Contractors are owed tens of millions of dollars by USAID, and they warn that they might have to shut down and face lawsuits in developing countries. One major firm even says that US banks refuse to lend it more money because they worry the US government won’t fulfil its funding promises.

These claims, which include threats of physical harm to overseas employees due to unpaid debts, were revealed in new court filings on Monday. The cases aim to reverse the Trump administration’s 90-day freeze on foreign aid funding and projects, which has disrupted the global aid sector. The case is part of the legal response to the administration’s broader efforts against federal government employees. These actions have significantly affected the United States Agency for International Development (USAID) and its partner organisations.

On Tuesday afternoon, a judge ruled that the US government must pay its dues by midnight Wednesday. However, just a few hours later, the government appealed the decision. The plaintiffs have repeatedly claimed that the Trump administration has not followed the court’s orders. USAID oversees over $43 billion in 2023 and primarily uses contractors to carry out projects on its behalf globally; some companies handle hundreds of millions of dollars' worth of development projects year, primarily at low profit margins.

President Donald Trump and his billionaire adviser, Elon Musk, who heads the Department of Government Efficiency (DOGE), believe that USAID should be closed. As a result, the administration has put most of USAID’s 10,000 employees on leave and cancelled many contracts. This decision has impacted projects in Africa, Ukraine, and other regions, leading to job losses in the US.

DAI Global LLC, a company based in Bethesda, Maryland, near Washington, says it has not received any payments on the $115 million that USAID owes it. Of this amount, $70 million has been overdue for more than 30 days. Founded in 1970, DAI Global has led U.S.-funded projects in Afghanistan and Iraq after the 9/11 attacks. The company also stated that it has already used up its $75 million working capital facility. "Four of the largest financial institutions in the US and Europe" are now "unwilling to extend DAI any further working capital, because they have lost confidence that the US government can be counted upon to pay its legitimate bills." Previously, the company's relationship with the US government has allowed it to secure favourable commercial terms for loans. According to DAI, the US government's failure to pay its debts has compelled it to turn to a "non-bank lender that specializes in distressed situations." 

“It’s absolutely unprecedented,” said Zan Northrip, an executive vice president at DAI, in an interview. “In general, this is a sort of lessening of the confidence that lenders have in the US government as a client that can be relied upon to pay its bills.” DAI, which has already put more than 500 U.S.-based employees on unpaid leave, now faces potential fines, tax penalties, and legal action from several vendors. The company could also be sued if it has to suspend up to 4,000 more overseas employees without pay, as this would violate local labor laws.

Meanwhile, Chemonics International Inc., a separate company that has carried out over 1,000 foreign aid programs in more than 100 countries for the U.S. over the past 50 years, reported in mid-February that it is still owed more than $100 million. In the case involving DAI, the plaintiffs have repeatedly urged the judge to order the government to pay its dues. Additionally, nonprofit organisations in a related lawsuit have even asked the court to hold the U.S. government in contempt, though the judge has not taken that step.

Some USAID employees have been ordered by the courts to return to work, but contractors say the agency is struggling to function with its current staffing levels. They also claim that payment approvals have been stalled due to political reasons.

Democracy International, one of the contractors waiting for payments from USAID, has warned that it could face legal action in other countries if it cannot pay salaries on time. In Tunisia, 17 employees have already informed the company that they will take legal action if they don’t receive their salaries by March 3. The organisation says it is owed $3 million for work completed before January 24. As a result, it has furloughed all 95 of its US employees, faces possible eviction from its headquarters, and may need to file for bankruptcy. The situation is also putting its overseas staff at risk.

“In Tunisia, for example, our senior staff/representatives are being threatened by vendors and other creditors with legal jeopardy or physical harm for failure to pay,” Eric Bjornlund, Democracy International’s chief executive officer, wrote in a declaration to the court, adding that staff now risk “arrest or reprisals due to their inextricable association with these USAID programs that are suddenly not keeping promises or meeting their obligations.”