USAID contracts and grants still being terminated despite court order

Last week, a federal judge ordered the Trump administration to temporarily halt its foreign aid freeze on existing programs — one that came as a result of a stop-work order issued by U.S. Secretary of State Marco Rubio on Jan. 24. Despite that, the Trump administration is still terminating grants and contracts, with Peter Marocco, the acting deputy administrator of the U.S. Agency for International Development, stating that virtually “all USAID contracts are terminable by the Agency for convenience,” according to a document filed on Tuesday. Nearly 500 USAID grants, contracts, and other awards have been terminated since Jan. 22, while many others have been paused, suspended, and forced to stop work, according to the court documents. The State Department has terminated more than 730 grants and 25 contracts and suspended thousands more. “USAID intends to continue its case-by-case review of existing contracts and grants,” wrote Marocco in a recently filed court declaration. “Following its review process and consistent with the terms and conditions of the relevant instruments, USAID intends to terminate instruments that [Rubio] determines are inconsistent with the national interests of USAID's mission.” While the temporary restraining order mandated a thaw of the blanket funding freeze, it also states that normal contract clauses can be enforced — an argument the government has latched onto, saying it was within its rights to terminate hundreds of contracts based on those clauses. The government has also claimed it is undergoing a review of payments to ensure no waste, fraud, or abuse is occurring, further delaying the process. Less than 24 hours after the government’s rebuttal, those suing the Trump administration bit back, filing an emergency motion to enforce the temporary restraining order and hold the defendants in civil contempt. “The report makes the remarkable assertion that Defendants have reviewed thousands of affected State Department and USAID grants, contracts, and cooperative agreements, and concludes that — despite this Court’s unambiguous order — terminating nearly all foreign assistance funding was legal,” states the document, which was filed on Wednesday afternoon. “Meanwhile, on February 15, Defendant Trump appeared to flout his obligation to comply with the Constitution and the law, posting on social media, ‘He who saves his Country does not violate any Law.’” A dizzying back-and-forth The temporary restraining order was issued Feb. 13 after a pair of lawsuits were filed against USAID, the State Department, and the Trump administration by a number of implementing partners. After nearly a month of stalled funding, organizations across the world thought that with the ruling, they’d begin to see previously contracted money resume its flow. Over the weekend, USAID’s front office sent out a series of messages to agency staff memos stating that “until further notice,” all contracting and agreement officers should not enforce stop-work notices. But in the same messages, there was a caveat: USAID was undergoing a "comprehensive review process for assuring payment integrity and determining that payments under existing contracts and grants are not subject to fraud or other bases for termination,” according to one email sent by Jami Rodgers, the director of the agency’s Office of Acquisition and Assistance, this past Monday morning. “These new case-by-case review processes will be consistent with the [temporary restraining order],” Rodgers wrote in the message, which was submitted as part of the court case. “Further guidance on the new payments integrity and grants and contracts review process is forthcoming.” Nearly a week later, no organization Devex spoke to had received new payments, with several stating that the requests they submitted to USAID’s payment system were still processing. The emergency motion filed by the implementing partners reflects the same: even after the temporary restraining order was announced, the plaintiffs were “stonewalled” by USAID and the State Department, with one USAID agreement officer stating she and her colleagues had “been left without guidance or direction to implement this Court’s order.” “Declarant Jessica Doe has ‘not personally seen any evidence that a thorough, case-by-case analysis’ has taken place with regard to the suspension of funds or stop work orders issued by USAID,” the emergency motion states, referring to an anonymous USAID contracting officer. Despite that, Marocco’s declaration noted issues with that same payment system, stating that USAID staff were unable to identify which payments were associated with which programs. That led to “significant payment delays,” Marocco said, ones that have placed “certain USAID programs at risk of catastrophic failure.” “These system deficiencies and inability to provide complete information led to serious questions about waste, fraud, abuse, and even illegal payments,” Marocco stated. “To correct these deficiencies, USAID