That DOGE Won’t Hunt

I am fairly confident that the federal government wastes money. It’s a very large organization, with access to very large amounts to money. There is inevitably going to be waste. Many politicians have been elected claiming that they will reduce such waste. It’s not an easy task. The Department of Government Efficiency (DOGE) has taken a Ready! Fire! Aim! approach to the problem. Early on, The New York Times reported, DOGE boasted that it had “canceled” $55 billion in contracts, but days later The Times also reported that those numbers were wildly inflated. It’s next move, as Jacob Sullum noted on Reason, was to make new claims of savings but to make its reporting system less transparent. The new numbers were nonetheless also challenged, e.g. by David A. Fahrenthold and Jeremy Singer-Vine, here. So, according to the same duo of New York Times journalists, DOGE reverted to more transparency.

Meanwhile, courts have already stayed some DOGE actions. The list is long and ever-expanding, so I once again recommend the JustSecurity blog’s litigation tracker. It seems unlikely that the government saves money by firing people, getting sued, and then having those people reinstated. To make matters worse, according to Eileen Sullivan and Isabelle Taft, reporting in The New York Times here, the administration does not seem to want the reinstated employees to work, so it is placing them on administrative leave, literally paying them to do nothing. Unless you value the work of federal employees below zero, this approach seems unlikely to increase government efficiency. 

Currently, DOGE claims to have saved the government $130 billion. I don’t believe it, but I have no idea what, if anything DOGE has really accomplished. Frankly, it is exhausting trying to follow their claims, the revelations of their incompetence or misstatements, their new claims, retractions, renewed claims. But I have been wondering what it means when a government agency claims to have “canceled” a contract. As we’ve discussed before, when private parties claim to have canceled a contract, they are in breach and will have to pay provable damages if there any.

I have no experience in government contracting. Obviously there are differences. I reached out to colleagues in the field, and what I’ve learned is below. In short, the government can get out of contracts more easily than private parties, but it is not pain free. Aggrieved parties will have to seek remedies through administrative rather than legal procedures, at least initially. However, as so much of what DOGE has done seems to be clearly ultra vires, I think the actual savings as a result of all of this chaos will be very limited. The costs and human suffering are hard to measure. I have no confidence that this duo knows what it is doing, at least when it comes to achieving government efficiency. At times like this, it is important to remember, with these guys, as Adam Serwer observed, the cruelty is the point.

So some theories as to what is really going on, from the most favorable towards DOGE to the most skeptical:

• At least some canceled contracts are simply contracts that will not be renewed, and canceling them generates real savings to the extent that they are multi-year contracts for which money had already been allocated;
• Some canceled contracts might be either long-term supply contracts or at-will employment agreements that the government can cancel without breach;
• Government contracts generally allow for “termination for convenience” (TFC), explored in more detail below;
• Drawing on their experience as well-financed bullies in the private sector, administration officials know that they are in breach/are acting ultra vires and expect that many contractors or employees will not have the stomach for a fight; and
• This is not about efficiency; it’s about optics.

I am especially dubious about DOGE’s claims that it has canceled leases. Last week, a trio of New York Times reporters, David A. Fahrenthold, Madeleine Ngo, and Jeremy Singer-Vine reported that DOGE had silently dropped 136 of the 700 canceled leases from its website, lowering its estimated savings by 30%. This change seems to be a product of pushback within the Trump administration. The other shoe will drop, I presume, when the property owners sue for back-rent or when administrative agencies have to find new office space. National Public Radio reports that DOGE wants to sell government buildings and lease them back. I understand that such a transaction can be attractive for private businesses. I don’t understand why it would be beneficial for the government to engage in such transactions. Property law folks, please weigh in! 

About a month ago now, David B. Dixon and Michael R. Rizzo published this explainer on the Pillsbury Law website. Parties whose contracts with the government are canceled can bring claims under the Impoundment Control Act (ICA) when funds are appropriated for specific purposes but then not spent. However, such claims have limited efficacy because contracts with the government allow for TFC, and the administration can often rely on such clauses to justify seeming violations of the ICA, so long as the contract terminations are in good faith. If contracting officers do not exercise “independent business judgment” in connection with terminations, aggrieved parties can bring claims under the Contract Disputes Act.

Aron C. Beezley and Nathaniel J. Greeson provide more details in a recent article in The National Law Review. They cite cases illustrating TFC terminations can be challenged when: used to correct the government’s own procurement mistakes; to allow the government to walk away from an unfavorable deal; to steer government business towards preferred vendors; when the government invokes the TFC clause in bad faith or arbitrarily or capriciously. Damages might be limited to costs incurred before termination plus profits on work completed. Lost profits on canceled work may be awarded in cases of bad faith termination. Reinstatement of contracts is rare. Under the Equal Access to Justice Act, some contractors can recover attorneys’ fees and costs. So, in short, much of the claimed savings may be clawed back and it will take years to sort it al out.

There are ways to improve government efficiency. They are not flashy. They are slow and painstaking, but they yield results. Those results will not generate headlines, unless of course DOGE decides to shut down the agencies like 18F that actually do promote government efficiency or inspectors general who can legitimately claim to have saved the government $93 billion in a single year. 

Thanks to the many contractsprofs who shared their expertise with me or tracked down information, including Andrea Boyack, Laura Heymann, Richard Neumann, Heidi Mandanis Schooner, and Frank Snyder.