Series: What DOGE’s Breakup Means for Federal Contractors Part 3
Even with DOGE disbanded, termination activity has not slowed. Instead, it has become fragmented and less predictable. Based on current shifts inside OPM, Agency leadership teams, and Inspector General offices, here are termination trends to prepare for in 2026:
1. The USDS DOGE Status: A temporary organization known as the U.S. DOGE Service (USDS) was set up within the U.S. Digital Service (USDS) and is scheduled to remain active until July 4, 2026.
The USDS Administrator, currently held on an acting basis by Amy Gleason, reports to the White House Chief of Staff, and here are some of her initiatives:
- Software Modernization Initiative: A government-wide effort to improve the quality and efficiency of software, network infrastructure, and IT systems. Key priorities include system interoperability, data integrity, and responsible data collection and synchronization.
- Workforce and Hiring Management: The USDS handles developing a federal hiring plan for agency heads and providing advice on its implementation. This includes managing agency hiring freezes and workforce optimization initiatives.
- Contract and Procurement Oversight: USDS is tasked with rethinking how the government buys digital services and reviewing discretionary spending, including federal contracts and grants.
- Pervasive Data Access: Executive orders mandate that agency heads ensure USDS has “full and prompt access” to all unclassified agency records and IT systems. This has resulted in DOGE personnel gaining access to sensitive financial data, health information, Social Security numbers, and payment systems that process trillions of dollars at the Department of the Treasury.
2. Termination-for-Convenience (T4C) Specific Policies
The increase in T4C actions is not just a trend but a formalized mandate under the Radical Transparency about Wasteful Spending (RTWS) memo as follows:
- Standardized Reporting: GSA has standardized practices for reporting T4Cs into the Federal Procurement Data System (FPDS) using a specific “RTWS flag” to track efficiency-driven cancellations.
- Sector Impact: T4Cs have already impacted high-profile programs, including support for the U.S. Department of Homeland Security (DHS) Cybersecurity and Infrastructure Security Agency (CISA) ‘s Red Team, hundreds of U.S. Agency for International Development (USAID) programs, and scores of U.S. Department of Education (DOE) contracts.
RTWS Ramifications for Federal Contractors
The RTWS mandate increases transparency and potential reputational risks for contractors.
- Public Access: Detailed information about canceled contracts is publicly available through agency archives and federal systems like SAM.gov. Terminations under RTWS are specifically identified as resulting from efficiency initiatives.
- Reporting Triggers: The RTWS flag in FPDS is used for Termination for Convenience, Termination for Cause, or Termination for Default. Modifications that remove future options from an award must also be reported.
- Documentation: Contractors should keep detailed documentation to support stop-work costs, as the government is tracking the impact of these efficiency measures.
3. Vendor Consolidation & HR Modernization
OPM-driven modernization is critical, particularly for the centralized Human Resources (HR) effort.
- Unified HR Systems: OPM is currently working to combine 119 disparate HR systems into a single government-wide platform.
- Fiscal 2026 Rollout: At least eight agencies, including OPM, DHS, US. Health and Human Services (HHS) and the Department of the Interior (DOI) are expected to begin transitioning to this unified platform in fiscal 2026. This transition will likely lead to the cancellation of legacy multi-vendor support contracts.
4. Address the Shift to Fixed-Price Contracts
A significant trend is the rise of Fixed-Price (FP) contracts over Cost-Reimbursable contracts.
- Risk Transfer: The administration is aiming to transfer financial risk from government budgets to contractors through FP awards.
- Incentive-Driven Stipulations: Expect more innovative terms such as award fee sharing or cost sharing, even in grant-related procurement.
5. U.S. Defense Department (DoD) and DHS Growth
While non-defense spending faces cuts (approximately $163 billion below prior levels), some areas are seeing massive growth that changes the “termination” narrative.
- DoD Overhaul: The 2026 National Defense Authorization Act (NDAA) and a new DoD “Acquisition Overhaul” aim to fast-track contract delivery and eliminate “fragmented accountability”.
- DoD Priority Areas: Contractors should pivot toward:
- Border security infrastructure ($175 billion investment).
- Military technology.
- Cyber defense, which is largely exempt from efficiency-driven termination mandates.
6. Actionable Response Strategies: How Contractors Should Respond
- Diversify Portfolios: Review reliance on a single agency, especially those targeted for deep cuts like the U.S. Department of Education, Environmental Protection Agency (EPA), and the U.S. Department of Housing and Urban Development (HUD).
- Watch for Class Deviations: Class Deviations areformal, temporary adjustments that allow government agencies to bypass or change specific provisions of the U.S. Federal Acquisition Regulation (FAR), Defense Federal Acquisition Regulation Supplement (DFARS), or an agency’s own acquisition regulations. These changes sometimes serve as early indicators that a specific FAR or DFARS rule is being phased out.
- Position for Set-Asides: For FY2026, significant set-aside opportunities still exist, such as the U.S. Defense Intelligence Agency (DIA)’s Solutions for Intelligence Analysis (SIA 3) contract vehicle.
- Monitor the “One Big Beautiful Bill Act” (OBBBA): This legislation defines many of the new spending priorities and funding streams for 2026.
OBBBA signed into law on July 4, 2025, is a sweeping 1,200-page budget reconciliation package that forms the core of President Donald Trump’s second-term domestic agenda.
The legislation (Public Law 119-21) permanently extends the 2017 Tax Cuts and Jobs Act (TCJA) tax rates, introduces new temporary tax deductions for tips and overtime, and significantly reallocates federal spending toward border security and the military while cutting funding for Medicaid, Supplemental Nutrition Assistance Program (SNAP), formerly known as the Food Stamp Program, and student loans.
