Defense Department scraps $5.1B worth of technology and consulting contracts – News

The U.S. Defense Department is scrapping a set of technology and consulting contracts worth $5.1 billion.

Defense Secretary Pete Hegseth directed officials to make the cuts in a Thursday memorandum. Additionally, he instructed the Pentagon’s chief information officer to prepare a new plan for lowering technology spending.

In a video, Hegseth said the canceled deals include a $1.8 billion batch of consulting agreements awarded by the Defense Health Agency. The DHA is tasked with supporting the internal healthcare services of the U.S. military’s six branches. The agency employs about 130,000 military and civilian personnel.

The scrapped contracts were awarded to multiple consultancies including Booz Allen Hamilton Holding Corp., Accenture Inc. and Deloitte LLP. The trio are among the world’s largest professional services companies. 

Booz Allen is a technology consultancy that generates 98% of its nearly $11 billion in annual revenue from the public sector. Accenture and Deloitte, meanwhile, mainly work with private companies. However, they too have significant public sector businesses: Deloitte’s government and public services practice alone generates $5.5 billion in annual revenue.

Another major item on the list of deals canceled by Hegseth is a $500 million Navy contract for business process consulting. Business practice consultants help organizations streamline the internal workflows through which they perform tasks such as processing documents. According to Hegseth, those services were provided to administrative offices at the Bureau of Medicine, the Navy’s internal healthcare system.

Another item on the list was a $1.4 billion cloud services contract with a software reseller. Additionally, the Defense Department is scrapping a $500 million program through which the Defense Advanced Research Projects Agency procures information technology help desk services. Hegseth said those services are “completely duplicative” because technical support is also provided by the Defense Information Systems Agency.

The memorandum in which Hegseth called for the contracts to be scrapped also directs the Defense Department’s CIO to find a way of further cutting IT costs. Officials will have to draft a plan for doing so within 30 days. The Department of Government Efficiency, or DOGE, will be involved in the effort. 

According to the memorandum, the cost-cutting initiative will place an emphasis on scrapping unneeded software licenses. Additionally, officials must develop a plan for lowering the price of the licenses and cloud services that the Pentagon chooses to retain. A third goal of the efficiency push will be to “in-source IT consulting and management services to our civilian workforce.”

The Pentagon’s civilian workforce is also a focus of Hegseth’s restructuring push. On Monday, the Defense Department issued guidance calling for non-essential civilian positions to be “reclassified, outsourced, or removed.” Officials were given until today to submit proposals for how to carry out the initiative.

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