How the pullbacks of U.S. foreign aid affects contractors who actually deliver it

Tom Temin And Ian, let’s start with you. You were at the State Department for a long time. Tell us the basics of how things normally work in foreign aid and contract lending. I guess a lot of the contracts are with overseas contractors.

Ian Moss That’s correct. I think I would begin first by saying this is very much unchartered territory. Not in any memory of mine can I find an example where there has been such swift, large scale cancellation of agreements with the part of the private sector that helps to implement U.S. foreign policy and national security. So understanding what is happening, I think we’re all trying to figure that out to some extent together.

Tom Temin And when the State Department or well, talk about the balance between U.S. based contractors, which help State Department and U.S. aid with the basics of operational support and this kind of thing, procurements for keeping the agencies going and computers, but then for USAID anyway, a lot of the contracts for the aid itself are with local in-country NGOs and private companies. Talk more about the balance there.

Ian Moss Yeah, that’s right. Setting aside, as you mentioned, a pretty significant group of organizations that help to just keep the agencies running through various agreements in terms of implementing programs, designing programs. There is a large network of non-governmental organizations that frequently contract with local organizations abroad. And the idea behind that is, one, it is essentially helping to reinvest in local communities and to garner the expertise of individuals in those local communities who know the populations they serve, which in turn make the delivery of aid and various programing more effective.

Tom Temin And David Robbins, just from a purely legal standpoint, the government can cancel contracts for convenience. That’s a particular advantage it has. Is that all that’s going on here from a legal standpoint, or could there be more to this?

David Robbins You’re right. There’s always an opportunity to cancel contracts for convenience, any reason or no reason at all. But that is not necessarily what’s happening here. We have an imposed funding freeze, A refusal to pay. A refusal to hold up the central government portion of the bargain, which is to pay for the services they contract for. So we don’t necessarily have terminations for convenience, which require an administrative step by a contracting officer to write a letter saying you are terminated. We just have a blatant breach in refusal to pay.

Tom Temin Right. So the contracts have rendered services then, as far as you can tell, which the government is obligated to pay but is not paying them.

David Robbins Yes, that’s part of what’s going on. We are not paying for services rendered before the orders saying we’re just going to hit a pause in funding. There’s validly tendered services that deserve payment, and payment is not coming. And then separately, there are orders for no further work. There’s an attempt to impose basically a work stoppage, which requires, again, a particular administrative process without doing the necessary steps. And we’ve got case law over the years that says government, you’ve got to do the necessary steps. They can probably get there in the end. They can perfect these things legally so they’re operable and appropriate. But until then, it’s not appropriately imposed, in my view.

Tom Temin We’re speaking with attorneys David Robbins and Ian Moss of Jenner and Block. And Ian, back to you. In your experience from the State Department and just watching this, generally, what do you think the effect is on those contractors other than the pure economics of not getting paid? In other words, I’ll just ask outright, is American prestige at stake here?

Ian Moss Without question, I would actually say American prestige has already been tarnished as a result of what really is a haphazard process to  bring it in to foreign aid. I think that there will be catastrophic consequences in various parts of the world. And ultimately, that means also significant consequences for American national security. The US government has been a stalwart proponent and provider of aid that has saved millions of lives. And to recede in this way from what has been historically a bright spot in American foreign policy raises a lot of serious questions. And frankly, is  pretty sad. It also will have a pretty substantial impact on the larger ecosystem of organizations that have historically helped to deliver this aid and advance U.S. foreign policy. Some of them, unfortunately, will not make it.

Tom Temin USAID has its basic mission. It has alleviated famine. It has helped reduce the spread of horrible diseases using U.S. developed technology, things like that, infrastructure projects for countries that need it. Yet, there have been reports coming from the DOGE, and Elon Musk of funding, I don’t know, transgender parades, this kind of thing. I don’t know. There’s a bunch of them listed. The dollar amounts are small, in some cases. $30,000, a million dollars, nothing like the big projects that USA does. How does those decisions get made? And is there any opportunity for someone to say let’s skip that one, let’s work on the water project this nation needs and not a parade for this or that group type of thing. If in fact that’s what actually happened.

Ian Moss Well, what I would say is I will tell you how they should be made. The administration should take a scalpel to these programs as opposed to a cleaver. And there has been no real discerning approach. This, as David mentioned, was just a blanket cessation which has caused significant confusion and uncertainty, not just for the organizations, but again, for the people that they deserve. The administration, the State Department, for example, has said that it is conducting a review. That is to conclude in 90 days. We’ll have to wait to see whether or not that happens. If you take them at their word, then there will be an analysis of these programs. It’s unclear right now what the process will be. They may have to resubmit proposals. They may start a new. But again, that also will require a significant lift. And one of the concerns here is folks have been dismissed. So who actually is going to conduct that review? The professionals that are most steeped in this process, at least at USA, don’t have access to their computers.

Tom Temin Sure. And David, then, what is your advice for Marco Rubio, the secretary of state? I’m not even sure he knew he would inherit USAID as its acting administrator, but that’s what happened. And what should he do now, If he can repair the damage or smooth the waters in some way, presuming he wants to do that?

David Robbins Presuming he wants to do that. And it’s a good question. What I think I would tell the secretary is devote resources to this review. Let’s move quickly from the clever to the scalpel that Ian mentioned. If there are things the government doesn’t want to fund, and it is their right to decide not to fund, get there quickly to avoid choking off an entire ecosystem. And frankly, at the end of the day, having to pay an awful lot more in breach damages than they would have saved otherwise.

Tom Temin Because you also have the issue of the people in country where many, many, many USAID employees are, and for that matter, State Department employees, the ones that are U.S. nationals have gotten the resignation letter. The USAID people are effectively out of work, at least for now, told to come back to the United States within 30 days. How can they rebuild if everyone gets home in 30 days and in 60 days they decide, yeah, we should be doing these things after all.

David Robbins It’s a dramatic problem. It’s one that’s going to take ramp up time, long lead time. And would any staffer reasonably want to go back to that line of work recognizing they could be told to come home at a moment’s notice having made their plans? It is a real challenge and one that I would like to give the benefit of the doubt and maybe just wasn’t thoroughly thought through and rather than is by design, but it’s one that will be expensive and time consuming to correct.

Tom Temin And Ian, it sounds as if the damage from a financial standpoint might be worse for those foreign based contractors. Some of them are small, some of them are NGOs and nonprofits. If Leidos has a dispute, for example, with the government, it’s got the means to fight the federal government, often does. Even in the protest format and so forth. But what about these small people around the world? Do they have any practical recourse at this point, do you think?

Ian Moss So certainly abroad, I think the recourse is exceedingly limited. But we’re not just talking about small organizations abroad. We’re also talking about small organizations here in the United States that have for decades provided really essential services, for example, in the refugee space or in with respect to the provision and procurement of food aid. So there’s going to be a real impact domestically. This is going to have an impact on American jobs.