Last week, President Donald Trump told federal agencies to stop disbursing Infrastructure Investment and Jobs Act and Inflation Reduction Act funding, including money that Congress already authorized. The move has thrown climate and infrastructure projects at various stages of development into uncertainty, as his agenda regarding federal government contracts and grants continues to rapidly evolve.

Trump’s Jan. 20 “Unleashing American Energy” order to pause and review funding processes has “significant implications for the implementation of the IIJA and IRA,” according to Washington, D.C.-based law firm Crowell, and may lead to project delays, terminations and broader economic uncertainty. 

Its precise implications may not be fully understood for months, “and this uncertainty alone is likely to disrupt infrastructure projects and give rise to claims,” according to an alert Crowell partners shared with clients Monday. 

“Whether the pause is temporary or becomes permanent, this action potentially could halt billions of dollars in obligated funding for infrastructure projects that already are underway, including those already under construction,” according to Crowell.

Another major announcement this week around funding has led to more confusion. A Monday internal memo from the Office of Management and Budget ordered a pause on all federal grants and loans, starting at 5 p.m. Tuesday. Federal agencies must temporarily halt funding and agency activities that may be implicated by the executive orders, “including, but not limited to, financial assistance for foreign aid, nongovernmental organizations, DEI, woke gender ideology, and the green new deal,” according to the memo.

A federal judge on Tuesday temporarily blocked the effort, CBS News reported. U.S. District Judge Loren L. AliKhan’s stay is in effect until Feb. 3 while she considers arguments from the U.S. government and the plaintiffs in the case, a nonprofit coalition that includes the National Council of Nonprofits and the American Public Health Association.

There are many open questions about the scope and effects of Trump’s orders and how they will be implemented, but it’s clear they will affect the contractual and other legal rights of federal contractors, Daniel Ramish, partner at Dallas-based law firm Haynes Boone, said in an email. 

“This will have a broad effect on federal contracts, grants and other assistance agreements in the specified areas and will take time to unpack,” according to Ramish. “Contractors and assistance recipients should follow these fast-moving actions closely and consider how their awards may be affected.”

Orders and clarifications

Section 7 of Trump’s Unleashing American Energy order directs federal agencies to halt all disbursements under the two laws while they ​“review their processes, policies, and programs for issuing grants, loans, contracts, or any other financial disbursements of such appropriated funds for consistency with the law.” It gives agencies 90 days to report how the frozen spending aligns with the new administration’s energy goals. 

The order’s wording was unclear to many, prompting the Office of Management and Budget to issue a Jan. 21 memo limiting the directive to programs that Trump has termed part of a “Green New Deal” in Section 2, and noting that “agency heads may disburse funds as they deem necessary after consulting with [OBM].”

However, Section 2 of the Unleashing American Energy order does not discretely list portions of the two laws for which money should be paused. Rather, it uses broad language to direct agency actions, touching on issues like energy exploration, non-fuel minerals, protecting economic and national security and “eliminating the electric vehicle mandate.” 

Section 7 does specifically cite funds to build EV charging stations, like the $2.5 billion Charging and Fueling Infrastructure Discretionary Grant Program and the $5 billion National Electric Vehicle Infrastructure Formula Program.

Provisions of Trump’s executive orders will likely face legal challenges in the coming months, according to Ramish.

Project freeze scope still unclear

Even with the Jan. 21 clarifying memo, the scope of Trump’s Unleashing American Energy directive is unclear as to whether it is limited to certain types of infrastructure expressly identified in the order, or more broadly to all projects funded under the IIJA and IRA, according to Crowell. 

“While OMB’s [Jan. 21] statement suggests that the Executive Order will only impact funding of what it calls “Green New Deal” projects, neither OMB nor the Executive Order clearly define the characteristics of such projects, leaving open to interpretation whether infrastructure projects for roads and bridges, broadband, and other traditional infrastructure could be impacted, at least in part,” according to Crowell. 

As of December, $294 billion in IIJA funds remained unallocated. While some experts expected the Trump administration to halt spending that federal agencies have yet to dole out, the executive order leaves unclear whether the freeze will also encompass spending that is legally committed under contract, according to a Canary Media article.

Indeed, Trump and incoming OMB Director Russell Vought have argued that the president has expansive power to cancel congressionally authorized spending, a move known as impoundment, according to Forbes. That goes against the prevailing interpretation of federal law: that presidents cannot unilaterally cancel congressional funds.

While much is in flux at this stage, Trump’s first term and his executive orders issued over the last week offer some clues for what federal contractors can expect, according to Ramish. Historically Trump emphasized efficiency and results-oriented accountability in federal grants, and his administration has indicated that it intends to implement policies favorable to American industry and to carry out a deregulatory agenda. 

The provisions of the Unleashing American Energy order “directed at the National Environmental Policy Act (NEPA) regulatory process, including the rescission of the NEPA regulations, are an early example of that agenda, which may benefit federal construction projects,” said Ramish.

However, in some cases, contracts or grants may be terminated if they are not aligned with the new administration’s priorities, Ramish said.

Regardless of how the orders eventually shake out, any disruption in funding could have immediate effects on contractors and suppliers engaged on infrastructure projects funded by the IIJA and IRA, according to Crowell. 

“Disruptions in cash flow to these projects will create uncertainty and raise several potential impacts,” per Crowell, including project delays and cancellations, various legal and contractual issues and continuing payment obligations despite the funding freeze.

Editor's note: This story has been updated with information about the court's block on the federal spending freeze.