Notice & Comment

Contracts, Contractors, and Fraud

It was a slow week opinion-wise at the D.C. Circuit, leaving me with no administrative law decisions to review. Instead, I thought I would use this week to reflect on a peculiarity of the D.C. Circuit Review. The peculiarity grows out of recent changes to the administrative state wrought by the second Trump administration. While our job is to read and evaluate administrative law opinions issued by an appellate court, some important administrative governance may not produce many such opinions. A new pattern seems to be emerging within the administrative state: favored federal government contractors increasingly do the work once done by agency employees, provisions in public contracts increasingly do the work once done by agency rules, and fraud enforcement increasingly does the work once done through agency adjudication and deference litigation. The result could be an administrative landscape where administrative law is less and less likely to be found in appellate decisions.

Start with who is doing the work of the federal administrative state. Although contract spending overall has remained roughly unchanged under the second Trump administration, we’ve seen a larger share of contracting dollars go to a smaller number of contractors. The administration has heavily leaned on a small set of favored contractors to achieve key policy goals, goals that the contractor might see through from start to finish. Take, for example, the contract awarded a GEO Group subsidiary to locate and surveil individuals targeted for arrest by Immigration and Customs Enforcement (ICE). In combination with GEO Group’s preexisting contracts with the agency to process and detain individuals arrested by ICE and operate ICE’s ankle-monitor and app-based supervision programs, the federal contractor now operates at almost every stage of the administration’s immigration agenda—a single company locating, surveilling, supervising, and detaining the same population. While federal contractors have long operated within the administrative state, we’re seeing a shift in the extent to which private corporations are being embedded at every stage of administrative governance.

The shift toward administration via contractor has, in turn, set off a second shift toward contract provisions instead of administrative rules. Skip-tracing contractors like GEO Group’s subsidiary are paid a fixed price per case, plus bonuses for speed and accuracy. The means by which the contractor goes about closing a case are largely left to the discretion of the contractor within the broad parameters sketched out in the contract. Indeed, that’s one of the appeals of fixed price contracts. They reduce the administrative load of overseeing contract performance and incentivize efficiency, two reasons why the administration has changed the federal default to universal fixed-price contracts. But note the administrative law consequence of these contracts: If ICE were itself locating individuals for potential immigration enforcement, such agency action would be subject to a host of legal constraints including potential APA review. Public contracts are exempted from the rule-making requirements of the APA, and while the FAR can be procedurally quite onerous, the substance of federal contracts is largely left up to the agencies themselves.

Structuring the federal administration around contractors in this way opens up a new mechanism for enforcement—fraud claims. Earlier this year, then-Acting Attorney General Todd Blanche formally created the National Fraud Enforcement Division of the Department of Justice (DOJ), the first significant new DOJ component since the National Security Division in 2006. The Division is responsible for investigating and prosecuting fraud against taxpayer dollars and taxpayer-funded programs, and has named as one of its priorities prosecuting government procurement fraud. The investigations and prosecutions led by the Division may become a key mechanism by which the administration disciplines the federal contractors carrying out its policy. Where an agency rule or regulation might have been challenged as arbitrary under the APA by any adversely impacted party with standing, the decisions of GEO Group and other contractors could be subject mainly to potential investigations and prosecutions initiated by the administration itself. But these prosecutions are unlikely to result in judge-made law for the simple reason that most are likely to plead or settle out.

We’ve seen this dynamic play out in miniature on the civil side. Since 1965, all federal government contracts over a certain dollar value have contained a provision stating that the contractor would not discriminate against any employee or applicant for employment based on characteristics like race or national origin. The Department of Labor’s Office of Federal Contract Compliance Programs investigated any violations and brought enforcement actions before the Department’s Office of Administrative Law Judges. Appeals went to Labor’s Administrative Review Board, and further review could be obtained in a federal district court. Where cases settled, they did so under a set of published regulations, sometimes before an ALJ, and against a backdrop of case law and accepted remedies. This is a lot of administrative law.

But in March of 2026, President Trump signed an executive order declaring diversity, equity, and inclusion (DEI) activities to be “not only unethical and often illegal” but also a main cause of waste, fraud, and abuse. The order, and the FAR provision implementing it, requires that all federal contracts contain a provision promising that the contractor “will not engage in any racially discriminatory DEI activities.” To enforce these requirements, DOJ has leveraged its Civil Rights Fraud Initiative to investigate and pursue False Claims Act claims against contractors knowingly violating federal civil rights law. Under the Initiative’s banner, DOJ has brought a number of high-profile False Claims Act actions against contractors that allegedly failed to comply with their contractual obligations. All of these matters have thus far settled out of court.

These actions reflect what could be a new reality of administrative law. Before 2025, the affirmative action obligations listed in the FAR were enforced primarily through familiar mechanisms even in the context of federal contractors. The FAR required specific contractual language, failure to comply with contractual obligations was investigated by an agency, enforcement was accomplished first through agency adjudication and then through federal courts. The result? Layers of familiar administrative law. Under the current regime, though, FAR requirements (and policy goals) are enforced through civil investigative demands issued by the DOJ, qui tam suits brought by whistleblowers, and out-of-court settlements designed to preserve continued contractual relationships. Very little administrative law.

The civil side may be proof of concept for a broader enforcement model. The administration has pursued its policy priorities around DEI by dictating and controlling contractors through False Claims Act actions. It doesn’t need to eradicate DEI inside the administrative state. It can instead shift work away from the administrative state by delegating more to contractors and then implement policies via contractual provisions and enforcement mechanisms that sit outside traditional administrative law. It’s not hard to imagine how the same administration might expand its capacity to implement policy priorities via federal government contractors through aggressive use of fraud investigations and prosecutions led by DOJ’s rapidly expanding National Fraud Enforcement Division. These investigations and prosecutions are unlikely to find their way into the D.C. Circuit. That’s not to say that such an outcome is a certainty—no one has a crystal ball. But it is the kind of thing I wonder about on weeks when I have no opinions to review.

Alexis J. Abboud is a Harry A. Bigelow Teaching Fellow and Lecturer in Law at the University of Chicago. Her research lies at the intersection of contract, administrative, and constitutional law.