Trump Can't Actually Cancel Federal Contracts on a Whim

President-elect Donald Trump's recent conjuring of Tweet storms fomented uncertainty in the contractor world as he threatened to force changes on major defense deals involving the modernizing of Air Force One and the F-35 joint strike fighter.

And, as revealed during the presidential campaign, Trump has a longtime reputation for getting tangled in litigation with contractors; a USA Today report found he has been involved in 60 lawsuits involving employees and vendors alleging he never paid them, while an additional 253 subcontractors said they were not paid in full or on time while working on Trump’s Taj Mahal Casino in Atlantic City.

During his Sept. 26 debate with Democratic nominee Hillary Clinton, in which she raised his failure to pay one architect, Trump defended such tactics by saying, “Maybe he didn’t do a good job and I was unsatisfied with his work. Which our country should do, too."

Working with contractors under the Federal Acquisition Regulation, however, may prove to be a new experience for the longtime businessman. The vast regulation’s precise language for such tools as progress payments or “suspension or reduction of performance-based payments” is designed to protect both the interests of the taxpayer and the contractors themselves, experts told Government Executive.

“Contract clauses in the private sector are more ambiguous, the FAR less so,” said Michael Fischetti, executive director of the National Contract Management Association. In fact, government contracts are often “criticized for their lengthy statements of work,” he said. “In the typical scenario, if a plane is delivered and it doesn’t work, there’s plenty of clauses on the ability of the agency to protect its interest.” And if the requirements that were spelled out are met, “You might not like it, but if you asked for it and got what you asked for, you’re required to pay for it,” Fischetti said.

If the agency's requirements did turn out to be wrong, “there are change clauses at different intervals,” he noted, so the contractor is allowed “to be whole,” if the changes cost more money, and “there is interaction between the government and the contractor along the way.”

Government agencies will pay if a contractor submits an invoice and the deliverable has been formally accepted. But an agency will withhold payment if there is a dispute about what is delivered, Fischetti added. “Contracting officers are generally free from political influence, which is not the case in many other countries,” he said. 

David Berteau, president and CEO of the 400-company Professional Services Council, agreed that both agencies and contractors benefit from a process that maintains integrity. “The probity of contracts is one of the underpinnings of our entire governance structure, going back to the dawn of the republic,” he said. “The government is careful in determining who has a warrant [authority] for contacts, and the circumstances in which that warrant is be exercised to commit the government to spending money in exchange for creating results.”

PSC is pressing for the government to “improve its ability to define what results it wants and how it measures the achievement of those results,” Berteau added. Under the new administration, he suggested, “we welcome this as an opportunity to be tackled.”