Defense Secretary Pete Hegseth is cracking down on the Defense Department’s (DoD) use of IT consulting contracts in an attempt to reduce reliance on outside firms and bolster the department’s in-house expertise.
In a May 27 memo, Hegseth instructed top Pentagon leaders to halt any new IT consulting or management services contracts – which DoD defines as work involving system integration, IT implementation, or advisory functions – without first showing that no DoD personnel or agency can perform the task, and that the work cannot be procured directly from a non-consultant service provider.
“The [DoD] has become very much over reliant on management consultants and contractors,” Hegseth said in a video posted on X announcing the policy. He added that, moving forward, the department will “responsibly reduce the number of management consultants and contractors.”
The directive also places new layers of oversight on contract approvals. Hegseth tasked Deputy Secretary of Defense Steve Feinberg with reviewing all consulting contracts.
Before executing any new consulting-related contracts, components must submit a cost-benefit analysis, a review of alternatives, and justification to Feinberg’s office at least 30 days in advance. These justifications must clearly demonstrate that in-sourcing is not a viable option. Attempts to bypass the directive by reclassifying integrator or consultant contracts to evade scrutiny are explicitly prohibited.
The new policy also charges the Under Secretary of Defense for Acquisition and Sustainment with monitoring compliance and reviewing the viability of current contracts. Noncompliant contracts may be subject to termination.
Some contracts are exempt from the directive, including those in direct support of defense weapon system programs and their sustainment, as well as contracts or task orders valued under $10 million. However, splitting contracts to remain under the threshold is not allowed.
The policy marks another step in Hegseth’s broader campaign to rein in Pentagon IT spending. Last month, he ordered the cancellation of several IT services contracts and directed the department’s chief information officer to propose new in-sourcing strategies.
“While we rely on our vital industrial base to deliver cutting-edge technology and support, we must in-source more expertise and harness the unparalleled talent of our existing experts to drive financial efficiency and operational strength,” Hegseth wrote in the memo, adding that the changes aim to “promote fiscal responsibility, streamline operations, and maximize our readiness and lethality.”
“We need to replace wasteful spending in favor of a culture focused on – get this – actual financial responsibility and stewardship so that our limited funds are spent better on, you know, things like health care and mission-related programs for our war fighters and their families,” Hegseth said.