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The Pentagon has terminated $4bn worth of IT services contracts with companies including Deloitte, Accenture and Booz Allen Hamilton as part of the Trump administration’s ongoing purge of consultancy spending.
Defence secretary Pete Hegseth determined the contracts to be “non-essential spending on third-party consultants” that could be carried out more efficiently by Pentagon employees, according to a memo he issued on Thursday.
Hegseth said the contracts represented “$5.1bn in wasteful spending” and the cancellations would result in “nearly $4bn in estimated savings”. More than $1bn has already been disbursed.
The Pentagon cancelled contracts that Accenture, Deloitte, Booz Allen and other firms had with the Defense Health Agency and terminated a separate Air Force contract with Accenture.
Hegseth also ordered the termination of 11 other consulting contracts that “support Diversity, Equity and Inclusion (DEI), Climate, Covid-19 response, and other non-essential activities”.
Despite the cuts, US President Donald Trump and Hegseth earlier this week promised the first-ever $1tn budget for the defence department.
The contract cuts come amid increasingly acrimonious attacks on consulting groups by the General Services Administration, which helps co-ordinate government procurement.
Ten top firms, including Deloitte, IBM and Booz Allen, were asked last month to identify potential savings as part of a “consultant spend review”, but their responses were deemed “insulting” by the administration.
As a result, the companies were given a new April 18 deadline to identify more cuts, restructure contracts to “outcome-based” or “shared-savings” models and offer the federal government a “credit” for what the GSA deems to have been excessive revenues during the Biden years.
The GSA did not immediately respond to a request for comment on whether the Pentagon cuts were a result of the new demands. Booz Allen, Deloitte and Accenture did not immediately respond to requests for comment.
In a podcast last month, Treasury secretary Scott Bessent singled out Booz Allen, which makes almost all its revenue from government contracts, as one of the companies involved in alleged “grift” and said reducing government contractors would be one of the administration’s biggest sources of savings.
Booz Allen this week said it “welcomes the challenge to drive better value” for US taxpayers. “We are engaged in good faith in a much-needed process to assist the government in increasing efficiencies,” it said. “We look forward to demonstrating our capabilities to the administration.”
The cancellations by Hegseth come as Elon Musk’s so-called Department of Government Efficiency increasingly targets what it sees as egregious spending on consulting contracts.
Last week, Doge celebrated terminating contracts for “Google AdWords management” and “global advisory and support services” for the Pacific island nation of Palau, among others.
Separately on Thursday, the GSA reached a deal with Google to lower the cost of software and services, including artificial intelligence tools, for the federal government.
The consulting cuts also come as the Pentagon culls 5 to 8 per cent of its civilian workforce, axing employees it deems “not mission-critical”.
But sitting alongside Israeli Prime Minister Benjamin Netanyahu on Monday in the Oval Office, Trump said the budget would hit “$1tn and nobody’s seen anything like it”.
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