by Tony Mazzeo and Tom Barrow
Eastern Virginia is home to more military bases and government facilities than just about anywhere else in the country, providing great opportunities for Virginia companies to participate in the federal marketplace. But in April 2025, the Trump Administration kicked off what could be the most significant round of procurement policy changes since the establishment of the Federal Acquisition Regulation (FAR) in 1984.
Contractors can prepare for the impact of this evolving procurement landscape by understanding the laws on which the system is based, analyzing the proposed changes, and looking for ways to stay ahead.
Statutory Foundations of Government Contracting
Even a highly motivated Administration cannot make changes beyond the powers of the Executive branch. Congress sets statutory guardrails that will blanch the intensity of the Administration’s fervor for rapid and sweeping acquisition reform. Change is inevitable, but some things will remain the same.
- The government will continue to buy. The U.S. federal government is the largest single consumer of goods and services worldwide. Even as the government shrinks through employee buyouts and cutbacks in agencies, even the most aggressive cost-cutting measures will have an arguably negligible effect on the overall $1.8 trillion annual discretionary spending (FY 2024). Meanwhile, the Administration has proposed adding 13% to the defense budget and 65% to Homeland Security for FY 2026, solidly indicating that the government will continue to buy.
- The government will pay its bills. Even though cost-cutting efforts like DOGE receive publicity for terminating or cancelling contracts viewed as unnecessary or wasteful, contractual rights to fair settlements remain in place. A long-standing legal framework known as the Antideficiency Act requires the government to honor its obligations, and the ContractDisputes Act (CDA) provides a right for contractors to sue the government to demand payment. These statutes cannot be changed without congressional action, so contractors will eventually be paid what they are owed.
- Competition will remain central. The Competition in Contracting Act (CICA) sets the baseline expectation that competition underlies our entire procurement system, with several specified exceptions for emergencies or when only one contractor can reasonably supply the goods or services required. Expect this to continue through the coming reforms.
- Small business set-asides will remain important. The Small Business Act has been around since 1953 and requires at least 23% of the federal budget to be obligated on contracts with small businesses. While Congress is unlikely to change that baseline requirement, administrations routinely increase or decrease contracting goals for various socio-economic categories such as small disadvantaged businesses (SDBs). The Administration recently dropped the SDB goal from 15% under the Biden Administration back to the statutory minimum of 5% but cannot go lower. Thus, agencies are still required to comply with the basic statutory small business requirements set by Congress, and small businesses will continue to benefit.
What To Watch
Acquisition reform is the dream of every federal procurement leader, but true progress has been elusive at best. Like trying to dig a hole in the sand, most efforts seem to lose significance and steam quickly. In the long run, procurement may not change that much; however, in the near term, companies must keep a close eye on changes announced by the Trump Administration and implemented by a recent flurry of Executive Orders.
- Emphasis on commercial items. The Administration has renewed the call for the government to purchase only products already priced and designed for commercial competition. Companies that sell the same or similar products or services to the federal government and the civilian sector alike may see this as good news. However, if you worked hard to carve out a unique defense-related niche, you may find fewer contracting opportunities. Keep in mind this only applies to future solicitations, not existing contracts.
- Short-term uncertainty in contracting processes. The Administration directed the Office of Management and Budget (OMB) to delete any portion of FAR not based on law, creating a much smaller “FAR 2.0” that will lack many familiar procedural norms. This will be difficult, as government contracting is heavily rule-based. Even experts are not sure which regulations will face deletion. Contracting officials may seem somewhat rudderless if many rules disappear – at least for a while. It is likely some version of the old procedures, which have “worked” for years, will re-emerge out of necessity, even if no longer required. For an initial period, however, confusion may reign.
- Tighter spending scrutiny and program oversight. The Administration is attempting to minimize cost, maximize speed, and simultaneously increase the quality of the products the government purchases. The only way to spin all three of these plates at the same time is to increase oversight, which, historically, is not cheap, fast, or well-targeted. Add the Administration’s push to exclude foreign-made products in favor of domestic production, and contractors should expect more program scrutiny and contract audits than ever.
Stock Photos courtesy Unsplash & Pexels
Preparing for Impact
Government contractors can successfully navigate the next months of acquisition turmoil through careful planning and preparation.
- Invest in compliance. Decades of stable procurement policy can lead companies to believe they have mastered the process and can take more compliance risks in favor of contracting volume. But in an era of rapid and unprecedented change, now is the time to re-energize your compliance team to stay current on regulatory changes and react accordingly.
- Understand your rights during a Termination for Convenience. The government can terminate contracts it no longer needs, but contractors are entitled to submit a Termination Settlement Proposal (TSP) that “makes them whole” by seeking payment for completed work and other allowable costs, including profit. Take stock of any sunk costs and be ready to make an airtight case to recover that money if the government terminates your contract for convenience.
- Know the difference between unilateral and bilateral changes. Some contract modifications include changes that cannot be challenged, such as administrative changes or option exercises. However, many substantive changes require your consent. When your government customer sends you a contract modification, study it carefully to find which it is. If the modification adds work or performance time, you can argue for just compensation including increased costs or other remedies. Under some circumstances where the customer tries to add work that is beyond the scope of the contract, you may be able to decline.
- Communicate with your government customers. The Administration is releasing broad and sweeping changes through Executive Orders at breakneck speed. Even your government customers may not know what is coming. Staying in close communication with customers on the status of your contracts, you will be among the first to know.
Change can be jarring and difficult to navigate, but our government is not rolling up the carpets and leaving just yet. Federal contracting solicitations come out regularly, and Virginia contractors can continue to lead the way in supporting the important work our government does every day. With some awareness and planning, you can come through this time of change poised for what lies beyond.
Tony Mazzeo
Tony Mazzeo, is principal in the Construction & Government Contracts practice at Woods Rogers, a Virginia-based law firm with an office in Norfolk.
Thomas Barrow
Tom Barrow, is of counsel in the Construction & Government Contracts practice at Woods Rogers
The authors may be reached at tony.mazzeo@woodsrogers.com and thomas.barrow@woodsrogers.com
