Secretary of the Navy John Phelan announced last week the cancellation of nearly $300 million in IT contracts, grants, and awards deemed to be “non-essential.”
“I’m canceling IT contracts that are ineffective and over-budget. I’m also canceling 45 grants and awards funding non-essential activities … By eliminating this waste, we will save almost $300 million,” Phelan wrote in a X post.
In a memo detailing the cuts, Phelan explained these cuts are “pursuant to [Defense Secretary Pete Hegseth’s] commitment to … cut wasteful spending” from the department.
One of the most significant cancellations includes the Navy’s Maintenance, Repair and Overhaul (NMRO) logistics program. Originally developed to use artificial intelligence, digital twins, and predictive analytics to forecast system failures on ships and aircraft, the program has struggled in execution. According to the Navy, for the past five years, systems integrators have over-engineered the software, rendering it largely unusable.
Another IT contract that landed on the chopping block is the department’s MyNavyHR Transformation Initiative, a five-year effort to modernize the Navy’s Human Resources systems. According to Phelan, the effort no longer aligns with the “Navy’s financial efficiency priorities” and the service must now “redirect resources towards strategies that better align with the Navy’s current and future needs.”
These decisions follow a DOGE-led review of military spending and align with the Trump administration’s broader push to implement DOGE cost-cutting initiatives across Federal agencies.
“I commend the DOGE team for finding these opportunities to help save the Navy and increase our readiness and warfighting capability,” Phelan said.
Phelan has charged Navy Chief Information Officer Jane Rathbun with developing a new acquisition strategy and conducting a management review of the NMRO program and the Navy’s HR systems “to ensure operational efficiency, fiscal responsibility, and rapidly deliver” necessary resources.
Rathbun must deliver her findings by July 31.
The Navy’s announcement also mirrors a wider pattern of IT spending reductions across the Department of Defense. Just weeks earlier, Hegseth ordered the termination of several major IT service contracts totaling $4.2 billion. The canceled projects included IT consulting for the Defense Health Agency ($1.8 billion), enterprise cloud services resale for the Air Force ($1.4 billion), business process consulting for the Navy ($500 million), and helpdesk support for DARPA ($500 million).