Pentagon cancels $4 billion in it contracts amid spending review

The Pentagon has terminated $4 billion in IT services contracts with companies such as Deloitte, Accenture, and Booz Allen Hamilton as part of the Trump administration’s ongoing liquidation of consulting expenditures.

According to a note released Thursday by Defense Secretary Pete Hegseth, the contracts were identified as “unnecessary expenditures on third-party consultants” that could be handled more efficiently by Pentagon employees.

Hegseth stated that the contracts represented “$5.1 billion in wasteful spending” and that the cancellations would result in “approximately $4 billion in estimated savings.” Over $1 billion has already been paid out.

The Pentagon canceled contracts with Accenture, Deloitte, Booz Allen, and other firms related to the Defense Health Agency and also terminated a separate Air Force contract with Accenture.

Hegseth also ordered the termination of 11 other consulting contracts “supporting Diversity, Equity, and Inclusion (DEI), Climate, Covid-19 response, and other non-essential activities.”

Despite the cuts, US President Donald Trump and Hegseth had earlier this week pledged a $1 million budget for the defense ministry for the first time.

The contract cuts come amid an escalating attack on consulting groups by the General Services Administration (GSA), which helps coordinate government acquisitions.

Last month, ten major firms, including Deloitte, IBM, and Booz Allen, were asked to identify potential savings as part of a “consultant spending review,” but their responses were deemed “demeaning” by the administration.

As a result, the companies were given a new deadline of April 18 to identify further cuts, restructure contracts based on “outcome-based” or “shared savings” models, and offer the federal government a “credit” for revenues the GSA considers excessive during the Biden administration.

Treasury Secretary Scott Bessent stated in a podcast last month that reducing government contractors would be one of the administration’s biggest sources of savings, singling out Booz Allen, which derives almost all of its revenue from government contracts, as one of the companies embroiled in “fraud” allegations.

Booz Allen stated this week that it “welcomes the challenge to create better value” for US taxpayers and that it is “engaging in good faith in a much-needed process to help the government improve efficiency. We look forward to demonstrating our capabilities to the administration.”

The cancellations by Hegseth come as Elon Musk’s Department of Government Efficiency (DOGE) increasingly targets what it sees as “outrageous spending” on consulting contracts.

Last week, DOGE lauded the termination of “Google AdWords management” and “global consulting and support services” contracts for the Pacific island nation of Palau.

On Thursday, the GSA also reached an agreement with Google to lower the cost of software and services, including artificial intelligence tools, for the federal government.

The consulting cuts also coincide with a period in which the Pentagon is reducing its civilian workforce by laying off 5% to 8% of employees it deems “not mission-critical.”