A costly HR tech modernization effort has been scrapped by the Pentagon, leaving Oracle (NYSE:ORCL) and Leidos (NYSE:LDOS) facing the fallout. The project, initially budgeted at $75 million to overhaul the HR systems for 900,000 civilian employees, ballooned to $280 million over six years.
Defense Secretary Pete Hegseth made the call, deeming further investment in the project a waste of taxpayer dollars. While Oracle’s involvement was never officially announced, contract records confirm their participation. The Department of Defense now has two months to devise a new plan for HR system modernization.
The news impacted investors, with Oracle stock dropping 2% and Leidos shares declining 0.7%. Neither company has issued a statement. This decision comes amid increased government scrutiny on spending, spurred by White House initiatives focused on efficiency.
Oracle, a long-time beneficiary of federal contracts, including a $16 billion VA health records deal, faces a shifting landscape. With cost-cutting a priority, even established firms with government ties are vulnerable. This cancellation signals a change in government tech spending, which could reshape the contractor market.
Key Takeaways:
- Pentagon cancels over-budget HR tech project.
- Oracle and Leidos face financial repercussions.
- Government scrutiny on tech spending intensifies.
The future of government tech contracts is uncertain, and investors should be aware of potential shifts in the market.