In a sweeping move reflecting the Trump administration’s intensified scrutiny of federal consultancy spending, the Pentagon has terminated $4 billion worth of contracts with major consulting firms including Deloitte, Accenture, and Booz Allen Hamilton. The news, first reported by the Financial Times, highlights what defense officials describe as a broader effort to eliminate what they consider non-essential expenditures on third-party services.
Defense Secretary Pete Hegseth announced the cancellations in a memo issued Thursday, calling the contracts “non-essential spending on third-party consultants” and arguing that much of the work could be done more efficiently by in-house Pentagon staff. Hegseth estimated the cuts would generate nearly $4 billion in savings, despite more than $1 billion already having been spent. He also characterized the total value of the terminated contracts as representing “$5.1 billion in wasteful spending.”
The terminations affect IT and consulting contracts across multiple departments, including the Defense Health Agency and a separate Air Force engagement with Accenture. In addition to the major firms named, 11 other contracts were canceled, many of which were tied to programs supporting Diversity, Equity, and Inclusion (DEI), climate initiatives, and COVID-19 response efforts — areas the administration now deems non-essential.
Despite the aggressive cuts, President Trump and Hegseth earlier this week reaffirmed their commitment to a record-setting $1 trillion defense budget. “The budget will hit $1 trillion and nobody’s seen anything like it,” Trump said during a meeting with Israeli Prime Minister Benjamin Netanyahu in the Oval Office on Monday.
The clampdown on consultancy contracts coincides with growing tension between the Trump administration and federal contractors. The General Services Administration (GSA), which oversees federal procurement, has demanded that top consulting firms — including Deloitte, IBM, and Booz Allen — identify significant cost reductions under a “consultant spend review.” The firms were given until April 18 to restructure deals toward “outcome-based” models and issue credits for what the GSA alleges were excessive earnings during the Biden administration.
A source familiar with the review told the Financial Times that responses from several firms were considered “insulting” by senior officials, prompting the GSA to escalate its demands. While the GSA declined to comment on whether the Pentagon cuts were directly tied to this initiative, the overlap in timing suggests a coordinated push.
Booz Allen, which derives most of its revenue from government contracts, has pushed back on the criticism. In a statement this week, the company said it “welcomes the challenge to drive better value” and is participating “in good faith in a much-needed process to assist the government in increasing efficiencies.”
The cuts are also part of a broader campaign by Elon Musk’s so-called Department of Government Efficiency, which has recently targeted a variety of consulting and digital services contracts as wasteful. Last week, the department canceled contracts for Google AdWords management and other global advisory roles, including one supporting the Pacific island nation of Palau.
Separately, the GSA announced a new deal with Google to lower the cost of software and AI services for the federal government.
As part of the cost-saving drive, the Pentagon is also moving to reduce its civilian workforce by 5 to 8 percent, focusing on employees labeled as “not mission-critical.”
