IT consulting spending is ‘wasteful,’ says US Defense Secretary

The US Department of Defense is scaling back its reliance on IT consultants.

In a new directive signed by Defense Secretary Pete Hegseth, the Defense Department has ordered the cancellation of several contracts with firms including Accenture, Deloitte, and Booz Allen Hamilton, citing them as “wasteful spending.”

Hegseth outlined the changes in a memorandum to senior Pentagon leadership entitled “Continuing Elimination of Wasteful Spending at the DoD.”

“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 a Defense Department video to explain the cuts. “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 one for enterprise cloud IT services that Hegseth said 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, he said, was duplicated by services already provided by the Defense Information Systems Agency. Cutting it, he said, would save the department another $500 million.

The memo ordered the termination of 11 more contracts for consulting services supporting diversity, equity, and inclusion (DEI), climate, COVID-19 response, and other activites Hegseth described as non-essential.

Accenture, Deloitte, and Booz Allen did not immediately respond to requests for comment.

AI: automation, internally?

Pareekh Jain, CEO at EIIRTrend & Pareekh Consulting, said he expects the Defense Department to follow the same playbook as DOGE, the Department of Government Efficiency, has used elsewhere: “They will cancel many IT 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,” he said.

Neil Shah, VP of research at Counterpoint Research, also pointed to the potential for the department to use AI to cut costs and bring some functions in-house: “With the looming potential of AI to automate and modernize IT services, the dependence on third-party consultancies for general IT support, business process consulting, and enterprise cloud IT services is expected to continue its decline,” he said.