Buckle up: The acquisition ride is only going to get bumpier

“Flood the zone” is the mantra under which the Trump Administration took office. And flood the zone they have. Federal contractors and the acquisition system more broadly have definitely not been spared — and more upheaval is on the horizon. 

Consider the following: For the first time in memory, the U.S. government is refusing to pay contractors for work already completed. One of the federal market’s core tenets is that compensation for work properly contracted and delivered is backed by the full faith and credit of the U.S. Government. That this is now even a question, as evidenced by the administration’s position vis a vis USAID contractors, is both unprecedented and raises serious questions about company access to credit and broader financial risk assessments. Fortunately, the courts have so far pushed back against the administration, but the battle is not over.

On a similar note, “termination for convenience” clauses are standard in most government contracts, but the breadth and scope of their use across government in just the last two months has been breathtaking. It has been especially breathtaking because there has been little or no mission or cost analyses underpinning the actions. Instead, they’ve been largely based on data scrubs and keywords which may or may not accurately describe the work being done.

The General Services Administration is demanding that major consulting contractors justify their value, identify cost savings and make pricing concessions. Contract reviews are important and should be routinely conducted. But it is not at all clear GSA has the authority to make this demand. Contracts and task orders are owned by the agencies that procured them, not by GSA. Reviewing and justifying them is the purview of the program managers, contracting officers and contracting officer technical representatives that set the requirements and manage the contracts.

GSA has also announced that it will become the government’s central procurement hub for so-called “category management services” and IT. The agency expects its workload to grow exponentially, and that it will eventually be handling over $400 billion in procurement actions. Many will remember that GSA once was the government’s procurement hub, but balky systems, a lack of responsiveness and a lack of understanding of and intimacy with customers and their missions catalyzed a stark market shift to governmentwide and agency-specific contract vehicles.

What has changed? The GSA of today is definitely not the GSA of yesterday; in many areas, GSA has been doing exceptional work. But it is not at all clear that the agency has either the resources or the expertise to efficiently and effectively support its leadership’s objectives, even with the expanded use of AI and other technology tools. The challenge is only exacerbated by the deep staff reductions, including but not limited to probationary employees — the “seed corn” of the future workforce. Very significant efficiencies are definitely achievable through technology, but acquisition is also about broader organizational and human resources alignment and development. Slashing the existing workforce absent in-depth workforce planning is not likely a recipe for success.

It doesn’t stop there. On March 24, GSA announced “major changes” to its Schedules program which, among other things, are certain to cause confusion both within government and without. The agency said the new policy would allow for termination of under-utilized schedules contracts, but GSA has always had that authority. It also talks about addressing undefined “compliance and performance” issues. GSA definitely has responsibility for compliance but as noted above, when it comes to performance, the responsibility lies elsewhere.Still to come: an effort to rewrite the Federal Acquisition Regulation — which will be directed out of OMB. No small challenge, that.

Speaking of OMB, we may well see the creation of new contract clauses to “enforce” the administration’s anti-DEI policies — it’s already happening with university grants. Leaving aside the legitimacy of the government telling a private company how to manage its own workforce, how many companies will be able to certify that nothing in their human resources practices or employee engagement recognizes any diversity or celebrates the accomplishments of different communities when such components are both commonplace and widely seen as human resources best practices and are yet part and parcel of the administration’s anti-DEI initiatives? 

Then there are the budget wars. Difficult as it may be for agencies, the current continuing resolution might prove to be a high-water mark. As FY26 and FY27 approach, every agency, faces substantial budget pressures. History tells us that when that occurs, low price/technically acceptable contracting is increasingly used as a bill-payer, despite the overwhelming evidence that an over-reliance on LPTA procurements results in sub-standard decisions and performance. Similarly, increased margin pressures in a market where margins are already generally below commercial standards is often counter-productive and definitely counter to efforts to expand market participation by non-traditional firms. This is one reason the GSA demand that firms make pricing concessions mid-performance on existing contracts sends a worrisome signal. Price gouging, or excessive fees are never acceptable. But through competition, price realism tests and more, the procurement process is designed to prevent that from happening. Getting on the GSA schedules, for example, is in large part dependent on a company’s pricing being deemed fair and reasonable — and their published pricing is almost always discounted through competition.

Yes. The zone is being flooded and we’re only two months in. And reportedly still to come is an overhaul of the federal acquisition regulation, which may be a good thing but, if done right, will be a massive undertaking. Other than in agencies where missions are being slashed, there is no reason to think the underlying public-private partnership that is so central to the proper functioning of government will diminish. But the market’s dynamics could significantly change. Expectations will shift, rules and lines may be blurred and customer engagement strategies will need to adjust. 

As Charles Darwin said, survival is about which species is most adaptable to change. So, buckle up.

Stan Soloway is CEO of Celero Strategies and a former Deputy Undersecretary of Defense. He is also the Vice Chair of the National Academy of Public Administration and a member of the Defense Business Board