The Trump administration is widening its assault against government spending on consultants, after an Elon Musk-led cost-cutting drive triggered the cancellation of dozens of contracts and threatened hundreds more.
Ten of the largest US consultants have been told that they have until Friday to justify billions of dollars of ongoing projects for the federal government, and officials told the Financial Times they planned to expand the number of targeted firms in the coming weeks.
An FT analysis of federal data shows that more than 30 contracts held by the 10 consultants have been completely or partially cancelled. The largest is an umbrella contract covering IT services for the Internal Revenue Service, led by Deloitte, valued at up to $1.9bn over seven years.
“Only services with a demonstrable return on investment for the taxpayer will remain,” said Josh Gruenbaum, commissioner of the Federal Acquisition Service, which helps co-ordinate government procurement.
“Any enterprise with $36tn of debt while running a $2tn deficit per annum in the current interest rate environment would be grossly irresponsible if they did not undergo a line-by-line audit on all cash outflows.”
The 10 consultants initially targeted by the administration include Deloitte, Accenture, Booz Allen Hamilton, Guidehouse and IBM. The FT’s analysis covers contracts held by these companies which, according to federal returns, have been the subject of “terminated for convenience” notices.
The number of these cancellations in the six weeks since Donald Trump’s inauguration is higher than the total in any recent full year, underscoring the speed at which Musk’s so-called Department of Government Efficiency (Doge) has been trying to cut spending.
The contracts are held by a wide range of federal entities, including Immigration and Customs Enforcement, the Department of Defense, the Social Security Administration and the US Patent and Trademark Office. In five cases, the cancellation is explicitly linked to the White House’s directives to axe diversity initiatives.
A contract between Booz Allen Hamilton and the Federal Acquisition Service was being partially terminated “to comply with the diversity, equity and inclusion, accessibility (DEI) executive orders”, according to one filing.
The potential cost to contractors of the actions is unclear, not least as some cancellations may prove to be partial and some contracts may be recreated in some form in future. In the case of the IRS contract, the $1.9bn figure was a cap on spending rather than a forecast for the cost, and no work had yet been billed by Deloitte or other contractors.
The remaining terminations, mainly subcontracts entered into under larger “blanket purchase agreements”, were listed as being worth up to $256mn, of which $143mn has already been committed.
Executives from some targeted firms have met Trump administration staff to defend consulting projects, and “additional meetings will continue over the coming weeks”, according to a senior official at the General Services Administration, which helps to co-ordinate federal procurement.
The official said the administration anticipated broadening the list following the initial reviews, and added: “GSA expects firms to take this seriously. Coming in saying every contract is mission critical is not realistic. Projects supporting mission critical functions may stay, and could deepen, but at good and fair prices for the government and taxpayer.”
The defence department is conducting its own review of consulting contracts, with an April deadline.
Industry analysts said the reviews, coming on top of mass firings in some departments and a slew of executive orders reversing Biden-era initiatives, had caused widespread confusion.
“People just don’t know what’s happening,” said Fiona Czerniawska, chief executive of Source Global, a research group. “Even those who haven’t had contracts cancelled are concerned that the parts of the government they work for are being ‘Doge’d’ and therefore they might not have the money to complete the work.”
Source Global is poised to cut its forecast for management consulting revenue from the US public sector, which accounts for about 6 per cent of the US market and totalled $6bn last year.
It had forecast growth of 1 per cent this year, accelerating to 3 per cent in 2026, but now expects “flatlining” revenue in 2025 as existing contracts run off and an outright decline next year. It says the figures are provisional, given the high level of uncertainty.
The figures exclude IT systems integration and development work, which the Trump administration has signalled is not a focus of this week’s review process, although some analysts fear these projects may also be affected.
“Firms don’t know quite what is on the chopping block, or what definitionally constitutes consulting, so they don’t know where they need to focus,” said John Caucis, senior analyst at Technology Business Research.
Doge has been orchestrating cost-cutting measures across government that include mass firings of federal workers, the freezing of aid projects and the elimination of agency functions in a manner that critics have charged is haphazard and blind to the consequences.
“In an ideal world, we would see a reduction in consulting gigs and the increased hiring of accountable public servants to replace them,” said Benjamin Brunjes, an associate professor at the University of Washington. “That will not happen, so the result will be understaffing, loss of institutional knowledge and failure to provide many essential public services.”
Some consulting industry executives have expressed optimism that, after the initial phase of Doge’s strategy is complete, there could be lucrative opportunities in outsourcing government services or implementing new IT that improves efficiency.
Earlier this week, one government agency, the Department of Veterans Affairs, said it had already completed the review of its nearly 2,000 professional services contracts and would cancel 585 non-mission-critical or duplicative contracts, representing “less than 1 per cent of the roughly 90,000 contracts VA currently has in place”.
The news from the VA led to a rally in the beaten-down shares of listed government contractors, several of which were up more than 4 per cent on Tuesday when the wider market was down 1.2 per cent.
The sector is still down by more than one-third since November’s presidential election.
“We’re not looking to put anyone out of business,” the senior GSA official said. “But they need to be candid when analysing their value regarding return on investment.”
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