is in the process of adopting a comprehensive review process for assuring payment integrity and determining that payments under existing contracts and grants are not subject to fraud or other bases for termination.” Allegations of potential fraud were refuted by USAID staffers Devex spoke to, with one stating the process of matching an implementing partner’s award number to the award name is relatively simple. Each payment voucher or financial report goes through several layers of review, the staffer added, even for staff reimbursements of a few dollars. “There’s no rocket science here,” they said. “We’re not working at NASA.” During a recent Devex Pro Briefing, lawyer Robert Nichols, who represents one of the plaintiffs in the pair of lawsuits, seemed to predict that the government would refuse to pay its bills based on Marocco’s assertions. “[W]hen they deem the whole agency and its implementing partners criminals, and say this is all fraud and waste, they’re teeing up the ability to not pay the bills and to have some argument that even if court says you have to pay your bills, they say, ‘Well, we’re paying them. We’re just making sure there’s no fraud and waste in there first,’” Nichols said. The other key claim by the government is that it can terminate programs based on terms set out in existing agreements. The State Department has begun an analysis of USAID’s thousands of contracts, grants, and cooperative agreements — with the defendants claiming that the analysis found all terminations, suspensions, and stop-work orders “were allowed” under the terms and conditions of those agreements. Marocco cited several existing regulations that allow contracting officers to terminate awards if they find doing so is in the best interest of the federal government. Those interests, Marocco explained, were manifold: contracts have already been terminated if they focused on diversity, equity and inclusion; sustainability and climate change; and regime change, civic society or democracy promotion. Awards were also canceled if deemed to be reliant on third-party consultants, contractors, or organizations with “accountability issues”; if they were found to have “operational expenses and/or general waste”; or if they were unrelated to USAID’s “core mission” of delivering lifesaving aid. “To the best of my knowledge, the 498 contracts, grants, and related instruments terminated by the USAID Front Office thus far were subject to termination either under particular contract terms or implicitly incorporated terms,” Marocco wrote. The steps toward cancellation In one of the court filings, Marocco explained how the review process was taking place. First, senior USAID staff members and political appointees identify the specific awards they believe should be terminated or suspended. Then, Marocco evaluates those recommendations himself. In some cases, he said the State Department may consult external stakeholders, after which the team examines the program and the “programmatic consequences of termination.” A list of awards recommended for termination then goes to Rubio, Marocco stated, who then “conducts an independent review that considers, among other things, American foreign policy and national interests.” After that, Marocco said awards slated for termination are sent to USAID’s Office of Acquisition and Assistance, which disseminates those awards to contracting and agreement officers. Before those terminations are finalized, Marocco said OAA consults with USAID’s regional and pillar bureaus to obtain more information, and bureaus are then given “the option of requesting that senior leadership pause or reconsider their decision.” As a result of that process, Morocco stated more than 20 awards have been removed from the termination list. Some $250 million is expected to be paid out this week, he continued, all of which corresponds to awards contracted before Trump returned to office. “Consistent with its constitutional, statutory, regulatory, and instrument-specific authorities, and pursuant to the terms of the [temporary restraining order] stating that Defendants may still ‘enforce[e] the terms of contracts or grants,’ USAID intends to continue its case-by-case review of existing contracts and grants,” Marocco’s declaration states. For Mitchell Warren, the executive director of the AIDS Vaccine Advocacy Coalition — one of the organizations bringing the lawsuit against USAID, the State Department, and others — the back-and-forth is adding another layer of “confusion and chaos” to the last few weeks. Earlier on Wednesday, Warren was speaking with several organizations from South Africa who were trading bits and pieces of information — one saying that USAID projects could get waivers; another saying they couldn’t; one saying foreign assistance can restart due to the court case; another saying it was still frozen. “No one knows,” Warren told Devex. “And if you go to anyone at USAID to get information, the message you get back is: ‘Thanks for your email. The agency has not provided guidance.’”