Trump's federal overhaul creates confusion among D.C. contractors

State of play: Elon Musk's DOGE has slashed and frozen contracting work amid a slew of agency audits at spots like USAID, where payments on existing contracting invoices remain outstanding, per a press release from government contracting trade group Professional Services Council (PSC).

• "Without reimbursement for funds already disbursed, companies will run short of cash," says PSC president David Berteau in the release. "Some, especially small businesses, may soon go out of business."
• PSC's member groups have already laid off or furloughed almost 3,500 workers, per the release.

And stop-work orders like those issued at USAID don't mean that contracts are automatically dissolved, per the release — workers must still be employed should the order lift, upping the charge for already strapped contracting groups.

Zoom out: While it's common for new administrations to review whether existing programs fit with their agendas, as well as institute hiring freezes, the scope of these moves is unprecedented, Berteau said at a briefing at the end of last month.

• "Across the board, different guidances are coming out at different paces with different levels of precision and clarity," says Berteau. "That level of confusion really does need to be done away with to the maximum extent possible."

The intrigue: Berteau is quick to remind contractors that orders to stop a project can only come from the contracting officer assigned to it: "So if an executive order says stop work, if a memorandum from the secretary of the cabinet department says stop work, that has no contractual effect."

Between the lines: Despite the uncertainty, Berteau tells Axios he still thinks there's "a tremendous opportunity" for contractors because the industry could help meet DOGE's cost-cutting goals.

• Because contractors have to meet the government's deliverables to get paid, there's a greater emphasis on quickly nailing results than with in-house work: "You actually have an opportunity to get better efficiency and better effectiveness," Berteau says.
• And it's often more flexible and less expensive to use contractors than civil servants for a project, he says.

Should it turn out that demand for contracting rises as a result of DOGE's audits, Washington is prepared to meet it, says Northern Virginia Technology Council president and CEO Jennifer Taylor.

• "If we see a trend toward private-sector expansion similar to the Reagan era, our tech ecosystem will be ready to respond," Taylor writes in an email to Axios, pointing to the DMV's investments in AI, machine learning, cyber, cloud computing — all priority areas of the federal government, she says.

Flashback: D.C.'s contracting industry of today got its start under former President Reagan, whose push to reduce the scope of government led to more federal work being outsourced.

• This continued under presidents Clinton and George W. Bush, and as agencies slimmed staff but ballooned budgets, contractors ended up with much of the work — minting a new class of white-collar workers pumping money into Washington's economy.

Yes, but: Relying more on contracting than agency work brings an element of economic uncertainty to hometown Washington, says Mercer, of the Council of Governments. "There are trade-offs between good, stable jobs that you know you have beyond the end of a pay period or project being done, and folks' willingness to spend."

• And, he points out, it's not a given that jobs on any future contracts would stay within the Washington region.