Pentagon Cuts $5.1B in IT Contracts

The U.S. Department of Defense is set to terminate $5.1 billion worth of information technology contracts with firms like Accenture, Deloitte, and Booz Allen Hamilton. The decision, spearheaded by Defense Secretary Pete Hegseth, aims to eliminate what he deems “non-essential spending” on external consultants.

According to a Pentagon memo released Thursday, these contracts cover services that can be efficiently handled by existing Pentagon employees. Hegseth emphasized that ending these agreements would lead to substantial savings, estimating a reduction of nearly $4 billion in wasteful expenditure.

The announcement impacted the stock market, with Booz Allen Hamilton shares declining by 2.4% to $106.30 and Accenture shares dropping by 2% to $279.52 during morning trading in New York. Requests for comment from Accenture, Deloitte, and Booz Allen Hamilton representatives went unanswered.

The contract terminations appear to target a wide range of consulting services provided to the Navy, Air Force, Defense Advanced Research Projects Agency (DARPA), and the Defense Health Agency.

In a video shared on X, Hegseth explained that the cuts focus on “ancillary things like consulting and other non-essential services,” which will now be brought in-house. The Pentagon plans to collaborate with Elon Musk’s Department of Government Efficiency to develop a plan for streamlining and internalizing IT consulting and management services within the next 30 days. The department also intends to negotiate more favorable rates for cloud computing services.

This move signals a shift towards greater self-reliance within the Defense Department, prioritizing internal expertise over external consulting firms.

Source: Reporting by Mike Stone in Washington and Ismail Shakil in Ottawa; Editing by Clarence Fernandez, Howard Goller and Frances Kerry.