Pentagon aims to save money by reducing consulting contracts

In a memo sent Tuesday, Defense Secretary Pete Hegseth directed DOD leaders and components to produce a written justification before issuing new contracts or task orders for IT consulting or management services. That justification must lay out why the work cannot be performed by DOD personnel or be “acquired from the direct service provider, whereby the prime contractor is not an integrator or consultant.” The justification must also include a cost-benefit analysis, evidence that alternatives were evaluated, and the justification for going outside both DOD and direct service providers. Finally, no such work can proceed without approval from the deputy defense secretary.

Under Hegseth, consulting, IT, and management-services contracts have drawn scrutiny and skepticism. In April, the Pentagon canceled several such contracts worth a potential total of $5.1 billion after a review that included personnel from the DOGE Service.

In a video posted to X Wednesday, Hegseth said that the Air Force and DOGE also ended the service branch’s largest management-consulting program, a move he claims will save $1 billion.

The service branch is not going ahead with awards for the recompete of a contract for that line of work. The Department of the Air Force Strategic Transformation Support II vehicle would have had a $3.7 billion ceiling over five years.

According to a second memo signed on Wednesday, DOGE will get access to all of the department’s unclassified contracts at DOD.

Hegseth’s first memo defines integrators and consultants as “providing system IT integration, implementation, or advisory services (e.g., designing, deploying, or managing IT systems, or offering strategic or technical IT expertise).” The memo does not provide DOD’s definition of a direct service provider. 

“Merely reclassifying integrator or consultant contracts to avoid the requirement to evade review is prohibited,” Hegseth wrote, adding that the defense secretary for acquisition and sustainment will lead the work to monitor compliance across DOD.

Stan Soloway, former president of the Professional Services Council and a former DOD acquisition official, told us he sees the memo as having some merit but has concerns over the downstream impacts.

"The way it is structured and the elements of it can lead to a big slowdown and a real fear on the part of government folks to award contracts that they actually need," Soloway said.

DOD makes awards to contractors to fill needs in their own capabilities and this memo does not acknowledge the department's human capital challenges, he said.

Hegseth officials have said they aim to cut its civilian workforce by 5 to 8 percent as part of the Trump administration's effort to shrink the federal workforce.

“The contracts they are targeting are really reflective of where the human-capital gaps are and they are missing that whole piece. It is inextricable.” Soloway said.

Hegseth's new contracting memo directs the A&S office to review IT consulting and management services contracts and task orders “for viability and alternatives under the above guidance." Contracts that directly support “defense weapon system programs” and their “directly associated program sustainment activities” are excluded from the requirement, as are contracts and task orders with a total value below $10 million.

What the memo calls “advisory and assistance services” contracts are also under review. Hegseth defines this work as including expert advice, recommendations, studies, analyses, or support for management, strategic planning, policy development, organizational assessments, technical expertise, or operational decision-making.

As far as DOD itself goes, components have been directed to maximize the use of their employees for “broad functions” that include IT but extend far beyond that. This scope of work also includes analytical research, administrative support, human resources, training and education, compliance, and reporting.

Meanwhile, the military’s main IT services component, the Defense Information Systems Agency, is slated to lose roughly 10% of its staff of about 20,000 workers. That number includes about 6,800 DOD civilians and 1,200 active-duty service members; the other more-than-half are contractors. ]]>