Global Aid Imperiled: Secretary Rubio’s Directive Halts Billions in Assistance

On the day he was sworn into office, President Trump signed an Executive Order entitled Reevaluating And Realigning United States Foreign Aid – The White House.  The following day, Nichols Liu held a conference call to discuss the EO and its impact on the sector. This post tracks the initial announcements and subsequent directives from Secretary Rubio implementing the free.

Reevaluating and Realigning US Foreign Aid

The EO characterizes the current U.S. foreign aid industry and bureaucracy as misaligned with American interests and often promoting ideas in foreign countries that destabilize peace. Here are the highlights:

• 90 Day Pause: 90-day pause in United States foreign development assistance for assessment of programmatic efficiencies and consistency with United States foreign policy. This appears to apply to State, USAID, MCC, DFC and other departments and agencies implementing “foreign development assistance programs.” We have since learned that the pause extends to humanitarian assistance as well, although USAID is prioritizing waiver requests for emergency humanitarian activities. The pause is on new obligations and disbursements to foreign countries and “implementing non-governmental organizations, international organizations (i.e., United Nations affiliates and other PIOs) and contractors…” This pause is for assessing the programmatic efficiencies and consistency with U.S. foreign policy.
• Program Reviews: It requires reviews of U.S. foreign assistance programs by relevant department and agency heads, following guidelines from the Secretary of State in consultation with the Director of the Office of Management and Budget (OMB).
• Determinations and Resumptions: It states that within 90 days, the responsible heads must determine whether to continue, modify, or cease each foreign assistance program. The funding can resume earlier, in the same or modified form, if a review is completed, and the program is deemed consistent with U.S. foreign policy. Waivers may also be considered.
• Approval Requirement: Any new foreign assistance programs and obligations must have approval from the Secretary of State or his designee, in consultation with the Director of OMB.

A recording of the meeting and the slides are now available on the Pub K Development website. You can watch the recording below and click here to access the presentation materials.

Secretary Rubio Announces Stop Work and Suspension of All Foreign Aid

January 24, 2025 is a watershed date. In directing the immediate stop of activities measured in billions of dollars of foreign assistance for up to 90 days, Secretary of State Rubio has jeopardized the lives and well-being of millions of people in dire need around the world as well as the viability of many of the organizations that provide this support.

The stop-work directive was put into effect by USAID through a Notice on Implementation of Executive Order: Reevaluating and Realigning United States Foreign Aid, issued by the Office of Acquisition and Assistance (M/OAA) on the same date. Stop work orders and suspension notices began to pour into contractor and recipient offices.

According to the Notice, Contracting and Agreement Officers are instructed:

• Not to modify, extend, exercise options, or renew existing awards
• To issue stop-work orders, amendments, or suspensions for current awards later
• To communicate whether awards will continue, be modified, or terminated after a review.

No new awards or funding solicitations will be issued until each activity has been reviewed and aligned with the President’s policy. Waivers to this pause have been approved for:

• emergency food assistance programs and related administrative expenses,
• temporary personal services contractor expenses,
• legitimate expenses incurred before January 24, 2025, and associated with the stop-work, and
• exceptions approved by the Director of Foreign Assistance.

The Notice also states that Review standards will be developed within 30 days to ensure alignment with President Trump’s foreign policy agenda. The review is to be completed within eighty-five days of January 24, 2025.

Conference Calls on Stop Work Orders and Suspension

In a Pub K conference call, Robert Nichols addressed questions raised by the stop work orders (FAR 52.242-15) and suspensions (2 CFR 700.14):

• It is difficult to jam on the brakes on a USAID contract, grant or cooperative agreement. Implementers usually manage regular payments (rent, utilities, security services, etc.) that cannot be readily stopped and must comply with local labor laws requiring advance notices for layoffs.
• Contractors/Recipients should make sure at the onset there’s an understanding with the CO/AO on how to treat these and other costs believed to be legitimate during the pause.
• An important question to ask CO/AOs is the prospect of continuing to pay staff salaries and associated benefits (e.g. health insurance) during the pause as was done during the COVID 19 shut-downs, in order to preserve the workforce for when the pause is lifted.
• The 90-day Stop Work Orders and Suspensions will impact cash flow and recovery of indirect costs, causing uncertainty in ongoing and planned corporate activities.
• Indirect costs are “legitimate,” but will likely be recovered on a reduced base of direct costs. Responsible measures should be taken to appropriately reduce indirect costs commensurate with reduced work and associated direct costs.

As further discussed in the conference call, Rubio’s directive on the foreign assistance freeze also required Missions to produce for State’s Directorate of Foreign Assistance for review a list of all active, pending, or proposed grants, subcontracts, contracts, or subcontracts, and provide a clear and concise statement explaining if and how the current or proposed use of obligated funds advances President Trump’s policy. At this point, we believe the information being considered includes:

• Alignment with Foreign Policy
  • Rubio’s 3 questions tied closely to foreign policy objectives: Does it make us safer, stronger, and more prosperous?
    • Likely targets include climate activities, women empowerment programs, gender-related programs and countries with limited strategic value.
    • Humanitarian assistance is also being reviewed, although emergency feeding programs have been approved to continue their operations.
  • We also heard in the chat that one organization was asked to provide input on “How does this award counter “Chinese influence?”
• Efficiency
  • Not clear at this point
  • Innovation and the use of technology will be prioritized
  • Localization may be a consideration as its seen as a more efficient use of development dollars
  • Faith-based organizations with presence in-country may also being prioritized
  • Private sector engagement will also be a theme
  • A more accountable relationship with PIOs
  • The “aid industrial complex,” in general, is a target of reform given its high overhead and the intent to diversify the partner base.

Rubio’s worldwide cable on the freeze also states that the review process will involve State’s Director of the Office of Foreign Assistance (F) and the Office of Budget and Planning (BP) to work with the Office of Management and Budget (OMB) in making the determinations. The review is to be completed within 85 days and reported out to the President.

Pub K has learned that Peter Marocco is set to head the Directorate of Foreign Assistance, overseeing the review over the next 90 days. Marocco’s extensive experience with the first Trump Administration includes serving as the Deputy Assistant Secretary for the Bureau of Conflict and Stabilization at the State Department, Deputy Assistant Administrator for African Affairs at the Department of Defense, and Assistant to the USAID Administrator in leading the Bureau for Conflict Prevention and Stabilization. A recent article in Politico linked here provides additional details on what he’s been up to since departing USAID.

The suddenness with which Foreign Assistance was frozen and a funding hiatus of at least three months put the lives and well-being of aid recipients at risk. Organizations managing this aid will struggle to keep their doors open and many highly skilled and experienced employees may lose their jobs. Beneficiaries will lose trust and likely blame the U.S. for their abandonment. The value of billions of dollars of long-term investment in these countries will be lost. As stated by a development executive, “Whether intentional or inadvertent, this destruction of economic value is not making America more secure, strong or prosperous.”

Pub K Development will continue to provide updates as more information becomes available.

Nichols Liu’s Strategic and Government Affairs practice is available to support contractors and recipients prepare for the program review and compliance aspects of other Executive Orders, as well as engage policymakers on issues arising from the EOs.

Readers may access the slides for Robert Nichols Pub K conference call here.