Government Spending Tracking, Part 2: Contract Services and Supplies

Contracting and procurement spending is the second largest segment of federal spending, according to usaspending.gov. More than $1.1 trillion has been spent in government-negotiated deals to hire contractors to do the work. This category is up 19% from five years ago.

“We expect significant reductions for all federal contractors and others. That bill exceeds the federal budget,” DOGE co-leader Vivek Ramaswamy said on Fox Business’ Sunday Morning Futures.

Commercial companies contracting for government goods and services date back to the late 1700s. The law has streamlined the process and helped make contracts more competitive.

“We are next to you. of change We started by helping the Navy. The army then prepared for World War II to move faster. to do things better,” said Horacio Rosanski, CEO Booz Allen Hamilton. “We are now the largest player in AI and cyber in the federal government. And we’re very proud of all that history. But that is the history of all change. My feeling is that we are ready for change. The country voted for it and we have to see it happen.”

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Elon Musk and Vivek Ramaswamy head government efficiency. (Photo by Anna Moneymaker/Getty Images)

Booz Allen Hamilton is one of the largest government contractors. As of 2024, the company has over $8 billion worth of deals from agencies such as the Department of Defense. General Service Department and the National Science Foundation

“One thing we’ve talked about for years is the idea of ​​results-based contracting. Instead of trying to figure out how much everything costs and how to do it. Let’s define the results. It’s something the government really wants, and let’s let private industry compete for it,” Rozanski said.

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 Department of Defense Inspector General showed that the agency was overcharging 831% for parts. Another recent audit found a 7,943 markup. % on soap dispensers sold to the Air Force

Military contractors are only required to provide a price explanation if the contract is worth more than $2 million. If the product is labeled as “Commercial” companies are not required to justify prices.

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In 2023, Booz Allen Hamilton agreed to pay $377.45 million to settle allegations that the company improperly charged commercial and international costs on government contracts.

“I think part of the challenge is the system. This system is built to manage risk and get things done with minimal risk. It was not built for speed,” Rosanski said. “We want DOGE to succeed in its transition to efficiency. to effectiveness That’s what our customers want. That’s what we want. Are there going to be winners and losers in that? Of course, I expect that I want Booz Allen to be the winner of that. But in the end We have to compete.”

The Defense Department has pledged about $550 billion. with government contracts in 2024 accounting for more than half of all government spending on contractors. Some analysts estimate the department could save millions by improving negotiations.

“They are reducing some of the bureaucracy. But they also understand that there are differences. To paint the entire federal government, a giant DMV is unfair,” Rosanski said. “There are all these areas where more could have been done to get it done faster. Better or not at all? To get things done.”

Some small businesses say DOGE is unlikely to have an impact on their jobs.

“From a performance standpoint, Arkisys co-founder Dave Barnhart said: We all have to operate at the highest level of performance.” “I’m not really sure what impact it’s going to have. Because we’re basically operating within the U.S. government. As quickly as possible.”

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Arkisys has contract with the Space Development Agency. which is part of the Space Force (Archisis)

Arkisys has a contract with the Space Development Agency, which is part of the Space Force. The port will provide the service provider. repairs in space There is a permanent station for transporting goods or parcels. The federal government has specific contracts set aside for small businesses that help level the playing field.

“This specific area of ​​space and especially the domain we are talking about. which is providing service Something is being done with the spacecraft in space after the launch. Never done it before It is a research area that is open to all kinds of innovations. It can happen,” Barnhart said.

Other small business owners said they believe DOGE can help make the contracting process go faster.

“One day you suddenly come up with this idea. You have to get funding and develop it,” said Abbas Haider, co-founder of Aspetto. “You put in a white paper. That was Phase 1 funding, then Phase 2 funding, then Phase 3 funding. Once you get into phase two it’s several months. Someone else may have already copied your idea or done something, so why not let the government fund them?”

Instead of applying for specific government contracts, Aspetto sells high-tech Army products to various agencies. within the US government

“In our case We will go ahead and take the risk and fund it ourselves. Because it will make things happen. Move faster,” Haider said.

Aspetto makes bulletproof clothing. women’s armor and K9 bulletproof vests. The company has a contract with the Ministry of Defense. Department of State and NASA. The FBI also supplies Aspetto products to U.S. Border Patrol agents.

“I believe they will focus on innovation. If you are going to compete with a country like China. You have to focus on innovation,” Haider said.

NASA allocates the majority 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 motivation Private industry can also bring existing technology that has been proven in the private sector to government. To make that happen faster,” Rosanski said. “I really believe that there is a significant opportunity to save money and act faster.”