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Spending on hiring and supplies is the second most important spending group for the federal government, according to usaspending.gov. More than $1.1 trillion was spent on government-brokered deals to hire contractors to do the work. The category has increased by 19% compared to five years ago.
“We expect massive cuts from all federal contractors and others who are overbilling the federal government,” DOGE co-leader Vivek Ramaswamy told Fox Business’ Sunday Morning Futures.
The contracting of commercial companies for government goods and services 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. We started by helping the Navy and then the Army prepares for World War II to move faster, to do things better,” said Horacio Rozanski, CEO of Booz Allen Hamilton. “We are now the largest player in AI and cyber in the federal government , and we are very proud of this whole story. But this is a whole story of changes. My sense is that we are ready for change. The country voted for it, and we have to see it.”
Elon Musk and Vivek Ramaswamy run the Department of Government Efficiency. (Photo by Anna Moneymaker/Getty Images)
Booz Allen Hamilton is among the largest government contractors. By 2024, the company was worth more than $8 billion in agency deals like 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 this notion of outcomes-based procurement. Instead of trying to figure out what it all costs and how to do it. Let’s define an outcome, something the government really needs. And let let private industry compete for it,” 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 report showed the agency charged as much as 831 percent for replacement parts. Another, more recent audit found a 7,943% markup on one soap dispenser sold the Air Force.
Military contractors are only required to provide an explanation of pricing if the contract value exceeds $2 million. If an item is labeled “commercial,” companies don’t have to justify prices.
In 2023, Booz Allen Hamilton agreed to pay $377.45 million to settle allegations that the company improperly billed international and trade costs on its government contracts.
“I think part of the challenge is the system. This system is built to manage risk and do things with as little risk as possible. It’s not built for speed,” Rozanski said. “We need DOGE to succeed in the shift to efficiency, to effectiveness. It’s what our customers want, it’s what we want. Will there be winners and losers in this? Of course. I hope I want Booz Allen is a winner in this, but at the end of the day, we have to compete.”
The Defense Department committed about $550 billion in government contracts by 2024, more than half of all government spending on contractors. Some analysts estimate the department could save millions by streamlining negotiations.
“They are to reduce some of the bureaucracy, but they are also to understand that there is a difference. To paint everything. federal government, the 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 to do it at all, to get things done.”
Some small businesses say DOGE likely won’t have an impact on their jobs.
“From an efficiency standpoint, we all need to operate at the optimal level of efficiency,” said Arkisys co-founder Dave Barnhart. “I’m not entirely sure it’s going to have an effect, because we’re essentially already operating as quickly as we can within the US government.”
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Arkisys has a contract with the Space Development Agency, a part of the Space Force. (Arkisys)
Arkisys has a contract with the Space Development Agency, which is part of the Space Force. The Port would give service providers, making repairs to the space, a permanent station to deliver cargo or supplies. The federal government has specific contracts reserved for small businesses that help level the playing field.
“This particular area of space and especially the domain that we’re talking about, which is the service, which is doing something to a spacecraft in space after it’s launched, it hasn’t been done before. It’s an area of very open research. All kinds of innovation can happen,” Barnhart said.
Other small business owners say they believe DOGE could help make the hiring process move faster.
“One day you get the idea quickly. You have to get the funding and you have to develop it,” said Abbas Haider, co-founder of Aspetto. “You put in your white paper, that’s phase one funding. Then it’s phase two funding, then it’s phase three funding. By the time you get to phase two, it’s months. Someone else has probably already copied your idea or has already done something similar, so why should I go to the government to get this funding?”
Instead of soliciting specific contracts that the government needs, Aspectto sells them high-tech body army products to various agencies of the US government.
“In our case, we’re going to go ahead and take the risk and fund it ourselves, because it would just move things a lot faster,” Haider said.
Aspetto makes bullet resistant clothing, women’s bulletproof vests and K9 bulletproof vests. The company has contracts with the Department of Defense, the Department of State and NASA. The FBI is also equipping US Border Patrol agents with Aspetto products.
“I think they’re going to focus on innovation. If you’re going to compete with countries like China, you have to focus on innovation,” Haider said.
NASA provides most of its funding to contractors to develop innovative products for space travel. In 2024, the agency allocated more than 76% of its budget to 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 to the government to make that happen faster,” Rozanski said. “I really think there’s a significant opportunity to save money, to do it faster.”
