Government spending on contractual services and supplies: An analysis.

According to usaspending.gov, the federal government's second-largest major spending group is contracting and supplies, with over $1.1 trillion spent on government-negotiated contracts for work. This category has seen a 19% increase from the previous five years.

Vivek Ramaswamy, co-leader of DOGE, stated on Fox Business' Sunday Morning Futures that we anticipate significant reductions in federal contracts for all overbillers, including those who are not government contractors.

Government contracts with commercial companies have been in existence since the late 1700s. Over time, laws have simplified the process and increased competition in contracts.

"Booz Allen Hamilton CEO Horacio Rozanski stated, "We're on the side of change. We began by assisting the Navy and Army in preparing for World War II, enabling them to act more quickly and efficiently. Now, as the largest player in AI and cyber in the federal government, we take great pride in our history of change. However, this history of change is not over. The country has voted for it, and we must see it happen.""

In 2024, Booz Allen Hamilton was one of the largest government contractors with over $8 billion in agreements from agencies such as the Defense Department, the General Services Administration, and the National Science Foundation.

Rozanski suggested an alternative approach to contracting, which involves defining an outcome that the government requires and allowing private industry to compete for it, rather than trying to determine the cost of everything.

Government agencies are tasked with securing the best possible deals for the country, but contractors have a history of inflating prices. A 2014 Defense Department Inspector General report revealed that the agency was overcharged as much as 831% for spare parts. A more recent audit uncovered a 7,943% markup on a soap dispenser sold to the Air Force.

If the value of a military contract is over $2 million, contractors must provide an explanation for their prices. On the other hand, items labeled as "commercial" do not require justification for prices.

In 2023, Booz Allen Hamilton settled allegations of improper billing for commercial and international costs to its government contracts for $377.45 million.

"Rozanski stated that the challenge lies in the system, which is designed to minimize risk and maximize efficiency. However, it is not optimized for speed. To succeed in shifting towards efficiency and effectiveness, DOGE is necessary. Clients and Booz Allen both desire this change, but there will inevitably be winners and losers. Rozanski expects Booz Allen to emerge victorious in this competition, but ultimately, the goal is to compete."

In 2024, the Department of Defense spent approximately $550 billion on government contracts, which accounts for more than half of the total government spending on contractors. Some experts predict that the department could potentially save millions of dollars by simplifying negotiations.

"Rozanski stated that the proposed solutions aim to reduce bureaucracy while acknowledging the distinction between different areas. He emphasized that the DMV is not representative of the entire federal government and that more can be done to improve efficiency, effectiveness, or eliminate certain tasks altogether."

Some small businesses believe that DOGE will not affect their operations.

""To operate efficiently, we must strive for optimal performance, but I'm not sure it will make a difference since we are already operating at our maximum capacity within the U.S. government," said Dave Barnhart, co-founder of Arkisys."

Arkisys has a contract with the Space Development Agency, which is part of the Space Force. The Port would provide a permanent station for service providers to deliver cargo or supplies in space. The federal government has specific contracts set aside for small businesses to level the playing field.

Barnhart stated that the area of space servicing, which involves performing tasks on a spacecraft after its launch, is a new and unexplored research field. This opens up a vast potential for innovation to occur.

Small business owners believe DOGE could streamline the contracting process.

"Abbas Haider, co-founder of Aspetto, stated that one day he came up with an idea quickly. However, he realized that he needed to secure funding and develop it. He put in a white paper for phase one funding, followed by phase two and phase three funding. By the time he was on phase two, it had been months. Someone else had probably already copied his idea or done something similar. Therefore, he questioned why he should go to the government for funding."

Aspetto offers its advanced military equipment to various government agencies in the U.S.

We will fund it ourselves and take the risk to move things faster, as Haider stated.

Aspetto produces bullet-resistant clothing, women's body armor, and K9-bullet-proof vests. The company has contracts with the Defense Department, the State Department, and NASA. Additionally, the FBI is outfitting U.S. Border Patrol agents with Aspetto products.

If you want to compete with countries like China, you must prioritize innovation, according to Haider.

NASA's budget allocation in 2024 was over 76% for contracts to develop innovative products for space travel.

"Rozanski believes that the government can benefit from private industry's proven technologies with the right incentives, which can save time and money."