There have been a few important updates in federal appropriations law and source selection processes this summer. Here is what federal contractors should know:
Government Accountability Office (“GAO”) Reinforces Congress’ Funding Authority
Under the Impoundment Control Act (“ICA”), the President (and any other officer or employee of the Executive Branch) can pause or cancel spending only with formal notice to Congress. Otherwise, agencies must promptly use funds as directed by law. Recent GAO decisions underscore the limits on executive agencies’ ability to delay or cancel congressionally approved funding.
- National Institutes of Health (“NIH”) Research Grants Freeze: In its August 5, 2025 decision, GAO concluded that NIH violated the ICA by canceling over 1,800 grants and withholding billions in FY 2025 funding without congressional notification. GAO ruled the administration’s cancellation and slowdown in grant awards represented an illegal impoundment.
- Department of Energy (“DOE”) Program Delay: A week earlier, GAO similarly found that DOE illegally impounded fiscal year 2025 funds for the Renew America’s Schools grant program by postponing awards for a new round of grants.
However, GAO clarified that short, justified delays are not ICA violations. For example, the Department of the Interior (“DOI”)’s 30-day pause of a water recycling project to review an infrastructure program created by the Infrastructure Investment and Jobs Act (“IIJA”) was found lawful, given its brief duration and the agency’s assurance that all funds would be used by the end of their availability.
Takeaway: These decisions are a reminder that federal agencies must respect Congress’ funding decisions and cannot unilaterally shelve Congress’ appropriations to suit new policy preferences without following ICA rules. A short, justified delay in spending may be allowable, but outright cancellation of programs or indefinite freezes on funds without notifying Congress violate federal appropriations law. Federal contractors should expect continued spending in line with congressional appropriations, regardless of administration changes, unless Congress itself intervenes.
The Court of Federal Claims (“COFC”) Extends GAO Protest Deadline: Equitable Tolling of the Competition in Contracting Act (“CICA”) Stay
Under CICA, when a federal contract award is protested at GAO, the protester can usually obtain an automatic stay of contract performance – but only if the protest is filed within strict deadlines (generally 10 days after contract award or debriefing). However, in Starside Security & Investigation, Inc. v. United States, the COFC allowed equitable tolling—essentially extending—GAO’s 10-day automatic stay protest deadline.
Starside protested a General Services Administration (“GSA”) contract award, when due to a technical glitch, it did not receive the award notice through the usual system. In fact, when Starside inquired about the award a few days later, a contracting official who was no longer handling the procurement replied that no award had been made, thus leaving the company in the dark. By the time Starside discovered the truth via public database records and filed a GAO protest, the 10-day CICA deadline had long passed.
Initially denied an automatic stay of contract performance due to the late filing, Starside took its case to the COFC. Senior Judge Wolski applied the equitable tolling doctrine, a principle the Supreme Court has endorsed for federal statutory deadlines. Under the equitable tolling doctrine, a statutory deadline is subject to equitable tolling if the plaintiff can show it has been pursuing its rights diligently, and that an extraordinary circumstance stood in its way, preventing timely filing. The COFC held accordingly that CICA’s timeline for an automatic stay, as a federal statutory deadline, is subject to equitable tolling. Further, the Court found that Starside acted diligently by promptly and repeatedly seeking information about the contract award, and that the agency’s misinformation and lack of notice were an “extraordinary circumstance[s].” The COFC ruled in Starside’s favor, allowing the company to protest despite missing the usual GAO deadline.
Takeaway: While timely protests remain crucial, Starside signals that courts, in the interest of fairness, might toll GAO protest deadlines if a government contractor acts diligently but is kept uninformed of a contract’s award or other crucial facts. This could prevent agencies from avoiding bid protests through inadequate communication.
A “FAR 2.0” Overhaul: Streamlining Federal Acquisition Rules
In April, President Trump issued Executive Order (“EO”) 14275, directing a comprehensive rewrite of the Federal Acquisition Regulation (“FAR”). The overhaul effort is now known informally as “FAR 2.0.” This initiative, led by the Office of Management and Budget (“OMB”)’s Office of Federal Procurement Policy (“OFPP”), aims to streamline federal procurement by removing redundant, outdated, or unnecessary regulations.
As of mid-2025, FAR 2.0 is already underway. Updates to several parts of the FAR have been drafted or rolled out, including Part 1 (the FAR system), Part 10 (Market Research), Part 34 (Major System Acquisition), and Part 52 (solicitation clauses). The FAR Council and OFPP appear to be moving quickly, prompting some industry concern over potentially reduced opportunities for public comment.
If and when FAR 2.0 is finalized, government contractors could see a lighter compliance load and more flexibility in acquisition. This could benefit new contractors and small businesses in particular, who often struggle with the complexity of federal rules. A leaner streamlined FAR might also lower barriers to entry and encourage more competition for government projects. Conversely, fewer detailed FAR clauses could introduce uncertainty in how to interpret “essential” requirements, potentially leading to more questions and disputes in the short term.
Takeaway: Federal contractors may benefit from reduced regulatory complexity, but initially there could be greater ambiguity as established rules change. Agencies will also be adjusting their procurement strategies to the slimmed-down rulebook. Experienced contractors more accustomed to the existing FAR clauses will need to stay abreast of the changes and adapt their compliance practices during the transition.
Conclusion
These recent developments underscore two key points: government agencies must adhere strictly to congressional funding authority, and procurement processes demand fairness and transparency. Contractors should stay alert to these shifts, as they shape compliance expectations, bid protest strategies, and procurement interactions moving forward.
