The US government slams IT consulting spending as ‘wasteful’
The US Department of Defense is scaling back its reliance on IT consultants.
In a new directive signed by Defense Secretary Pete Hegseth, the DoD has ordered the cancellation of several contracts with firms including Accenture, Deloitte, and Booz Allen Hamilton, citing them as “wasteful spending.”
Using the X account, Hegseth shared details in a video post titled – “New @DOGE findings, this time it’s $5.1 billion.”
“We’re signing a memo right now directing the termination of $5.1 billion in DoD contracts. for ancillary things like consulting and other non-essential services,” Hegseth said in the video. “Here’s a few examples. DHA contracts for consulting services from Accenture, Deloitte, Booz Allen, and other firms. They’re going to save the department $1.8 billion.”
Other impacted contracts include – a software reseller contract for enterprise cloud IT services, that will save the department $1.4 billion. Another one was the $500 million Navy contract for business process consulting.
“For the administrative office in the Bureau of Medicine, by the way, we need this money to spend on better health care for our warfighters and our families, instead of $500 an hour business process consultant,” he added. Another contract that Hegseth highlighted was a DARPA contract for IT help desk services that are completely duplicative with services already provided by DISA workforce, saving the department another $500 million. On the DEI front, the memo terminated 11 more contracts on DEI climate, COVID-19 response, and related non-essential activities across the department.
According to a report, the Air Force’s contract with Accenture to “re-sell third-party Enterprise Cloud IT Services,” was also chopped, which Hegseth stated that the government can “already fulfill directly with existing procurement resources.”
The details of where the projected money would go to has not been revealed yet. Accenture, Deloitte, Booz Allen did not respond to request for comments on the development.
Concerns for IT consultancy firms
The DoD memo raises concerns for the IT consultancy industry at large as this could be just the beginning. Given the DoD’s decision to cancel contracts, even in the future, new tenders are likely to come with stricter cost controls, scaled-down scopes, and a preference for in-house or small business execution models.
“DOGE is aligned with what Elon Musk did at Twitter after its takeover. He let go of 80% of the staff and now Twitter or X is working fine,” said Pareekh Jain, CEO at EIIRTrend & Pareekh Consulting. “The same approach is visible in the US DoD now. They will cancel many IT (consultancy) services contracts, and many IT software contracts, and also do internal work to optimize spend. They will use AI where possible. Their approach will be to eliminate unnecessary or nice-to-have work, and for what is necessary, do more with less, combining AI and internal resources,” said Pareekh Jain, CEO at EIIRTrend & Pareekh Consulting.
The likelihood of these contracts being reinstated — either in full or in modified form — remains low in the near term. While some Pentagon departments may handle the work, eventually they may need to rebid portions of the canceled work. However, there is very little chance of the current administration aiming to re-engage large consulting firms under similar terms.
Also, what was once seen as a guaranteed avenue for some of the large IT consultancy service companies, this decision may now subject these companies to intense scrutiny and political pushback.
These company’s federal business units will now have to navigate a tougher procurement climate, compete with leaner players, and justify every dollar in delivery value.
Meanwhile, for the broader IT services industry — especially offshore players like TCS and Infosys — the implications are more indirect but no less significant. While they don’t work much on Federal contracts, the sudden retreat in the US federal IT spending adds to the climate of uncertainty already created by trade policy shifts, tariff freezes, and cost-consciousness across corporate America.
