Spending on contracting and supply is the second largest large spending group for federal government, according to uspending.gov. More than $1.1 trillion was spent on contracts that the government negotiated to hire contractors. The category has grown by 19% compared to five years ago.
“We expect massive cuts to all federal contractors and others who overcharge the federal government,” DOGE co-host Vivek Ramaswamy said on Fox Business’s Sunday Morning Futures.
The contracting of commercial companies for government goods and services dates back to the late 18th century. Over the years, laws have streamlined the process and helped make contracts more competitive.
“We are on the side of change. We started by helping navy and then the military prepares for World War II to move faster, to do better,” said Horacio Rozanski, CEO of Booz Allen Hamilton. “We’re now the largest player in AI and cyber in the federal government, and we’re very proud of that whole history. But that is the whole history of changes. I have a feeling that we are ready for change. The country voted for it and we need to see it happen.”
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Elon Musk and Vivek Ramaswamy head the Department of Government Efficiency. (Photo by Anna Moneymaker/Getty Images)
Booz Allen Hamilton is one of the country’s largest contractors. In 2024, the company had more than 8 billion dollars worth of contracts with agencies like Ministry of Defense, General Services Administration and the National Science Foundation.
“One of the things we’ve been talking about for years is this notion of outcome-based contracting. Instead of trying to figure out what everything costs and how to do it. Let’s define an outcome, something the government really needs, and let private industry compete for that,” Rozanski said. .
Federal agencies are responsible for negotiating the best deal for the government, but contractors have a history of overcharging. In 2014, a Defense Department inspector general’s report found that the agency was billed as much as 831% for spare parts. Another recent audit revealed a margin of 7.943% on the soap dispenser sold air force.
Military contractors are only required to explain prices if the contract is worth more than $2 million. If an item is marked as “commercial”, companies do not have to justify the prices.
In 2023, Booz Allen Hamilton agreed to pay $377.45 million to settle allegations that the company improperly charged commercial and international costs to its government contracts.
“I think part of the challenge is the system. This system is built to manage risk and do business with the least possible risk. It’s not built for speed,” Rozanski said. “We need DOGE to succeed in moving toward efficiency, toward effectiveness. That’s what our clients want, that’s what we want. Are there going to be winners and losers in this? Sure. I expect I want Booz Allen to be a winner in it. But at the end of the day, we have to compete.”
The Defense Department has committed about $550 billion for government contracts in 2024, more than half of all government spending on contractors. Some analysts estimate the department could save millions by streamlining negotiations.
“They’re about cutting red tape, but they’re also about understanding that there’s a difference. Paint the whole thing federal government, a giant DMV is not fair,” Rozanski said. “There are all these areas where more can be done to do it faster, to do it better or not do it at all, to get things done.”
Some small businesses say that DOGE is unlikely to have an impact on their work.
“From some sort of efficiency standpoint, we all have to operate at an optimal level of efficiency,” said Arkisys co-founder Dave Barnhart. “I’m not really sure it’s going to have an effect, because we’re basically already operating as quickly as possible within the US government.”
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Arkisys has a contract with the Space Development Agency, part of the Space Force. (Arkisys)
Arkisys has a contract with the company Agency for Space Development, which is part of the Space Force. The port would give service providers, who carry out repairs in the area, a permanent station for the delivery of cargo or supplies. The federal government has special contracts designed for small businesses that help level the playing field.
“This particular space arena, and particularly the domain we’re talking about, which is servicing, which is doing something with a spacecraft in space after it’s launched, hasn’t been done before. It’s a wide open area of research. All kinds of innovation can happen,” he said. is Barnhart.
Other small business owners say they believe DOGE could help the contracting process move faster.
“One day you come up with an idea quickly. You have to get funding and you have to develop it,” said Aspetta co-founder Abbas Haider. “Put your white paper, that’s stage one funding. Then there’s stage two funding, then stage three funding. By the time you’re in stage two, months go by. Someone else has probably already copied your idea or done something similar. So, why should I go to the government for those funds?”
Instead of applying for the special contracts the government needs, Aspetto sells its own high-tech military products for the body various agencies within the US government.
“In our case, we’re just going to go ahead and take the risk and fund it ourselves, because that would just move things along a lot faster,” Haider said.
Aspetto manufactures bulletproof clothing, women’s bulletproof vests and K9 bulletproof vests. The company has contracts with the Ministry of Defense, the State Department and NASA. The FBI also equips US Border Patrol agents with Aspetto products.
“I believe they will focus on innovation. If you are going to compete with countries like China, you have to focus on innovation,” Haider said.
NASA gives most of its funding to contractors to develop innovative products for space travel. In 2024, the agency allocated more than 76% of its budget for contracts.
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“With the right incentives, private industry can also bring existing technologies that have already been proven in the private sector government to make it happen faster,” Rozanski said. “I really believe there’s a significant opportunity to save money, to make it happen faster.”
