Trump increases federal tech contractors’ cost-cutting initiative

Key Points

• Ten major value-added resellers, including Dell and CDW, received GSA letters demanding they justify current pricing and identify cost-cutting measures to eliminate “excessive markups.”
• Since January, the administration has canceled 11,297 contracts across 60 agencies—saving roughly $33 billion—and terminated 2,809 consulting agreements under its OneGov procurement consolidation initiative.
• Pressure from these spending cuts has already led firms like Booz Allen to announce workforce reductions, with 2,500 jobs slated for elimination.
• An April executive order pushes agencies to buy more off-the-shelf products directly from manufacturers and adopt outcomes-based contracts that reward results over hours worked.

Technology contractors are the latest target of the Trump administration’s escalating campaign to reduce federal spending. Federal officials are now focusing on businesses that provide complicated, and frequently disregarded, IT services to government agencies after months of closely examining consulting firms like Accenture and Deloitte.

Ten technology companies, including well-known brands like Dell and CDW, received letters from the General Services Administration (GSA) on Wednesday. The takeaway was unambiguous: defend your prices and find ways to cut expenses. To meet federal IT requirements, these businesses—known as value-added resellers—combine hardware, software, and services. According to the letter from the GSA, the current system has led to “excessive markups and increased costs to the taxpayer.” The letter also added that, “this must change.”

Trump Administration increases federal tech contractors’ cost-cutting initiative

Josh Gruenbaum, the commissioner of the GSA’s Federal Acquisition Service, wrote the letter, which The Wall Street Journal reviewed. He is in charge of the contractor spending review, and businesses had until June 11 to reply. CDW and Dell chose not to comment. The effects of this cost-cutting measure are already being felt by federal contractors. Booz Allen recently declared that it would fire 2,500 workers, citing pressure from the administration’s spending cuts.

Despite Elon Musk recently stepped away from the Department of Government Efficiency. However, administration insiders say the effort to cut waste and lessen reliance on outside contractors is still a top priority.

According to a person familiar with GSA’s operations, since January, the government has canceled 11,297 contracts across 60 agencies, saving $33 billion. The Treasury Department’s project management contracts and the Education Department’s IT services have been slashed. Additionally, the GSA has been aggressively renegotiating or ending consulting agreements. Thus far, 2,809 contracts pertaining to consulting services have been terminated. There are still negotiations going on with companies like Booz Allen, Deloitte, and Guidehouse. This latest round of reviews is part of a broader consolidation strategy under the “OneGov” initiative. The goal is to create more efficient procurement and shift toward “outcomes-based” contracts that reward results rather than time spent.

President Trump also signed an executive order in April that encourages federal agencies to buy more off-the-shelf products directly from manufacturers. The letter to the 10 tech providers underscores that objective, asking companies to “evaluate whether the offered pricing is appropriate given best commercial industry comparables.”

“We don’t need to outsource everything; we don’t need to always go and buy bespoke, specialized products and services,” Gruenbaum told interviewers. “The point is, really, can you shape shift the way the federal government does business? We think unequivocally ‘yes.’”

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