In late May, Secretary of Defense Pete Hegseth issued a series of directives aimed at driving greater discipline and efficiency and eliminating redundancies and waste in Defense contracts. At a high level, the directives require a secretariat-level approval and/or a DOGE review prior to the award of any IT or professional services contracts with a value of over $10 million and all advisory and assistance services contracts valued at over $1 million. Additionally, the directives require that, prior to awarding an advisory and assistance services contract, components scour all alternative internal governmental sources, including GSA contracts, and wherever possible, “insource” work that would otherwise be contracted for.
The Secretary’s goal of reducing unnecessary, duplicative or overly expensive contracts or contractors has merit. No one could reasonably argue that there isn’t bloat across the department, including in its contracts. Nor could one reasonably argue that some contracts have not outlived their usefulness or are simply not delivering the expected value. And the focus on “outcome or performance-based” procurements makes eminent sense, although, as has been the case for 30+ years, we too often fail to realize that doing so is not actually about contracting, but rather about significant engagement across the spectrum of acquisition functions.
None of that is new. Indeed, the Hegseth memos are in many ways a combination of strategies we have seen from DOGE and, ironically, witnessed more than a decade ago from the Obama Administration. Like the DOGE’s approach to contracts and contractors, Hegseth’s memos are sweeping in nature and rely on a number of assumptions, at least some of which lack context or data. Ironically, the directives for secretariat-level reviews and insourcing initiatives largely amount to expanded versions of policies implemented in the Obama DoD.
So, the real question is whether these directives are likely to result in the desired outcomes. History suggests otherwise.
First, as noted above, Hegseth’s directives are sweeping. The sheer volume of contract actions that will require DOGE review is staggering, orders of magnitudes greater than the “peer reviews” for contracts over $1 billion implemented during the Obama years. Those reviews, conducted by seasoned acquisition professionals, at times caused significant delays and, not infrequently, disputes between the component buyer and OSD.
Will the DOGE reviews be conducted by similarly seasoned experts? And if the DOGE reviews required under the new directive are to be substantive and impactful, it strains credulity that this greatly expanded volume can be done in in just 48 hours from submission, as required by the Secretary’s memo. This suggests they will either be cursory in nature or, as has been too often the case with DOGE, based on simplistic “quick looks” rather than serious analysis, thus raising the question of why do them at all?
Second, the memos are part of an effort to reduce the cost, role and pervasiveness of systems integrators and “consultants” (hence, the restrictions on advisory and assistance contracts). But they miss the more fundamental question: why is the government so reliant on both?
Say what you will about policies of the past, the stark reality today is that, in large part, the government relies on systems integrators and advisory and assistance contractors because over the years it has hemorrhaged so much of its own internal capabilities. And to be candid, early indications are that the bleeding has only been exasperated by personnel actions of recent months.
Whether the right contractors or contracts are in place, or whether the requirements companies are being told to execute against are the right ones, is for others to decide. But at its heart, this is an issue of human capital — of the government’s continued struggles to attract and retain critical talent. In fact, advisory and assistance contracts are, almost by definition, primarily reflective of internal talent gaps. Likewise, the Secretary’s expressed shock that some contractors are making more than government employees reflects a crucial misunderstanding: contractors compete for and compensate talent in a highly competitive, open marketplace. Comparing their total compensation to government salaries, particularly for the kinds of skills the government has been unable to hire, ignores that longstanding reality. So too does simply comparing compensation; total lifecycle costs paint a very different picture.
Most importantly, nothing in the memos speaks to a meaningful talent strategy that will help the government reverse its talent trajectory. In fact, even as the memos talk about using or hiring internal talent, elsewhere the administration has been eviscerating the civil service and eliminating programs and initiatives, like the digital services, designed to bring that very talent to bear. Every study produced by the Defense Business Board during my time on it, as well as scores of others, have highlighted the government’s continued lack of a contemporary talent strategy that realistically assesses the art of the possible, the investments that will be needed, or the workforce development and support that is essential.
In short, none of what Secretary Hegseth proposes can be achieved absent the kind of real, cogent, and bold human capital strategy that should actually underpin efforts of this type.
The memos are also silent on solutions we know will improve and expand the competitive marketplace for, and innovation in, the government: greater reliance on truly commercial buying strategies, as initially envisioned in the acquisition reforms of thirty years ago; finally dealing with the long-known barriers to entry into the government marketplace, including arcane audit and accounting processes, policies governing intellectual property, and more fulsome data sharing across components and agencies. After all, opening the competitive aperture is the surest way to drive efficiency and effectiveness, and hold contractors accountable both for performance and for innovating.
Reducing redundancies, ensuring costs are fair and reasonable and, to the extent possible, recapitalizing key internal talent, are all important goals. Unfortunately, it’s not at all clear that these new DoD directives will get us much closer to those goals. The layering of more bureaucracy rarely works. We’ve seen versions of this movie before; it’s time we learn from the lessons of the past, not just observe them.
