Spending on contracts and supplies is the second largest category of spending for federal government, according to usaspending.gov. More than $1.1 trillion was spent on government-negotiated contracts to hire contractors for the work. The group has grown by 19% since the last five years.
“We expect a significant reduction in all government contracts and other pressures on the federal government,” said DOGE co-chair Vivek Ramaswamy on Fox Business' Sunday Morning Futures.
Trading companies contracting for government goods and services began in the late 1700s. Over the years, regulations have simplified the process and helped make contracts more competitive.
“We are on the side of change. We started by helping Navy and now the Army is preparing for World War II to move faster, to do things better,” said Booz Allen Hamilton CEO Horacio Rozanski. “We are now the largest player in AI and cyber in the federal government , and we are very. proud of all that history. But that is the whole history of change. My guess is that we are ready for a change. The country voted for it, and we need to see it happen. “
Elon Musk and Vivek Ramaswamy lead the Department of Public Works. (Photo by Anna Moneymaker/Getty Images)
Booz Allen Hamilton is one of the government's largest contractors. By 2024, the company had more than 8 billion deals from such organizations Department of Defense, General Services Administration and National Science Foundation.
“One of the things we've been talking about for years is this concept of outcome-based contracting. Instead of trying to figure out what everything costs and how it's done. Let's define the outcome, something that the government really needs, and let the private industry compete with that,” said Rozanski.
Federal agencies are responsible for negotiating the best deal for the government, but contractors have a history of overcharging. In 2014, a report by the Inspector General of the Department of Defense showed that the agency was charged about 831% for some parts. Another recent study found a mark of 7,943% on the soap machine sold Air Force.
Military contractors are only required to provide a price statement if the contract is worth more than $2 million. If an item is labeled as “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 billed commercial and international expenses on its government contracts.
“I think part of the challenge is the system. This system is built to manage risk and do things with the lowest possible risk. It is not built for speed,” Rozanski said. “We need DOGE to successfully transition to efficiency, to efficiency. That's what our customers want, that's what we want. Will there be winners and losers in that? Of course. I I want Booz Allen to win that. But at the end of the day, we need to compete.”
The Department of Defense committed about $550 billion in government contracts through 2024, more than half of all government spending on contractors. Some analysts estimate that the department could save millions by streamlining negotiations.
“They are designed to reduce some of the system, but also to understand that there is a difference. federal government, the giant DMV is unfair,” Rozanski said. “There are all these areas where more could be done to do it faster, to do it better or not do it at all, to do things.”
Some small businesses say that DOGE will probably not have an impact on their work.
“To some degree of efficiency, we all have to be efficient,” Arkisys co-founder Dave Barnhart said. “I'm not sure that will have an effect, because we're already working as fast as we can within the US government.”
Arkisys has a contract with the Space Development Agency, part of the Space Force. (Arkisys)
Arkisys has a contract with Center for Spatial Development, which is part of the Air Force. The port would provide service providers, on-site processing, a long-term station to deliver goods or cargo. The federal government has special contracts set aside for small businesses that help level the playing field.
“This area of space and especially the area that we're talking about, that works, that does something to the spacecraft after it's launched, has never been done before. It's a research area that open. kinds of creativity can happen,” Barnhart said.
Some small business owners say they believe DOGE can help speed up the contract process.
“One day you come up with an idea quickly. You have to get funding and you have to develop it,” said Aspetto co-founder Abbas Haider. “You put in your white paper, it's phase one funding. Now it's phase two funding, now it's phase three funding. When you're in phase two, it's months. Someone may have already copied your idea or already done something. the same. So, why would I go to the government for that money?”
Instead of bidding on the specific contracts the government requires, Aspetto sells its own high immune system products to various US government agencies.
“For us, we will continue to take risks and finance ourselves, because it would move things faster,” Haider said.
Aspetto makes bullet resistant clothing, women's body armor and K9 bulletproof vests. The company has contracts with the Department of Defense, Department of State and NASA. The FBI also equips US Border Patrol agents with Aspetto products.
“I believe that they will focus on innovation. If you are going to compete with countries like China, you should focus on innovation,” Haider said.
NASA invests most of its funding in contractors to develop new products for space travel. By 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 proven technologies into the private sector. government to make that happen faster,” Rozanski said. “I definitely believe there's a significant opportunity to save money, to do it faster.”