guidance on how it would implement President Trump's directive. In particular, the secretary of state ordered that no new obligations for foreign assistance shall be made and that stop-work orders are to be issued for existing foreign assistance awards.
Effective immediately, Assistant Secretaries and Senior Bureau Officials shall ensure that, to the maximum extent permitted by law, no new obligations shall be made for foreign assistance until such time as the Secretary shall determine, following a review. For existing foreign assistance awards, contracting officers and grant officers shall immediately issue stop-work orders, consistent with the terms of the relevant award, until such time as the Secretary shall determine, following a review. Decisions whether to continue, modify, or terminate programs will be made following this review.
Furthermore, the secretary of state also ordered that pending solicitations, requests for proposals and grants and other requests for foreign assistance funding were to be halted and that the review process for proposals for foreign assistance grants, subgrants, contracts, and subcontracts is suspended. All of these actions would be halted in order to determine whether these efforts comported with the president's foreign policy agenda.
The guidance illuminated that waivers to the "pause" may be granted for (1) foreign military financing for Israel and Egypt, as well as administrative expenses, including salaries, to administer said financing; (2) emergency food assistance and expenses, including salaries, to administer said assistance; (3) salaries and related administrative expenses, including travel, for U.S. direct-hire employees, personal services contractors, and locally employed staff; (4) legitimate expenses incurred prior to January 24, 2025 and legitimate expenses associated with stop-work orders; and (5) any additional exceptions approved by the director of foreign assistance. However, it is unclear if these waivers are automatically applied or require a specific finding by and approval by the secretary of state. Additional waivers may also be possible, but per recent comments from Secretary Rubio, foreign aid would need to meet at least one or more of the new administration's foreign policy goals: to make the United States safer, stronger, and/or more prosperous.
Shortly after the State Department's guidance, partners and contractors of the State Department and the U.S. Agency for International Development (USAID) began receiving stop-work notices. The content of these notices has varied; some state that "all" costs need to cease, while others recognize that some costs may still be necessary and that recipients and contractors should be doing their best to minimize costs—as the current case law provides. However, and perhaps more concerning, they also include references to executive orders seeking to curb diversity, equity, and inclusion (DEI) activities and requested certifications that such organizations were ceasing all such activities. This raises other issues, which we wrote about last week.
While the guidance provides that this review shall be completed within 85 days, it throws countless organizations into limbo as to what they are expected to do regarding expenses incurred (even if mitigated) during this period. Neither the FAR nor the Uniform Guidance (the governing regulations for contracts and grants, respectively) expects organizations to cease incurring costs, but rather that they mitigate costs during a stop-work order. However, if disbursements are not available except for the narrow exceptions subject to waiver, are organizations expected to carry these costs for the 85 days and potentially longer? With regard to programs that the U.S. government is partially funding, in connection with matching funds or funds from other governments or private foundations, might the U.S. government be breaching multilateral agreements? Are other parties expected to step in and fill the void?
The questions are numerous, but there are a few things organizations should be doing immediately:
- Collect their costs up to January 24, 2025 and preparing those allowable costs for reimbursement
- Cease operations to the extent practicable, including notifying subrecipients and subcontractors
- Begin mitigating costs to the extent possible, including redeploying personnel to unaffected programs
- Maintain full and complete records of costs incurred and mitigated during the pendency of the stop-work period
- Examine all U.S.-funded foreign assistance to determine whether any programs or expenses fit within the waiver criteria and contact their contractor/agreement officer to seek reimbursement
While many questions may remain, some will require additional guidance. Venable will continue to monitor guidance related to the executive order and is prepared to advise on and assist with questions and issues that may arise.