Gordon Rees Scully Mansukhani presents the latest insights from our Government Contracts group, offering a comprehensive overview of recent significant decisions, regulatory changes, and essential updates for businesses contracting with federal and state governments. Our team compiled the most pertinent legal developments to keep you informed in the dynamic landscape of government contracts.
Tune in to The Essential GovCon Brief podcast for an in-depth discussion of the issues highlighted here.
Recent Cases/Decisions:
Federal Court Halts Dismantling of USAID
Case Overview
In Does 1–26 v. Musk, the U.S. District Court for the District of Maryland issued a preliminary injunction halting ongoing efforts by the Department of Government Efficiency (DOGE) to dismantle the U.S. Agency for International Development (USAID). The court found that certain actions taken by DOGE and its leader, Elon Musk—acting in his official capacity—likely violated constitutional requirements under the Appointments Clause and the principle of separation of powers.
The case was brought by a group of anonymous plaintiffs, all current or recently terminated employees and contractors of USAID, who alleged that DOGE’s activities resulted in the shutdown of USAID’s operations, including the permanent closure of the agency’s headquarters, deactivation of email and payment systems, and mass personnel and contract terminations.
DOGE and Its Mandate
DOGE was established by executive order on January 20, 2025, with a mission to “cut the federal government down to size.” Renamed from the former U.S. Digital Service, DOGE was placed within the Executive Office of the President and given broad authority to access agency records, evaluate contracts, and oversee staffing and spending decisions.
DOGE Actions at Issue
DOGE’s involvement in USAID was particularly sweeping. According to the court’s opinion, DOGE teams arrived at the agency’s headquarters within hours of the executive order’s issuance. Over a period of weeks, DOGE took a number of aggressive steps:
- 58 senior USAID officials were placed on administrative leave.
- DOGE team members were given root access to email accounts and internal systems.
- The USAID website was taken offline.
- Security-clearance protocols were overridden to access classified areas.
- Thousands of email accounts were deactivated.
- Contracts with personal services contractors were terminated en masse.
- Approximately 90% of USAID’s direct-hire workforce was placed on administrative leave.
- DOGE announced that the USAID headquarters would be closed and repurposed for use by another federal agency.
Court’s Constitutional Analysis
The court concluded that DOGE’s actions likely exceeded constitutional limits. In particular, the decision to permanently close USAID’s headquarters was viewed as an act requiring lawful appointment and congressional involvement.
The court also determined that dismantling a congressionally established agency like USAID without express legislative authorization violated the separation of powers. While the president possesses broad authority over foreign affairs and executive operations, Congress retains the exclusive power to create or abolish federal agencies. Because Congress had not authorized the reorganization or elimination of USAID and, in fact, had enacted laws affirming its continued operation, the court found the executive actions constitutionally problematic.
Terms of the Injunction
The court granted a preliminary injunction with several key provisions:
- DOGE was barred from terminating additional contracts, placing more personnel on administrative leave, or shutting down USAID offices or IT systems.
- Any action related to USAID must be authorized by a lawfully appointed agency official.
- DOGE was ordered to restore email, security systems, and other electronic services for current USAID personnel and contractors.
- The injunction protected all current USAID employees and personal services contractors, including those on administrative leave.
- The court stopped short of barring all contract or personnel decisions by USAID itself, noting that some may have been ratified by properly appointed officials.
What’s Next
The case will continue as the underlying constitutional claims are litigated. In the meantime, the preliminary injunction aims to preserve the status quo and prevent further disruption to USAID’s operations.
Citation: Does 1-26 v. Musk, No. CV 25-0462-TDC, 2025 WL 840574 (D. Md. Mar. 18, 2025).
GAO Sustains Protest Over Labor Rate Evaluation and DFARS Compliance in Air Force Task Order Award
Case Overview
On March 4, 2025, the Government Accountability Office (GAO) sustained a protest filed by SMS Data Products Group, Inc., challenging a task order award by the Department of the Air Force to Trace Systems Inc. The task order was issued under a multiple-award indefinite delivery/indefinite quantity (IDIQ) contract for communications support at the Combined Air and Space Center Operations Center (CAOC). SMS alleged multiple evaluation errors, including flaws in the agency’s review of professional compensation plans and failure to comply with Defense Federal Acquisition Regulation Supplement (DFARS) requirements on price risk analysis.
