Can Hegseth’s push to in-source IT consulting at the Pentagon actually happen?

Secretary of Defense Pete Hegseth (Photo by Anna Moneymaker/Getty Images)

WASHINGTON — The recent memo signed by Defense Secretary Pete Hegseth directing a major shift in how the department handles IT consulting contracts has left some experts with pointed questions about how it’s supposed to be implemented, and whether the Pentagon can actually bring such services “in house.” 

The April 10 memo ordered the termination of four IT contracts, called for the Pentagon’s Chief Information Officer and the Elon Musk-led Department on Government Efficiency to complete a review on how it will in-source IT consulting services, and mandated an audit on all current software licenses the department holds. 

But claiming to cancel $5.1 billion in contracts is likely the easiest part of implementing the ideas in the memo, analysts tell Breaking Defense. 

Matt Pearl, the director of the Strategic Technologies Program at the Center for Strategic and International Studies (CSIS), said that the Hegseth memo “doesn’t provide a lot of detail” about how to carry out its goals. 

Greg Williams, director of the Center for Defense Information at Project on Government Oversight, was more pointed with his comments, saying, “This memo reads like a directive, but doesn’t include enough detail for anyone to take action. Is it direction, celebration or just nonsense?”

“This strongly suggests that either he has no idea what he’s doing, or he thinks we have no idea what he’s doing,” Williams added. 

Both men emphasized that the April 10 memo is sending a mixed signal, as it came out three days after another memo from Deputy Defense Secretary Stephen Feinberg which expressly says that every civilian role should be “reclassified, outsourced, or removed” if it does not “directly enable lethality, readiness, or strategic deterrence.” The memo also mandated leadership to identify civilian responsibilities that are “not inherently governmental” saying they should be “prioritized for privatization.” 

How that works with the order from Hegseth to “in-source IT consulting and management services to our civilian workforce” is unclear. 

“You have the Deputy Secretary of Defense saying, I want to outsource everything we can, and then the Secretary of Defense coming around three days later and saying, I want to in-source this,” Williams said. 

“It’s just a little bit confusing in terms of what the relationship between these two memos is. When you have the [Secretary of Defense] talk about in-sourcing, and you’ve got the [Deputy Secretary] talk about privatization… What is the relationship between those two?” Pearl said.

“The danger is that, because you have these two memos from senior leaders at DoD and it’s not clear what the relationship is between them, and they sort of, in terms of policy, they seem to cut against each other without offering a lot of guidance, it just creates a lot of uncertainty for industry.” 

The Pentagon did not respond to Breaking Defense’s request for comment for this report. The IT consulting firms named in the original order also did not respond to a previous request for comment.

Middlemen, But Necessary?

Though Williams said Hegseth’s memo is deficient in clarity and creates some confusion, he said he believes it’s a good idea for the Pentagon to be critical of the money it’s spending on outsourced IT services. 

“He [Hegseth] seems to be trying to cut out the middleman. We have the Pentagon buying software from companies that make software, but it’s doing it indirectly, through these expensive consulting firms, and I think it’s a natural and healthy question to ask, ‘Do we really need this middleman?’” Williams said. “So I’m glad he’s asking the question.” 

“There’s a lot we’d like to get behind in this memo, but the lack of detail, unrealistic goals and apparent contradictions make it hard to take this and other memos seriously,” he added. 

Similarly, Pearl also said he sees the reasoning behind the decision for the Pentagon to look inward for IT services. 

“I think that there are opportunities to do in-sourcing at DoD that I think would probably be beneficial,” Pearl said. “A lot of times when you’re outsourcing like this, it can cost two to three times more to hire a contractor who is equivalent to a full time employee, and so I do think that there’s an opportunity to in-source consulting contracts.” 

David Berteau, president and CEO of the Professional Services Council, a trade association that advocates for federal contractors, disagreed, telling Breaking Defense that there’s a reason these roles have been outsourced in the first place.

“History says it is unlikely that DoD can insource these tasks at a lower cost than the contracts. When all costs are accounted for, it is nearly always more expensive for the government to do it,” he told Breaking Defense in an email. “When comparing fully burdened costs, contractors can actually be more cost-effective in certain scenarios, especially when considering the overhead associated with expanding permanent federal staff.” 

While DoD has a “productive and capable internal workforce,” Berteau wrote, “Contractors bring flexibility and agility, which are essential in rapidly changing technological environments. Contractors can be brought in quickly, adapt to specialized needs and scale projects up or down efficiently.”

That’s all hypothetical, though. In real terms, both Williams and Pearl expressed concern that DoD has the ability to actually handle the work if it was all brought in house.

“It would surprise me if there were already the necessary staff with the time available to perform $4 to $5 billion worth of work,” Williams said. “If that’s the case, then I’m glad he’s finding them something to do, but the idea that they could, at the drop of a hat, take over $5 billion worth of contract work seems unrealistic.” 

Pearl pointed out that this order is happening at the moment that the Pentagon, like other government agencies, are under orders to slash the civilian workforce — making a tough challenge even more unlikely. 

“I think that in normal times, there would be the opportunity to look at bringing some consulting work and some it work within DoD,” he said. “Now, it depends, right? Are they considering whether the people that they have let go or will let go are precisely the people that they would be what they would need in order to in-source?” 

Not only is it unlikely that the Pentagon does not have the resources to bring outside IT consulting services in-house, but it also doesn’t have the capabilities to conduct a review on how it will in-source IT consulting services within 30 days, as the memo laid out, Williams said. 

Nor, he added, does it have a realistic capability to audit all current software licenses within eight days of the memo’s signature, as was requested. (The Pentagon did not return a request for comment on whether that audit occurred by its April 18 target date.)  

“I spent 25 years in the IT industry, and I cannot imagine any meaningful software audit, let alone one of a three million person organization, being conducted in a week,” he said. 

Pearl agreed with Williams saying that everything he knows about the DoD suggests the timeline is “very unrealistic.” 

With the Pentagon, “you need to provide probably weeks, or probably in being realistic, months, just for them to understand all the licenses they’re using and come up with ways to monitor them,” he said.