US expands federal contract cuts to target tech vendors: WSJ
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As part of the OneGov initiative, the US' GSA is pressuring tech vendors to justify pricing and reduce costs, marking a shift toward direct procurement and outcomes-based contracts across federal agencies.
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BAE Systems and Dell EMC collaborated to offer the first scalable, hybrid cloud solution of its kind for the US government in 2018. (BAE Systems)
The Trump administration’s federal contract cuts have entered a new phase, now targeting technology vendors as part of its broader effort to reduce government spending. According to The Wall Street Journal, the General Services Administration (GSA) has shifted focus from consulting giants to value-added resellers, tech firms that bundle hardware, software, and services for federal agencies.
This week, the GSA sent letters to 10 technology companies, including Dell and CDW, requesting detailed justifications for their pricing and operations. The move is part of a sweeping GSA tech vendor review meant to address what officials describe as excessive markups and inefficiencies. “This must change,” the letter reportedly states, referring to the current procurement model.
The GSA, citing an annual federal IT expenditure of $82 billion, has raised concerns that complex procurement practices have inflated costs for taxpayers. The agency emphasized the need for better pricing transparency and a shift toward direct purchasing. The companies have until June 11 to respond. Dell and CDW have declined to comment on the matter.
Josh Gruenbaum, who heads the GSA’s Federal Acquisition Service, signed the letter and is leading the initiative. His remarks point to a strategic shift in how the government engages with vendors. “We don’t need to outsource everything; we don’t need to always go and buy bespoke, specialized products and services,” Gruenbaum stated.
Contractors Under Pressure Amid Growing Layoffs
The impact of the administration’s spending review, as per the piece, has already been felt across the contracting landscape. Last week, Booz Allen announced it would lay off 2,500 employees, citing contract reductions. Since January, more than 11,000 contracts have been canceled across 60 federal agencies, generating $33 billion in reported savings. These cuts span a variety of services, from IT support at the Education Department to project management at the Treasury.
This initiative is part of OneGov, a federal strategy to consolidate procurement and transition toward outcomes-based contracts, agreements that tie vendor compensation to measurable results rather than traditional deliverables.
In addition, 2,809 consulting-related agreements have been terminated, with further OneGov procurement reform talks underway. Major firms like Deloitte, Guidehouse, and Booz Allen are engaged in ongoing negotiations to revise and scale down their contracts.
The administration’s new direction was solidified in mid-April when President Trump signed an executive order requiring agencies to prioritize purchasing commercial, off-the-shelf products directly from manufacturers. The GSA’s recent letter reflects this directive, urging vendors to align pricing with industry standards and eliminate unnecessary intermediaries.
“Evaluate whether the offered pricing is appropriate given best commercial industry comparables,” the letter instructed.
Although Elon Musk recently stepped down from his role in the Department of Government Efficiency, officials say the administration’s core mission to eliminate waste and inefficiency remains intact. The Trump administration’s federal contract cuts now signal a deeper restructuring of how the government manages IT procurement, with potential long-term effects across the tech and consulting sectors.
Gruenbaum summed up the administration’s vision: “The point is, really, can you shape shift the way the federal government does business? We think unequivocally ‘yes.’”
