Trump's contract-cutting blitz rattles a once-flourishing DC industry

Yahoo

25-05-2025

A Trump administration project to revisit thousands of federal agreements is starting to sink a vast ecosystem of contractors that deploy jobs across the Washington economy.
It's an effort — launched in February — that's already produced claims of big savings, including $43 million for oversight and protection of private information in the federal insurance marketplace. Contracts worth $14 million for health care support within the Department of Veterans Affairs and $16 million for assisting relief efforts in Texas following last year's Hurricane Beryl and other natural disasters have also been marked as terminated.
At least 2,775 out of more than 20,000 contracts for consulting and investment advice under review have been cut as of May 11, worth $3.1 billion in claimed savings, according to an analysis of DOGE's list of terminations and government data obtained by POLITICO.
But the reach of the review — looking back at contracts that have already gone through a competitive bidding process overseen by career civil servants — is nonetheless unprecedented. It has frozen hiring, triggered layoffs and sparked chaos across the consulting industry, a vast shadow workforce across Virginia, Washington and Maryland that often weathers broader economic slumps.
'The government's going to force [contractors] into a race to the bottom,' said Stan Soloway, a former procurement official at the Defense Department who later ran the Professional Services Council, a trade association for federal contractors. 'These are consequences that happen when the process leading up to them is not appropriately deliberative and thoughtful and insightful.'
For decades, the government has grown increasingly reliant on the private sector to perform functions once handled by federal employees, a shift done ostensibly to control costs by having companies compete.
It also created today's opportunity: The Trump administration has brought a new intensity to slashing contractors partly because they're easier to cut than federal workers, many of which have civil service protections. In the same breath, the government is renegotiating contracts to get better deals for relatively greater work, according to three lobbyists representing large and small consulting firms who, like others in this report, were granted anonymity for fear of retribution.
The General Services Administration, which oversees government contracting and is leading the review, is systematically targeting business deals it can retroactively deem 'non-essential' — 'any contract that merely generates a report, research, coaching, or an artifact,' according to an agency memo obtained by POLITICO.
The early stages of the economic fallout for the D.C. region are starting to trickle out. Consulting firms included in GSA's list of 20,000-plus contracts have reported layoffs for nearly 3,600 employees in Washington, Maryland and Virginia alone since the start of the Trump administration, according to publicly available data. And consulting industry giant Deloitte, which has not yet announced layoffs in the DMV area, is widely expected to shed staff as well.
Trump administration officials say the undertaking is determined to make sure the agreements provide good value to taxpayers. It's exactly the sort of mission conservatives elected President Donald Trump to do — shrink the federal government in a way that previous administrations have failed to deliver.
They have also said these cuts would not impact essential services and instead target redundancies.
Veterans Affairs spokesperson Peter Kasperowicz said the agency has so far canceled 'hundreds' of the 130,000 contracts it is reviewing and won't cancel those that 'directly support Veterans, and beneficiaries or provide services VA cannot do itself.'
Josh Gruenbaum, GSA's commissioner for the federal acquisitions division, also downplayed the fears of the administration's critics.
The contract review, he said, 'is simply identifying the right private industry partners who take the deficit as seriously as we do and are willing to provide quality goods and services at competitive prices.'
White House DOGE adviser Katie Miller did not respond to multiple requests for comment.
To get out of a contract early, the government can simply pay companies a 'kill fee' that varies by contract, said Christine Harada, who oversaw procurement in the White House and GSA during the Obama and Biden administrations. But it's against federal business practices for agencies to cut a contract midway just to get a better deal, she said.
But taking the government to court comes with enormous risks, said Darrell West, a senior fellow at the center-left Brookings Institution who studies government contracting.
'If you sue this White House, you're never going to get a future contract. Everybody knows that,' he said.
As part of its review, Trump's GSA instructed agencies to provide one-sentence justifications for essential contracts worth keeping, according to the GSA memo. It has also asked every agency to review their contracts with the 10 consulting firms it says receive the most government funds and terminate any non-essential agreements.
POLITICO is tracking updates to DOGE's 'Wall of Receipts,' which already claims nearly $32 billion in savings from all contract terminations it has posted publicly, and $170 billion in savings overall from cuts government-wide, as of May 11 — though DOGE's logs have been riddled with errors.
Among those terminations are at least 2,775 of the consulting contracts highlighted by GSA. The actual number of consulting contracts DOGE claims to have canceled may be higher, as the group has masked identifying information from hundreds of contracts on its page due to 'legal reasons' and describes its termination list as a 'subset' of its activity.
