‘Lean and mean’: Hegseth releases new memo limiting IT consulting work 

Secretary of Defense Pete Hegseth and Polish Deputy Prime Minister and Minister of Defense Wladyslaw Kosiniak-Kamysz participate in a bilateral exchange at the Pentagon, Washington, D.C., May 27, 2025. (DoD photo by U.S. Air Force Senior Airman Spencer Perkins)

WASHINGTON — Defense Secretary Pete Hegseth has directed the Pentagon to strictly limit its use of IT consulting and management contracts, pushing more reliance on in-house resources, according to a newly released memo.

“While we rely on our vital industrial base to deliver cutting-edge technology and support, we must in-source more expertise and harness the unparalleled talent of our existing experts to drive financial efficiency and operational strength,” Hegseth wrote. “We will become lean and mean, eliminating wasteful practices and reallocating resources to fortify our strategic edge.” 

Pentagon acquisition leaders cannot carry out new IT consulting or management services contracts, nor can it carry out task orders with integrators or consultants unless they first “justify that no element of the contracted effort can be: (1) accomplished by existing DoD agencies or personnel; or (2) acquired from the direct service provider, whereby the prime contractor is not an integrator or consultant,” the memo states. 

Further, acquisition leaders are now mandated to get approval from Deputy Defense Secretary Stephen Feinberg or his “designee” 30 days before a contract is set to be finalized. The approval process will be contingent on a cost-benefit analysis, evaluation of alternatives, and justification that such duties cannot be carried out by existing parties in the Pentagon or a direct service provider 

But there are exceptions, Hegseth wrote. For example, IT consulting contracts that are in “direct support” to weapons system programs and “directly associated” with program sustainment activities are exempt. 

Contracts that are under $10 million are also exempt from such procedures, and they “may not be split into multiple efforts to stay under the threshold limit,” the memo states. 

Similar limitations also apply to “advisory and assistance services” such as those that provide “expert advice, recommendations, studies, analyses, or support for management, strategic planning, policy development, organizational assessments, technical expertise, or operational decision-making,” per the memo.

“Components that receive approval to execute consulting, advisory, or assistance service contracts stand to lose funding for in-house personnel with overlapping expertise of said contracts.” 

This week’s memo follows a directive Hegseth signed April 10 calling for the termination of a handful of IT consulting contracts, valued at nearly $5 billion. That guidance also called on the DoD’s chief information officer to prepare a plan within 30 days to in-source IT consulting and management services to the department’s civilian workforce. The Pentagon did not respond to a request for comment regarding if such a plan had been completed or how the plan relates to Tuesday’s memo.

When the April 10 memo was released, experts spoke with Breaking Defense expressing their concerns regarding the Pentagon’s ability to in-source IT consulting. 

David Berteau, former president and CEO of the Professional Services Council, a trade association that advocates for federal contractors, told Breaking Defense that there’s a reason such consulting 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 last month. “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.” 

Similarly, Greg Williams, director of the Center for Defense Information at Project on Government Oversight, told Breaking Defense that he’s skeptical the DoD could completely in-source IT consulting, especially the $5 billion in contracts that it ordered to cancel last month. 

“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 last month. “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.” 

Separately, and in a move that effects not just IT but Pentagon acquisition at large, Hegseth issued another directive Tuesday announcing that the agency will now get a chance to assess almost all unclassified contracts before they’re awarded. However, the memo says packages for overseas contingency operations, contracts with performance outside the US and awards under just $1 million are exempt. 

According to memo, DOGE will first review contracts related to communications and utilities, advisory and assistance services and other professional support services. The memo does not state whether or not DOGE will have the jurisdiction to cancel awards, but stated that DOGE only has two days to conduct a review. 

Such memos complying with DOGE come at a time when billionaire Elon Musk is stepping back from his time as a “special government employee” as the public face of the agency. 

“As my scheduled time as a Special Government Employee comes to an end, I would like to thank President @realDonaldTrump for the opportunity to reduce wasteful spending,” Musk posted to X Wednesday. “The @DOGE mission will only strengthen over time as it becomes a way of life throughout the government.”