Navy Secretary axes contracts for fleet maintenance software, ‘DEI,’ climate in $300M purge

The Secretary of the Navy, the Hon. John C. Phelan, gives a speech over the pilot house 1MC to the crew of the world’s largest aircraft carrier, USS Gerald R. Ford (CVN 78), April 11, 2025. (U.S. Navy photo by Mass Communication Specialist 2nd Class Jacob Mattingly)

WASHINGTON — Secretary of the Department of the Navy John Phelan has released two memos cancelling a slew of grants and contracts aimed at what he called “eliminating wasteful spending” in the DoD, including those related to ship and aircraft maintenance software.

“I commend the DOGE [Department of Government Efficiency] team for finding these opportunities to help save the Navy and increase our readiness and war-fighting capability,” he said. Between the two memos the Pentagon will save almost $300 million, Phelan said in a video posted to X.

In the memo related to maintenance, Phelan directed the termination of all contracts under the DON’s Naval Maintenance, Repair and Overhaul (NMRO) logistics program. The NMRO program was established to help predict potential system failures on ships and aircraft using artificial intelligence, digital twins and other predictive analytics. 

“The NMRO logistics program is critical software for the Navy. However, for 5 years systems integrators have over-engineered the software to the point where it is unusable. Upon the recommendation of Navy leadership, the current contracts under the NMRO program shall be terminated. This will allow the Program Office to apply the savings towards a new strategy to meet our needs,” Phelan wrote.

Defense prime Lockheed Martin and enterprise applications developer IFS were awarded the NMRO contracts in 2021. Neither of the companies responded to a request for comment by press time. 

Phelan wrote that collectively the IT contract cancellations represent over $568 million in total contract value, which he estimates will allow the Navy to “repurpose” up to $200 million in taxpayer funds in a “more effective manner.” Phelan also directed Navy Chief Information Officer Jane Rathbun to come up with a new acquisition strategy and a management review for the NMRO program by July 31. 

A second memo focused on what Phelan described as DEI, climate change and other programs that he said “are not aligned with DoD and DoN priorities.” Phelan directed the termination of 45 grants and contracts.

He wrote that “examples” of cancelled contracts include the following: 

• $2.7 million grant to the University of South Carolina to study “development,  assessment and simulation of enabling fuels for naval de-carbonization”  
• $3 million grant to Carnegie Mellon University to study “Persuasion, Identity, and  Morality in Social-Cyber Environments”
  
• $1.1 million contract for “Gender advisor services” at NAVSUP FLC Pearl Harbor  
• $409,637 grant to Arizona State University to study “engendering and leveraging trust in longitudinal human-AI interactions”  
• $146,293 grant to University of Hawaii to study “population consequences of  disturbance of humpback whales in the context of climate change” 

Additionally, earlier this week Phelan announced he’s rescinding a Navy plan focused on combating climate change established by the Biden administration.

Phelan said that the 45 terminations announced Thursday represent over $87 million in total award value, which he says will save up to $41 million in taxpayer funds that the Navy can “better apply to critical  priorities.” 

At the end of the memo he called for the assistant secretary of the Navy for Research, Development, and Acquisition to collaborate with the contracting offices in charge of the grants and contracts to “ensure  immediate cancellation and prompt disposition of remaining funds and associated activities in  accordance with this order.”

Phelan’s memos come only a few weeks after Defense Secretary Pete Hegseth published a memo on April 10 directing the termination of four major IT consulting contracts and 11 additional contracts across the Pentagon related to consulting services that “support Diversity, Equity and Inclusion (DEI), Climate, Covid-19 response, and non-essential activities.”

Hegseth claimed the contract terminations called out in the April 10 memo will save the department over $5 billion.