Will USAID partners get paid? The verdict is still out

It was an important win for USAID partners who’ve been scrambling ever since President Donald Trump froze most U.S. foreign aid last month. On Thursday, a judge ruled that the administration must reverse its stop-work order and unfreeze funds on existing programs, meaning money could theoretically start flowing again to hundreds of contractors and NGOs. Theoretically. The reality is much more complicated, said Robert Nichols, a partner at the Nichols Liu law firm, during a Devex Pro briefing on Tuesday. Nichols represents one of the plaintiffs in a pair of lawsuits brought by implementers of USAID and State Department projects and programs. The temporary restraining order, or TRO, requires the government to immediately stop any suspensions or pauses that prevent the obligation or disbursement of foreign assistance funds for contracts, grants, cooperative agreements, loans, or other awards that existed before Jan. 19. But Nichols said the TRO is “not nearly as good as we had hoped.” For one thing, while the order says to unfreeze funds, it did not tell the government to pay its bills, Nichols pointed out. He learned that the government is starting a review process to make sure that invoices do not contain fraud and waste. “We think that that essentially means [they’re] not paying the bills any time soon. They will review every invoice, line by line, even if it takes a long time.” So Nichols is going back to the court to ask that the government pay its bills in a timely manner, but he’s not optimistic, even if the judge rules in his favor. “My guess is they are not going to actually heed it, that they are going to say, ‘Well, this is an article three-judge telling the executive how to run the executive branch, and we are just simply not going to adhere to that. We think it’s a separation of powers issue [and] unconstitutional.’ And my guess is that it’s going to get appealed up to the Supreme Court.” “They’re supposed to be paying their bills now,” Nichols said of the U.S. government. “But when 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 added: “Maybe the administration will change their mind and say, ‘Our bad. We’ll start paying your bills.’ I just don’t think that’s going to happen. So timing is to be determined.” Where does that leave partners that are owed in some cases tens of millions of dollars for work that’s already been done? Not in a good place, according to Nichols. Even though plaintiffs are seeking immediate payment, Nichols notes that these types of claims can take months or years to wind their way through the courts — time that many cash-strapped implementing partners do not have. The claims could even get appealed all the way to the Supreme Court, “so I do not want to give false hope that this will be resolved in the next 30 days,” he said. As more subprimes and foreign organizations face dire straits, the desperate stampede for money could lead them to sue their prime contractors, but Nichols warns against this type of strategy. “If this community starts turning on each other and suing each other, all you’re going to do is waste a lot of money on lawyers and it’s not actually going to make much of a difference because everybody’s just going to go bankrupt,” he argued. “And so I have been encouraging organizations to understand exactly what their rights are, but also recognize the practical realities.” Nichols puts all of the various cases and contingencies into a broader context, calling it “a war over federal spending.” “The administration, right or wrong, believes in what it’s doing, and the implementing partners, right or wrong, just want to get paid,” he said. “This administration believes the whole system needs to be shocked, and then you have a negotiation about what our government should be. Well, that’s kind of extreme, but that seems to be the playbook,” he added, recalling a 2014 interview in which Trump ally Steve Bannon declared that the goal was to shut down all contracts and install “Make America Great Again” loyalists in positions of power. Nichols said Bannon described it as “a hostile takeover of the apparatus.” “So you could question, is the point to shut down spending, or is the point to give spending to your allies,” Nichols said. “So there’s a lot to be seen here as to exactly what the intent is, but what we’re talking about is: What is the future of our government?” And “unfortunately,” Nichols said, foreign assistance is the opening salvo in the battle to cut spending because it lacks a constituency — outside of the Washington, D.C., area, where many contractors are based. “I believe that they started with foreign assistance for a reason. Nobody outside of this little group is defending it. The Democrats can go to stand outside of USAID and hold a bake sale. It doesn’t matter. Doesn’t matter at all. The Republicans are not going to do anything to die on this hill for foreign assistance contractors,” he said, arguing that other agencies are next, from the Department of Education and National Institutes of Health to Social Security and Medicare. “What the federal government looks like on the other side of all this is to be determined, but these are all very, very well thought-out tactics in a broader strategy to remake the government.”