Leading consulting giants Accenture Plc (NYSE:ACN), Deloitte, and Booz Allen Hamilton Holding Corp. (NYSE:BAH) are facing significant contract reductions as the U.S. Department of Defense (DoD) announced a sweeping $5.1 billion cut in IT services and other contracts deemed “wasteful spending.”
What Happened: Defense Secretary Pete Hegseth issued these cuts on late Thursday as part of a broader effort to streamline the department’s budget and redirect funds toward warfighting capabilities and improved healthcare for service members and their families.
“We need this money to spend on better health care for our warfighters and their families, instead of $500 an hour business process consultant,” Hegseth said. “That’s a lot of consulting.”
According to the memorandum, Secretary Hegseth detailed the specific areas targeted for cuts, emphasizing a shift away from reliance on external consultants for services that can be performed by the DoD’s workforce.
“That’s with a ‘B’; $5.1 billion in DOD contracts for ancillary things like consulting and other nonessential services,” Hegseth said while recording a video of the announcement from his office.
He specifically highlighted several major contracts being terminated, including:
- $1.8 billion in consulting contracts awarded by the Defense Health Agency to various private sector firms, including Accenture, Deloitte, and Booz Allen, for services the DoD believes its civilian workforce can handle.
- A $1.4 billion Air Force contract with Accenture for reselling third-party enterprise cloud IT services, which the department intends to fulfill directly using existing procurement resources.
- A $500 million Navy contract for business process consulting for administrative offices.
- A $500 million contract with the Defense Advanced Research Projects Agency (DARPA) for IT help desk services was deemed “completely duplicative” of existing services provided by the Defense Information Systems Agency (DISA).
Why It Matters: The announcement builds upon a previous $580 million in cuts announced on March 20, bringing the total savings identified under the Department of Government Efficiency or DOGE initiatives to “nearly $6 billion in wasteful spending over the first six weeks,” Hegseth added.
Beyond IT services, the remaining $0.9 billion to reach the $5.1 billion total comes from the termination of 11 additional contracts across the DoD.
These contracts target consulting services related to diversity, equity, and inclusion (DEI), climate change initiatives, the department’s response to the COVID-19 pandemic, and other “non-essential activities.”
To ensure the continued efficiency of the DoD’s IT operations, Secretary Hegseth has directed the DoD Chief Information Officer (CIO), in coordination with the DOGE team, to develop a 30-day plan for:
- In-sourcing IT consulting and management services to the department’s civilian workforce.
- Negotiating the most favorable rates for software and cloud services.
- Completing an audit of DoD software licensing by April 18, 2025, to eliminate unnecessary expenditures.
Price Action: Shares of Accenture were down 18.23% on a year-to-date basis, whereas it declined by 12.29% over a year. Booz Allen Hamilton, on the other hand, was down 15.07% YTD and 24.54% over a year.
The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, ended lower on Thursday. The SPY was down 4.38% to $524.58, while the QQQ declined 4.25% to $446.18, according to Benzinga Pro data.
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