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Spending on hiring and supplies is the second most important spending group in the federal government, according to usaspending.gov. More than $1.1 trillion was spent on government-brokered deals to hire contractors for the work. The category has increased 19% compared to five years ago.
“We expect massive cuts from all federal contractors and others who are overbilling the federal government,” DOGE co-head Vivek Ramaswamy said on Fox Business’ 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 simplified the process and helped make contracts more competitive.
“We are on the side of change. We start by helping the navy “And then the Army prepares for World War II, moves faster and does 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 that whole history. But that is quite a story of change. My feeling is that we are ready for change. The country voted for it and “We need this to happen.”
Elon Musk and Vivek Ramaswamy head the Department of Government Efficiency. (Photo by Anna Moneymaker/Getty Images)
Booz Allen Hamilton is among the largest government contractors. By 2024, the company had more than $8 billion in deals with agencies 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 contracting. Instead of trying to figure out how much everything costs and how to do it, let’s define an outcome, something the government really needs, and let the 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 Department of Defense Inspector General report showed the agency was being charged up to 831% for replacement parts. Another more recent audit found a 7,943% profit margin on a soap dispenser sold at the Air Force.
Military contractors are only required to provide an explanation of prices if the contract is worth more than $2 million. If an item is labeled “commercial,” companies do not have to justify prices.
In 2023, Booz Allen Hamilton agreed to pay $377.45 million to resolve allegations that the company improperly billed commercial and international costs for its government contracts.
“I think part of the challenge is the system. This system is designed to manage risk and do things with as little risk as possible. It’s not designed for speed,” Rozanski said. “We need DOGE to succeed in the shift towards efficiency, towards effectiveness. It’s what our customers want, it’s what we want. Will there be winners and losers in that? Absolutely. I hope Booz Allen is a winner in that “But at the end of the day, we have to compete.”
The Defense Department committed about $550 billion to 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 are in favor of reducing some of the bureaucracy, but they are also in favor of understanding that there is a difference. To paint the whole picture federal government, “The giant DMV is not fair,” Rozanski said. “There are all these areas where you can do more to do it faster, do it better or not do it at all, to get things done.”
Some small businesses say DOGE likely won’t have an impact on their work.
“From sort of an efficiency standpoint, we all have to operate at the optimal level of efficiency,” said Arkisys co-founder Dave Barnhart. “I’m not too sure that will have any effect, because we’re basically already operating as quickly as possible within the United States government.”
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Arkisys has a contract with the Space Development Agency, part of 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 performing repairs in 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 domain of space and more especially the domain we’re talking about, which is servicing, which is doing something to a spacecraft in space after it’s launched, hasn’t been done before. It’s a very open area of research.” “All kinds of innovation can happen,” Barnhart said.
Other small business owners say they believe DOGE could help speed up the hiring process.
“One day you come up with the idea quickly. You have to get the funding and develop it,” said Aspetto co-founder Abbas Haider. “You put in your white paper, that’s phase one funding. Then it’s phase two funding, then it’s phase three funding. When you’re in phase two, it’s months. Someone else has probably already copied your idea or has already done something similar. So why would I go to the government to get those funds?”
Instead of applying for specific contracts that the government needs, Aspetto sells its high tech corps army products to various agencies within the United States government.
“In our case, we’re just going to go ahead and take the risk and fund it ourselves, because then things would move much faster,” Haider said.
Aspetto makes bullet resistant clothing, bulletproof vests for women, 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 incorporate existing technologies that have already been tested in the private sector. the government “To make that happen faster,” Rozanski said. “I really think there’s a significant opportunity to save money, to do it faster.”
