In an extensive cost-cutting move, US Defense Secretary Pete Hegseth has declared the cancellation of $1.5 billion worth of IT and consulting contracts granted to companies like Deloitte, Accenture, and Booz Allen Hamilton. The decision was highlighted in an internal Pentagon memo released on Thursday night. As per Reuters report, the contracts have been termed as ”non-essential spending on third party consultants.” These are services, as Hegseth stated, that could be handled internally by Pentagon personnel.

Expected to save nearly $4 billon for US government

”These terminations represent $5.1 billion in wasteful spending,” Hegseth stated, adding that the cancellations are expected to save nearly $4 billion for the government. ”The Department of Defense will no longer pay outside firms for ancillary things like consulting and other non-essential services,” he mentioned in a video statement posted on the social media platform X.

The terminated contracts span across many defense agencies, including the Air Force, Navy, DARPA, and the Defense Health Agency. The cuts are part of a broader objective to streamline defense spending and boost in-house capabilities.

Pentagon to take help from Musk’s DOGE team

Meanwhile, Hegseth has also instructed the Pentagon’s Chief Information Officer to work closely for the next 30 days with the Department of Government Efficiency. This initiative is supported by tech billionaire Elon Musk. The idea is to develop a new framework for managing the Pentagon’s IT and consulting services internally. According to the memo, the plan will also analyse renegotiating cloud services agreements to secure ”the most favourable rates.”

Following the announcement, the shares of the affected companies were impacted. According to a Reuters report, Accenture slid 2% to $279.52, and Booz Allen Hamilton fell 2.4% to $106.30 during the early morning trading in New York. As of now, none of the affected companies have issued a public statement regarding the announcement.