Update On Government Contracts Ramifications Of The Trump Administration

In December 2016, Jones Day issued ” Government Contracts Ramifications of the Trump Election,” a Commentary in which we discussed several likely impacts of the Trump Administration in the government contracts arena. Specifically, we discussed that the new Administration would:

Seek repeal of numerous Executive Orders affecting government contractors.
Reject some Obama Administration procurement policies, such as: the preference for fixed-price type contracts; the preference for lowest-price technically acceptable (“LPTA”) evaluation schemes; and the preference against outsourcing government jobs to private companies.
Embrace Commercial Item contracting.
Increase government spending for defense, cybersecurity, infrastructure, and immigration-related activities.
Decrease spending by many agencies, including the Department of Education, Environmental Protection Agency, and Internal Revenue Service.
Focus on compliance issues such as rooting out fraud, waste, and abuse, and ensuring compliance with the Buy American Act and Trade Agreements Act.
Withdraw from, or renegotiate America’s participation in, certain trade relationships, which could affect companies’ supply chains.
Decrease the federal workforce, which could result in understaffing and undertraining within the acquisition workforce.
Appoint the members of the FAR Council, including the Office of Federal Procurement Policy (“OFPP”) Administrator, Secretary of Defense, Administrator of National Aeronautics and Space Administration, and the Administrator of General Services Administration.
Since the issuance of our earlier Commentary, President Trump has taken several actions that provide additional insight into the impact his Administration will have on government contractors. President Trump’s actions and statements in the last few months indicate the following potential impacts on government contractors:

Willingness to Participate in Contract Negotiations

On several occasions before his inauguration, then President-elect Trump made public statements criticizing what he saw as overspending on government programs. For example, he issued public statements criticizing the costs of two high-profile Air Force procurements—the F-35 fighter jet procurement and the Air Force One procurement. In both cases, the President’s willingness to get involved in price negotiations resulted in the contractors agreeing to lower their prices.

President Trump views himself as a dealmaker, and he may seek to involve himself directly in negotiating procurements even now that he has taken office. Therefore, government contractors can expect that, especially with regard to high-profile procurements, the President may take a keen interest in the selection process and seek to negotiate price decreases—perhaps even after the award of the contract has been made.

However, President Trump’s public criticism of acquisitions could have negative effects. First, some believe that such public criticism, which has had an impact on the stock prices of the contractors involved, could dissuade contractors from competing for certain government contracts, resulting in less competition. Second, the President’s involvement could introduce risk to the government. If the President influences the selection of a contractor during the procurement process, companies could protest the award, alleging that the selection did not follow the evaluation criteria laid out in the solicitation. If the President influences the performance of a contract after award, this could potentially result in costly claims against the government for changes to the contract terms.

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