Trump’s “Cost Efficiency Initiative” Expected to Decrease Federal Contracting, Grant, and Loan Funding

On February 26, 2025, the White House issued an Executive Order (“EO”), “Implementing the President’s ‘Department of Government Efficiency’ Cost Efficiency Initiative,” to transform federal spending on “covered” contracts, grants, and loans. The EO defines “[c]overed contracts and grants” as “discretionary spending through Federal contracts, grants, loans, and related instruments, but excludes direct assistance to individuals; expenditures related to immigration enforcement, law enforcement, the military, public safety, and the intelligence community; and other critical, acute, or emergency spending, as determined by the relevant Agency Head.”

The EO seeks to achieve its stated purposes through six core changes:

1. Creation of a Centralized Payment System: each agency head, with input from a DOGE team lead, must build a centralized system that facilitates a review and approval process for all covered contract and grant payments. This process requires agency employees to submit a written justification for each payment, which will be publicly posted and included in a monthly report to the DOGE Administrator (currently Amy Gleason). Any payment unaccompanied by a written justification may be paused by the Agency Head. Once the centralized payment system is operational, the agency head, with the DOGE team lead, must memorialize the payment justification, review, and publication process in a formal agency guidance.
   
   
2. Contract Review and Grant Reallocation: within 30 days, each agency head must review existing covered contracts and grants, primarily with educational institutions and foreign entities, to reduce or reallocate federal spending. The EO directs agency heads to terminate or modify (including through renegotiation) contracts and grants “where appropriate” in order to “reduce overall Federal spending or reallocate spending to promote efficiency and advance the policies” of the Administration. Each agency head, in consultation with the agency’s DOGE team lead, must within 30 days also complete a review of the agency’s contracting policies, procedures, and personnel. During this period, agencies may not issue or approve new contracting officer warrants unless the appropriate agency head deems it necessary.
   
   
3. Contract and Grant Approval: each agency head, in consultation with the agency’s DOGE team lead, must issue guidance on signing new and modifying existing contracts in line with the Trump Administration’s efficiency goals. Each DOGE team lead must also provide the DOGE Administrator a monthly report that includes all payment justifications on contracting activities.
   
   
4. Justification of “Non-Essential” Travel: similar to the above payment and review process, all federally funded travel for conferences and other “non-essential purposes” must be submitted to a central system with a written justification for the travel to be reviewed by the agency head, publicly posted, and shared with the DOGE Administrator on a monthly basis.
   
   
5. Agency Credit Card Freeze: all credit cards held by agency employees are frozen until March 28, 2025, except to cover disaster relief, natural disaster response benefits, or other operations and services deemed “critical” by an agency head and DOGE team lead.
   
   
6. Real Property Reports: each agency head must provide the Administrator of General Services a complete and accurate inventory of the agency’s real property by March 5, 2025. Thereafter, the agency head must identify all termination rights in existing leases and prepare a plan to dispose of Government-owned real property that the agency deems no longer necessary.

The EO excludes contracts and grants related to enforcement of federal criminal or immigration law; federal agencies like the U.S. Customs and Border Protection, U.S. Immigration and Customs Enforcement, and the Uniformed Services as defined in 20 C.F.R. 404.1330; classified information and systems; and “any other covered grant or contract, agency component, or real property that the relevant Agency Head exempts in writing from all or part of this order, in consultation with the agency’s DOGE Team Lead and the Director of OMB.”