New Defense Spending Shift: Pentagon Cuts $5.1 Billion in Consulting

In a decisive move to realign its spending priorities, the Pentagon has announced the cancellation of $5.1 billion worth of contracts with various third-party consulting firms. This marks a significant step toward redirecting defense funds back into core military capabilities and away from outsourced advisory services.

The decision is part of a broader review led by Defense Secretary Pete Hegseth, who emphasized the importance of ensuring every defense dollar directly supports mission readiness and national security. According to Hegseth, many of the terminated contracts involved services that could be effectively handled by the Department of Defense’s internal teams, eliminating the need for outside assistance.

The now-canceled contracts covered a wide spectrum of non-combat support functions, including IT consulting, diversity and inclusion program management, climate policy guidance, and pandemic response planning. The Pentagon determined that these areas, while important, no longer justified their high costs — especially as the Department refocuses on preparing for modern global threats.

By eliminating these agreements, the Pentagon expects to free up nearly $4 billion, which will be reallocated toward bolstering troop readiness, modernizing combat systems, and strengthening deterrence strategies against emerging threats. The shift signals a return to fundamentals: focusing on direct military investment and reducing bureaucratic layers created by external partnerships.

A key player behind the scenes of this spending overhaul has been the Department of Government Efficiency (DOGE). Under its leadership, an intensive audit of contract expenditures was conducted, helping the Pentagon identify areas of redundancy, excessive fees, and low return on investment. The insights provided by DOGE have proven essential in driving this cost-cutting initiative forward.

This pivot away from consultant-heavy models isn’t unique to the Defense Department. Other federal agencies are being encouraged to evaluate their own outsourcing practices, following updated guidance from the General Services Administration (GSA). Agencies are now required to justify their continued use of third-party consulting firms or risk losing funding for such partnerships entirely.

For the consulting sector, the Pentagon’s decision represents a wake-up call. Firms that once secured long-term government contracts will likely need to rethink their approach, explore new markets, or tailor their offerings to deliver clearer, measurable results that align directly with federal mission goals.

From the government’s perspective, this marks a broader cultural shift toward accountability, fiscal discipline, and mission-centered spending. With rising international tensions and an increasingly complex global defense landscape, Pentagon leadership is placing priority on operational strength rather than auxiliary services.

Experts suggest this strategy will not only cut waste but also foster greater self-sufficiency within the military. By reinforcing internal teams and reducing dependency on consultants, the Department aims to sharpen its strategic focus and ensure the resilience of U.S. forces in the face of new global challenges.

In the end, this isn’t just a financial decision — it’s a clear statement of intent. The Pentagon is restructuring its spending model to put military strength first, ensure efficient use of taxpayer dollars, and adapt to the evolving needs of national defense. As this realignment continues, the entire federal approach to consulting partnerships is likely to evolve, setting the stage for a more efficient and mission-driven future.