Key Findings
GAO upheld two of SMS’s four protest grounds:
1. Improper Evaluation of Professional Compensation Plans: GAO found that the Air Force failed to conduct a compliant evaluation under Federal Acquisition Regulation (FAR) 52.222-46, which governs the assessment of professional employee compensation plans. Although the Air Force used a benchmark to flag rates that were more than 8% below incumbent compensation, the agency did not justify that threshold or evaluate whether Trace’s proposed compensation, which was lower than incumbent rates, would impact program continuity or workforce retention, as required under the FAR.
2. Failure to Conduct DFARS Price Risk Analysis: GAO sustained SMS’s argument that the Air Force did not perform a price-risk analysis in accordance with DFARS 252.204-7024. The agency had generated a supplier risk report but did not prepare the required price risk report comparing proposed prices to historical pricing data.
GAO denied two additional protest arguments, including SMS’s challenge to the technical evaluation and its assertion that the Air Force failed to consider the risk posed by the awardee’s low total price. GAO found that the technical evaluations were reasonable and consistent across proposals and that the solicitation did not contemplate a price realism analysis of total evaluated price.
GAO Recommendation
GAO recommended that the Air Force reevaluate proposals in accordance with the decision and conduct a new best-value tradeoff. If SMS is determined to offer the best value, GAO directed the Air Force to terminate the award to Trace Systems and issue the task order to SMS. SMS was awarded the costs of filing and pursuing the protest, including attorneys’ fees.
Citation: SMS Data Products Group, Inc., B-423197; B-423197.4 (March 4, 2025).
GAO Sustains Protest Over Agency’s Failure to Justify and Properly Compete BPA Award for Commissary Produce
Case Overview
In a decision issued on March 25, 2025, the GAO sustained a protest filed by E.K.K. Investments, LLC, challenging the Defense Commissary Agency’s (DeCA) award of a blanket purchase agreement (BPA) for fresh fruits and vegetables to a single vendor without full and open competition. The protest centered on DeCA’s use of non-competitive procedures to award the BPA to Coastal Pacific Food Distributors, Inc. (CPFD) without issuing a justification and approval (J&A) or soliciting offers from as many sources as practicable.
Key Findings
The GAO determined that DeCA did not adhere to the legal and regulatory requirements for employing non-competitive procedures. Specifically:
- Lack of Required Justification and Approval (J&A): DeCA established the BPA under authorities that permit non-competitive purchases of commercial products for resale at commissary stores. However, GAO found that the agency was still required to issue a J&A unless it was procuring brand-name commercial products. Because the BPA covered generic fresh produce, not brand-name goods, DeCA was not exempt from the J&A requirement. GAO rejected DeCA’s argument that statutory amendments implicitly waived this obligation.
- Failure to Solicit Offers from Multiple Sources: GAO also concluded that DeCA did not meet the FAR requirement to solicit offers from as many potential sources as practicable. Although the agency issued a request for information (RFI) to six companies, it explicitly stated the RFI was not a solicitation. Ultimately, DeCA established the BPA without issuing a formal solicitation or seeking competitive offers, which GAO found inconsistent with regulatory obligations, even under non-competitive procedures.
GAO Recommendation
GAO recommended that DeCA cancel the improperly awarded BPA and either conduct a competitive acquisition or take appropriate steps to justify the use of non-competitive procedures in accordance with applicable laws. The protester, E.K.K. Investments, was also awarded its protest costs, including attorneys’ fees.
Citation: E.K.K. Investments, LLC, B-423246 (March 25, 2025).
GRSM Government Contracts Practice Group
GRSM’s Government Contracts team has considerable experience defending and enforcing the rights of our contractor clients in disputes against government entities and private businesses. In addition to litigating claims in state and federal courts, we routinely handle matters before administrative tribunals, such as the Government Accountability Office, the Small Business Administration, and the Armed Services Board of Contract Appeals.
Our team of attorneys is located throughout the United States, which allows the firm to represent contractors, regardless of size, and in a wide variety of industries, including defense, information technology, construction, and aerospace, among others.
GRSM would like to acknowledge the significant contributions to this update by incoming Associate Quyen Dang. Please contact Patrick Burns, Meredith Thielbahr, or Jeremy Camacho for further information or with any questions.