According to usaspending.gov, contract and supply spending is the second largest spending category for the federal government. More than $1.1 trillion was spent on government negotiations to hire contractors to do the work. The category has grown 19% from five years ago.
“We expect significant cuts for all federal contractors and other contractors who are overbilling the federal government,” DOGE co-leader Vivek Ramaswamy said on Fox Business Channel’s Sunday Morning Futures show.
Contracting for government goods and services with commercial companies dates back to the late 1700s. Over the years, laws have streamlined the process and helped make contracts more competitive.
“We are on the side of change,” said Booz Allen CEO Horacio Rozanski. “We started by helping the Navy and Army prepare for World War II so they could move faster, Do better. “Now we’re the largest player in artificial intelligence and cyber in the federal government, and we’re very proud of that whole history. But that’s the whole history of change. My sense is we’re ready for change. The country voted Support it, we need to see it happen.
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Elon Musk and Vivek Ramaswamy lead the Department of Government Effectiveness. (Photo by Anna Chanmemaker/Getty Images)
Booz Allen Hamilton is one of the largest government contractors. In 2024, the company secured more than $8 billion worth of agreements from agencies including the Department of Defense, the General Services Administration and the National Science Foundation.
“One of the things we’ve been talking about for years is the concept of outcomes-based contracts. Instead of trying to figure out how much everything costs and how to do it, let’s define an outcome, something that the government really wants and let the private sector compete. ,” Rozanski said.
Federal agencies are responsible for negotiating the best deals for the government, but contractors have a history of charging exorbitant fees. In 2014, a report by the Department of Defense Inspector General showed that the agency was spending as much as 831 percent on spare parts. Another recent audit found a 7,943 percent markup on soap dispensers sold to the Air Force.
Military contractors are only required to provide price explanations if the contract value exceeds $2 million. If an item is labeled “commercial,” the company doesn’t have to justify the price.
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In 2023, Booz Allen Hamilton agreed to pay $377.45 million to settle allegations that the company improperly billed commercial and international costs on its government contracts.
“I think part of the challenge is the system. The system is built to manage risk and get the job done with the lowest risk possible. It’s not built for speed,” Rozanski said. “We need DOGE to successfully transition to efficiency, effectiveness. That’s what our customers want, and that’s what we want. Are there going to be winners and losers? Of course. I want Booz Allen to be the winner here. But at the end of the day, , we need competition.
The Department of Defense has approximately $550 billion in obligations for government contracts through 2024, accounting for more than half of government contractor spending. Some analysts estimate the department could save millions of dollars by streamlining negotiations.
“They’re about reducing some of the bureaucracy, but they’re also about understanding the differences. To paint the entire federal government, the giant DMV is unfair,” Rozanski said. “In all of these areas, we can do more to get things done faster, better, or not at all.”
Some small businesses say DOGE may not have an impact on their jobs.
“From some efficiency perspective, we all have to operate at optimal efficiency levels,” Arkisys co-founder Dave Barnhart said. “I’m not so sure that’s going to have an impact because we’re basically already within the U.S. government. Worked as fast as possible.”
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Arkisys has a contract with the Space Development Agency, part of the Space Force. (Achysis)
Arkisys has a contract with the Space Development Agency, which is part of the Space Force. The port will provide a permanent site for service providers performing repairs in space to deliver cargo or supplies. The federal government has created special contracts for small businesses to help level the playing field.
“This particular area of space, especially the area we’re talking about, which is servicing, which is doing something with a spacecraft in space after it’s launched, has never been done before. It’s an open area of research. All kinds of All kinds of innovation are possible,” Barnhart said.
Other small business owners said they believe DOGE can help speed up the contracting process.
“One day, very quickly you hit on the idea. You have to get funding and you have to develop it,” said Aspetto co-founder Abbas Haider. “You put in the white paper, it’s phase one funding. Then there’s phase two funding, then there’s phase three funding. By the time you get to phase two, it’s been months. Others may have copied it. Got your idea or already done something about it? So why should I ask the government for these funds?
Instead of applying for specific contracts that the government needs, Aspetto sells its high-tech military products to various agencies within the U.S. government.
“As far as we’re concerned, we’re going to continue to take the risk and fund it ourselves because it’s just going to make things move faster,” Haider said.
Aspetto manufactures bulletproof clothing, women’s body armor and K9 bulletproof vests. The company has contracts with the Department of Defense, State Department and NASA. The FBI also equips U.S. Border Patrol agents with Aspetto products.
“I do believe they will focus on innovation. If you are going to compete with a country like China, you have to focus on innovation,” Haider said.
The National Aeronautics and Space Administration (NASA) provides most of its funding to contractors to develop innovative products for space travel. In 2024, the agency will allocate more than 76% of its budget to contracts.
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“With the right incentives, private industry can also get there more quickly by bringing existing technologies that are already proven in the private sector to government,” Rozanski said. “I really believe this is a Great opportunity to save money, and save money faster. ”