However, what DOGE claims to have cut is not always the same as what the agencies themselves claim. One of the largest contracts listed as canceled is a $1.3 billion agreement with New York-based Deployed Resources originally intended to help construct and furnish an immigration processing center along the southern border. But the contract, initially with the Department of Homeland Security, is active and was taken over by the Department of the Army, according to Army public affairs specialist Ryan Mattox.
In recent weeks, GSA has signaled to some contracting firms that it wanted far deeper reductions, said one agency official who was granted anonymity for fear of retribution.
And while contracts with behemoth companies like Booz Allen Hamilton, General Dynamics and Deloitte are under the government's microscope, smaller, little-known companies could also have their work cut or reduced.
One contract with a roughly 50-person research firm, MEF Associates, that helped states improve employment and other supportive services for welfare recipients facing domestic violence, mental health, substance use and other issues was cut in April. That's made it unclear if families on welfare are more likely to miss out on service improvements.
Contractors and former government officials are also worried there could be unintended cancellations for a broader sweep of projects because GSA's spreadsheets labeled contracts 'consulting' even if, in practice, they were used for construction and other unrelated services.
Detailed descriptions for each contract are not always available in public federal spending data sets, nor in the data obtained by POLITICO. But some contracts that have been under review, identified through a series of GSA documents, include a$33 million contract for logistical support following Tropical Storm Helene in Asheville, North Carolina (which DOGE claims to have canceled), a $155 million award to build out a system to help prevent veteran suicide and$132 million toward human resources services to help veterans transition back to civilian life.
At IBM, another large contractor whose deals GSA is scrutinizing, executives noted the contract review and cancellations prompted them to be 'prudently cautious around consulting for the year,' Chief Financial Officer Jim Kavanaugh said on an earnings call in late April.
'We actually process veterans benefits claims. We help process how the GSA does procurement. We help implement payroll systems,' Arvind Krishna, IBM's president and CEO, told investors. 'I don't think of these as optional.'
Many lobbyists, contractors and current and former federal officials acknowledged in interviews there are redundancies within consulting contracts. But some of these redundancies, they noted, are fail-safes that help keep important systems running smoothly and prevent service outages.
Harada, the Obama and Biden procurement official, said the Trump administration's penchant for making broad cutsand then backtracking makes her worry it could wipe out important programs and unnecessarily imperil thousands of private sector jobs.
'They're the ones that are operating the Medicare call centers,' she said. 'They're the ones that are administering your Medicaid payments, your veterans benefits. They're the ones that are actually doing some of the medical services for veterans.'
Consulting firms aren't sitting by passively.
Some have spent the first months of the Trump administration lobbying lawmakers and federal agencies including GSA to stave off contract cuts. Companies including Guidehouse and Booz Allen, which have been singled out by GSA, are working with agencies to make strategic carve-outs, according to three lobbyists and contractors familiar with the matter.
But these firms have hit a wall. As DOGE and GSA hack away at contracts, the businesses are having trouble breaking through, they said. A congressional staffer familiar with the matter told POLITICO that lawmakers' ability to intervene in the contract review is limited because appropriations laws don't dictate whom the executive branch hires or what contracts agencies need to issue.
During the lobbying blitz, contractors have learned the Trump administration is looking to "rescope" the size of preexisting contracts with the ultimate goal of squeezing lower prices and greater productivity from these consultancies, the three lobbyists and contractors said.
'Everybody's so desperate for work now,' said a former staffer at a major consulting firm GSA targeted. 'So they're going and they're basically lowball[ing] their price. … And as long as it's not ungodly low, they'll win on price.'
It's left the contractors in a precarious position: Do they put forward the cheapest bids to secure a deal, unsure if the money they are asking for is enough to fulfill the work, or forgo a contract entirely?
'We're heading toward an unhealthy dynamic. Would you use low price to choose your heart surgeon?' said Soloway, the former Pentagon procurement official, who now runs Celero Strategies, a federal market consulting firm. 'The end result is it ends up costing the taxpayer more. You get a lot less for your money.'
Methodology
POLITICO obtained 53 spreadsheets that GSA circulated to federal agencies, along with a memo instructing them to conduct a review of 'non-essential consulting' contracts. In total, those spreadsheets amounted to 22,150 rows of data, most of which refer to single contracts, though some individual contracts were repeated across rows. That data is shown in full in the table above, though some columns, including those with personal identifying information, have been removed.
POLITICO compared this data to DOGE's publicly available contract termination list posted on May 11 in order to identify contracts that DOGE claims to have canceled. When available, old versions of the DOGE data were used for USAID contract cancellations that are now stripped of identifying information on the DOGE website due to 'legal reasons.' As a result, there may be additional USAID consulting contracts on GSA's list that have been canceled by DOGE.