The Office of Management and Budget's memo to freeze federal agency funding disbursement caused mass confusion among federal IT contractors this week.
OMB's memo called for federal agencies to "temporarily pause" disbursement of federal assistance implicated by President Donald Trump's executive orders regarding energy, gender and DEI initiatives, while the administration assessed agency loan, grant and assistance programs. Immediate backlash, including lawsuits, caused President Donald Trump's administration to rescind the memo before it was scheduled to take effect at 5 p.m. Wednesday.
Though the OMB memo referenced Trump's executive orders when directing agencies on which programs to freeze funding for, its vague language caused significant concern among federal IT contractors, said Deniece Peterson, senior director of research at Deltek. The U.S. Department of Defense issued a memo Tuesday clarifying that it will not pause contract funding.
"I think what's happened is because of this disarray in how this stuff is being communicated, it leaves time and room for misinterpretation," Peterson said. "You've got upheaval in the workforce, agencies don't have their appointees in, some of the career leadership there have been let go -- nobody knows what's going on in these agencies."
OMB memo raises concerns for federal IT
I think what's happened is because of this disarray in how this stuff is being communicated, it leaves time and room for misinterpretation.
Deniece Peterson Senior director of research, Deltek
Peterson said the OMB memo created significant stress for federal IT contractors.
"I've had folks reach out to me trying to figure out what's going on because of the way all of this has been communicated," she said. "And the scope of it is very broad and vague."
In a press briefing Wednesday, Press Secretary Karoline Leavitt said the funding pause specifically meant ending "illegal DEI programs," the "Green New Scam," and "transgenderism and wokeness across our federal bureaucracy and agencies."
"That's why OMB sent out this memo last night, because the president signed an executive order directing OMB to do just this," she said during the press briefing. "And the reason for this is to ensure that every penny that is going out the door is not conflicting with the executive orders and actions that this president has taken."
Camille Busette, vice president and director of governance studies at the Brookings Institution, said the ill-conceived OMB memo would have equally negatively affected Republicans in states that supported Trump, which she said was surprising. Busette spoke during an online panel discussion about the Trump administration.
Busette said the Trump administration is heading for a major showdown over executive power, as its orders face legal challenges.
"The executive branch is going to end up getting its wings clipped," she said.
Peterson said federal IT contractors will need to pay attention to not just the OMB memo, but also what happens with agency regulations, an area that's also been frozen by the Trump administration.
She said it's also important for federal IT contractors to watch what happens with the federal workforce and potentially losing points of contact within federal agencies.
In an attempt to reduce the size of the federal workforce, Trump is offering buyouts to approximately 2 million employees. The buyouts include eight months of pay if employees accept the offer by Feb. 6.
"What if those folks are no longer there? Literally there's an early resignation option for federal employees," she said.
Makenzie Holland is a senior news writer covering big tech and federal regulation. Prior to joining Informa TechTarget, she was a general assignment reporter for the Wilmington StarNews and a crime and education reporter at the Wabash Plain Dealer.
