Interview transcript:
Terry Gerton: So let’s jump into a conversation about what’s going on with contractors. We just passed the hundred day mark of the new Trump administration. What sorts of things are you seeing that are key points for contractors in this new environment.
David Berteau: Oh, where to start, Terry? I mean, there’s so much that’s happened in those hundred days. You know, one of the things that I think is important to calibrate here is, is this administration is unique in our history. We didn’t even start tracking the first hundred days until the Roosevelt administration in 1932. And of course he didn’t take office until March. And so the first 100 days was middle of the summer. But the reality is that since we’ve been tracking this sort of thing, the Trump team is the first one that was in office for four years. Out of office for four years and then came back. So this is not a second term in any sense of the words or the phrase because there’s no holdovers, right? Everybody changes. So it’s really a second first term. And so the first 100 days matters in that sense different than any other second term any president has ever had. This team came in, they spent that four years or at least three of those four years out of office fully getting ready for what they were gonna do from the minute they got on board. And you see it in a host of areas. You see it, first of all, in just the documents that the president has signed, go back even to Inauguration Day. He had signed a bunch of executive orders before he even left the Capitol. And that’s unprecedented. But the pace has continued. I think we’re over 140-something executive orders now, 142, I believe, on the first 100 days there. Many of them don’t seem to affect government contractors, but you have to look at all of them, embedded in some of them will be something that does impact the contracting process. I’ll give an example. There’s an executive order on showerhead water flow, which is not something that would normally leap out at you and say, well, that sure matters to government contractors, because it probably doesn’t unless you’re installing shower heads for DOD somewhere, right? But in the text of the executive order, it has an element that really does matter to It rescinds an existing rule and it rescind that rule without going through any of the elements of the Administrative Procedure Act process. So there’s no proposal to rescind it on which you can comment. There’s no adjudication of those comments and in a final rule that’s issued, it just says to the executive cabinet officer, rescind the rule because I, as the president, have the authority to tell you to do that.
Terry Gerton: Been quite a change. They’ve done that more than once, right?
David Berteau: Oh, they’ve taken a whole bunch of different approaches to the entire Administrative Procedure Act process. And yeah, for acquisition regulations, for example, it’s a little known fact, or a little discussed fact, that actually the APA doesn’t apply to the FAR. It has its own statute that applies to that. It’s the same effect. You have to put out something for comment, either as a proposed or an interim rule. You have receive those comments. You have adjudicate those comments, you have to publish it in the Federal Register. So it gives people like PSC on behalf of our member companies, an opportunity not only to provide comments, but also to take those comments as a broader basis for interaction.
Terry Gerton: So what does it mean when the administration really isn’t opening the comment? How do contractors react to these changes?
David Berteau: So there’s three things that we do at PSC on behalf of our contractor members. Number one is we will develop our own views and put them in writing as if there were comments being submitted. There may not be an opportunity officially to submit them, but we’re prepared to send those comments to whatever agency is in charge of that process and just put them in writing, put them a letter, get them on the record, right? The second is we’ll make sure that others are aware of our comments, in particular the committees of jurisdiction on the Hill. We already do this even in the normal comment process. We’ll often publish our comments and make them available not only on our website, but we’ll put out a press release with an attachment. We’ll provide them to the relevant committees and staff on the Hill so they’re aware of what we’re gonna do because even if the government doesn’t accept our comments, and frequently they don’t, regardless of party or administration, we wanna be able to continue to build on those where it makes sense so that contractors can actually continue to deliver better results on behalf of their government customers.
Terry Gerton: So David, in addition to this new approach where we’re not really asking for what you think, we’re just going to tell you what we’re going to do, there have been a lot of disruptions to existing contracts. How are contractors responding to the stop work, start work, stop work maybe work environment?
David Berteau: It’s been very tough. And we had a number of examples. We only have data right now, Terry, for civilian agencies in terms of contract terminations. But for the first three months of this calendar year, January, February, March, and that is Q2 of FY25, in the civilian agencies, there were more terminations for convenience across the federal government and a higher level of de-obligation of funds than ever before since the records are being kept in the Federal Procurement Data System. So that’s a huge, huge indication of what’s going on. It’s still fairly small from a proportional point of view, but it’s pervasive from the government contracting community point of view. But there’s a second piece of it as well. Oftentimes, so when a stop work order is issued, what’s I think not always recognized by everybody is that the contractor stops work in accordance with the order, but has the affirmative responsibility to be prepared to start work again when the stop work order is lifted. This typically happens in a government shutdown where you can sort of gauge when it’s gonna be lifted, right? But in these cases, in many cases, for the stop work orders, for instance, in the U.S. Agency for International Development, work was stopped, then the stop work orders was lifted, so you’d start again, then it was reinstated, so you stop again, and in some cases, lifted even a second time. Maybe eventually replaced with a termination for convenience. For contractors, you not only have to be ready to start again. You also have to agree with the contracting officer on what cost you can accumulate to maintain the ability to start again and how you will collect those costs and then submit them as a potential claims. So it’s not an invoice, but it’s a claim to be negotiated. That requires actually government contracting officers prepared to play their end of the role. One of the other effects of the first 100 days is fewer government contracting folks involved in many agencies. Just as the work goes up for stop work orders and terminations for convenience, the capability to do that work goes down. This puts contractors in a double bind, obviously. You’ve got to be responsive, but there’s nobody there to do the responsiveness with.
Terry Gerton: Well, and at the same time, there’s a slowdown in the payments, right? The federal government is being expressly slow to make their payments back to contractors.
David Berteau: From the early executive orders, there were bans being put in place in a number of agencies and across programs on new obligations and disbursements. That was the phrase. The English major in me says, the adjective new applies to both obligations and disbursements, but it was interpreted as not just new disbursement, but all disbursements. And so many cases, payments on existing invoices, even for work done as far back as December, October, November of last year, those payments were held up. They’ve been reinstated but not at a pace consistent with what companies need, because ultimately, a company only stays in business if its revenue is flowing. And part of the value of government contracting is typically a government invoice is as good as cash because the federal government pays its bills. That’s historically been the case. When you interrupt that, it not only affects the company, it affects the whole system.
Terry Gerton: You know, I might mix my metaphors here, but it feels like the Trump administration has kind of taken the contractor’s plate and thrown it up in the air. Maybe it hasn’t quite landed yet, so we’re not quite sure what’s going to happen next. What do you see for the next 100 days?
David Berteau: Well, it’s different agency by agency, right? And so for some agencies, the effects have been dramatic and pervasive. Numerous stop work orders, numerous terminations for convenience, numerous questions about paying invoices for other agencies. It’s still pretty much business as usual. And we see that actually reflected a little bit in the skinny budget that the administration released late last week, where some agencies will have steady funding for FY26 proposed. This is, of course, a proposal that Congress has to act on. And other agencies have very steep cuts. And so contractors have to look at their own situations one at a time, customer by customer, agency by agency, program by program, budget line by budget line.
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