The decision by the United States Agency for International Development (USAID) to issue stop-work orders across its global portfolio has thrown the world’s development and humanitarian sectors into crisis in recent weeks. These orders, which abruptly halted ongoing projects and contracts, left implementing partners scrambling to cope with the consequences. Given that the United States is the world’s largest foreign aid donor – contributing more than $72 billion in 2023 alone – the suspensions have far-reaching consequences and are disrupting initiatives ranging from health programs to refugee resettlement efforts.
Under the Trump administration, the stop-work orders are a component of a larger policy review that aims to assess and realign the focus of U.S. foreign aid. For the companies on the ground, the immediate effect heralded an air of uncertainty as they questioned how to keep staff employed, how to maintain office spaces and, most importantly, how to ensure that vulnerable communities did not bear the brunt of these disruptions.
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Matthew Robinson, Director of the Euro Gulf Information Centre, views the stop-work orders as a shift toward ‘quasi-isolationism’, with a focus on reducing U.S. spending abroad and realigning aid programs with national interests.
“These are the consequences of the elections and Trump’s America First policies. They reflect an emphasis on reducing U.S. spending abroad and reassessing the effectiveness of foreign assistance programs,” he told DevelopmentAid.
Highlighting the broader implications of these suspensions, Robinson commented that “these aid cuts and freezes have sent shockwaves through the sector,” adding that the financial burden of the cuts extended beyond immediate program suspensions and warning,“The strain that gaps in funding can have on local health systems is huge. Reduced access to life-saving medications is so consequential for people in vulnerable communities, especially in the developing world suffering from HIV and AIDS.”
According to Robinson, the stop-work orders have had a devastating effect on vulnerable communities that rely on USAID-funded programs. From HIV/AIDS treatment to refugee resettlement, the suspension of aid has left millions stranded without help. The disruption has exacerbated emergencies, leaving families with limited choices.
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The situation is equally dire in the international health sector, where USAID’s funding had been pivotal in combating diseases like HIV/AIDS.
“American money had been crucial in supporting HIV/AIDS programs, education initiatives, and anti-corruption efforts,” Robinson explained. “If this suspension continues, we will start to see huge problems, especially in developing countries.”
Katherine Gentic, a senior US Government Compliance, Contracts, and Pricing Specialist, addressed the financial burden caused by the stop-work orders. She explained that while a stop-work order was not the same as a termination, it still required contractors to “immediately comply with its terms and take all reasonable steps to minimize costs.” Implementing partners found themselves walking a tightrope – trying to keep essential operations running while avoiding unnecessary expenditure, she explained.
“During the suspension period, implementing partners are permitted to continue incurring minimal costs, such as maintaining office leases and retaining staff,” Gentic commented.
However, many partners are unaware of what costs are considered to be “reasonable” due to the ambiguity of USAID’s Contracting Officers (COs). She suggested that partners should keep records of their justification to continue to meet certain costs, such as hiring employees or maintaining office space.
“Think about whether it is more cost-effective to keep the staff on the project rather than laying them off and paying termination costs if you can’t place them on other projects,” she advised.
This was particularly important for local hires because of the potential for high termination costs and the enforcement of legal regulations.
See also: Costs incurred under USAID’s stop work orders
Another significant worry is the possibility of disagreements over reimbursements. In order to resolve any future conflicts, Gentic emphasized the value of keeping a paper record of all communications with USAID’s COs.
“Your expenses are likely to be disallowed if you don’t have proof of attempts to minimize costs,” she warned.
This situation has left many in the development sector questioning the future of U.S. leadership in global aid. Robinson noted that while other actors, such as the European Union and private donors, might step in to fill the gap, their capacity is limited.
“In the short term, NGOs could cover the gap, but in the medium to long term, absolutely not,” he said. “If this gap continues, there is only so much the private and voluntary sector could do.”
