Huge Swath of Federal Contract and Assistance Spending.
*On January 29, 2025, the White House rescinded OMB Memorandum M-25-13, which suspended funding for federal assistance programs.
The Department of Defense (DoD) has temporarily suspended the award of new contracts, except for emergency contracts, while reviewing compliance with the latest presidential directives. The freeze on DoD contracts is effective immediately as of January 27, 2025. The DoD has not announced how long the suspension will last, as it could be as little as 10 days or potentially continue for months.
Concurrently, the Office of Management and Budget (OMB) has placed a hold on federal grants and disbursements which could result in the delay of state and local projects reliant on federal funding. OMB announced that the suspension of federal assistance – including grants and loans– takes effect at 5:00 PM EST today, January 28, 2025. Federal agencies will have until February 10, 2025 to submit detailed information to OMB on any federal assistance programs impacted, aside from Social Security and Medicare benefits, which are not affected. In the memorandum announcing the action, OMB estimated that in the 2024 fiscal year the government spent more than $3 trillion of the nearly $10 trillion in federal government spending on federal assistance.
With this suspension of federal assistance, it is important to note that the Small Business Administration will likely be affected, as well as federal programs providing infrastructure funding to state and local agencies. These actions may have a ripple effect on project timelines and the contractors involved in federally funded infrastructure and development initiatives.
At this time, contractors can be proactive in managing any prospective changes. Pending bids should be reviewed for potential cost increases, such as those caused by new tariffs or supply chain disruptions. If costs rise significantly during this suspension, contractors may need to revise bids to avoid financial strain. Additionally, contractors should closely monitor updates from the DoD and OMB for new compliance requirements that could impact contracts.
Effective risk management is also essential. Communicating with project owners, subcontractors, and suppliers about potential delays or cost impacts can help maintain transparency and minimize disputes. By staying informed and prepared, contractors can adapt to these changes and mitigate possible disruptions while awaiting further updates. Reviewing and revising bids, preparing for potential cost escalations, and ensuring compliance with new regulations will be essential to navigating this period. By staying informed and proactive, contractors can better manage risks and minimize disruptions. For assistance with bid adjustments, compliance reviews, or risk management strategies, consulting with experienced advisors is recommended.
Further updates will be provided as new information becomes available. As always, please do not hesitate to contact a Smith Currie Oles attorney to assist with your questions.
J. Logan RigsbeeÂ
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Associate
Atlanta
T: 404.582.8122
E: jlrigsbee@smithcurrie.com
Nufar Sharon
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Associate
San Francisco Bay Area
T: 510.903.2001
E: nsharon@smithcurrie.com
