From DEI rollbacks to funding freezes, industry leaders stress the need for vigilance as the administration swiftly implements new directives.

Since taking office, President Donald Trump has issued a flurry of executive orders affecting labor policies, permitting, project funding, and other key concerns for contractors.

The rapidly changing regulatory environment means that contractors and their clients must stay informed and adaptable, according to a Jan. 29 advisory from Washington, D.C.-based law firm Arnold & Porter.

“The Trump administration’s early issuance of numerous new policies requires organizations to carefully self-audit existing programs, monitor for new agency guidance, review the terms of existing grants and other financial assistance agreements, keep a record of costs, and remain in compliance with new contractual terms,” Arnold & Porter experts stated.

Infrastructure Funding Freeze Creates Uncertainty

On Jan. 20, Trump directed federal agencies to halt disbursement of funds from the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA), putting numerous projects on hold. The extent of the freeze remains unclear, but experts warn that the uncertainty could disrupt infrastructure and climate-focused initiatives.

The “Unleashing American Energy” directive also limits the White House’s rulemaking authority under the National Environmental Policy Act and seeks to accelerate permitting for energy projects involving oil, gas, nuclear, coal, hydropower, and biofuels.

Additionally, Trump signed multiple orders rolling back diversity, equity, and inclusion (DEI) initiatives implemented under former President Joe Biden. On Jan. 21, he rescinded a 1965 executive order from President Lyndon Johnson that banned discrimination in federal contracting. Another directive extended these changes to private businesses, instructing agencies to “encourage the private sector to end illegal discrimination and preferences, including DEI.”

Contractors Face Legal and Financial Risks

A Jan. 21 memo from the Office of Management and Budget clarified that the infrastructure funding freeze applies to programs Trump associates with the “Green New Deal.” However, state and local governments are seeking further clarification.

On Jan. 27, members of Congress sent a letter urging the administration to provide a detailed list of impacted programs and projects, emphasizing that the order “is a source of great anxiety for communities and businesses across the country that use this funding to build new roads, fix bridges, replace lead pipes, expand broadband access, strengthen infrastructure against natural disasters, and much more.” The administration has yet to respond.

The uncertainty surrounding these executive actions may lead some states and municipalities to halt or reassess projects to avoid financial liabilities. Nevada lawmakers, for example, have raised concerns about the potential impact on renewable energy initiatives and the Brightline West high-speed rail project. A separate Jan. 20 order specifically targeted wind power development nationwide.

Any disruption in funding could have immediate consequences for contractors working on IIJA and IRA-funded projects, possibly resulting in delays or cancellations, according to Washington, D.C.-based law firm Crowell.

“Disruptions in cash flow to these projects will create uncertainty and raise several potential impacts,” the firm stated, highlighting risks such as project cancellations, legal disputes, and continued payment obligations despite halted funding.

Federal Contractors Must Navigate Compliance Challenges

Some contracts and grants may be revoked if they no longer align with the administration’s priorities, said Daniel Ramish, a partner at Dallas-based law firm Haynes Boone.

“In that scenario, recipients and contractors should consult with counsel about their legal rights,” Ramish advised. “Construction contractors will also need to review and make changes to their compliance programs based on new presidential directives.”

The scope and implementation of Trump’s orders remain legally ambiguous, Arnold & Porter noted.

“All those accepting federal financial assistance should be thoughtful and deliberate when responding to agency certification requests, especially when they are being asked to certify compliance with nebulous or undefined terms,” the firm cautioned.

Subcontractors and suppliers may still demand payments despite funding suspensions, making it critical for contractors to carefully review stop-work orders, maintain communication with subcontractors, and document incurred costs.

“To prepare for any potential claims, grantees should carefully track and account for any costs incurred following the stop work order or termination. This accounting can be provided to legal counsel in support of the preparation of a claim,” Arnold & Porter advised.

Moreover, contractors will need to adjust compliance programs related to affirmative action. Trump’s Jan. 21 “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” order rescinded general affirmative action requirements for federal and federally assisted construction contracts, though protections for veterans and individuals with disabilities remain in place.

The order also mandates that DEI and affirmative action policies adhere to “all applicable Federal anti-discrimination laws,” requiring new contract clauses certifying compliance.

“The certification requirement is framed so as to signal to contractors that the administration may enforce the new requirements under the False Claims Act,” Ramish said. “Contractors will need to review their affirmative action programs to ensure compliance with these new legal directives.”