The Department of Defense (DoD) has issued a significant policy memorandum “to promote fiscal responsibility, streamline operations, and maximize [DoD] readiness and lethality.” The May 27 Memo, Implementation of Executive Order 14222 – Department of Government Efficiency Cost Efficiency Initiative Memorandum, identifies four distinct policies aimed at in-sourcing expertise, reducing reliance on external support, and harnessing the talent of existing DoD experts. This latest reform is consistent with the DoD’s ongoing efforts to phase out and eliminate reliance on consulting service contracts.
Tightened Restrictions on Information Technology (IT) Consulting and Management Services
The first major policy change imposes a broad prohibition on new contracts and task orders for IT consulting or management services with “integrators” or “consultants.” These are defined as entities that provide IT system integration, implementation, or advisory services, including system design and deployment, strategic or technical IT expertise, and IT system management. Under the new policy, DoD components must justify the need for such services through a cost-benefit analysis, an evaluation of alternatives, and a demonstration that services cannot be performed in-house or acquired from the direct service provider. All justifications must be approved by the Deputy Secretary of Defense (DSD) or their designee. Importantly, any non-compliant contract or task order—new or existing—is subject to termination.
Exceptions apply for:
- Contracts or task orders with a total value under $10 million, including options
- Contracts in direct support of defense weapon system programs or their sustainment
Broader Limitations on Advisory and Assistance Services Contracts
The memo also restricts a broader category of consulting and advisory contracts, including those involving strategic planning and policy development, organizational assessments, operational decision-making support, and services that provide expert advice, recommendations, studies, or analyses. As with the IT services policy, such contracts may only proceed following DSD approval of a formal justification. This justification must establish the contract’s purpose and deliverables and evidence that in-house capabilities are insufficient or less cost-effective.
Exemptions are provided for:
- Contracts or task orders under $1 million, including options
- Contracts for systems engineering and technical assistance in support of major defense acquisition programs
The DoD will conduct quarterly compliance reviews, and any non-compliant contract may be terminated.
Optimizing Civilian and Contractor Employee Utilization
A third policy focus emphasizes maximizing utilization of the DoD’s civilian workforce for broad functional roles, including human resources, administrative support, analytical research, training, compliance, and reporting.
Contractor support for these roles is permitted only when a workforce sufficiency analysis demonstrates:
- The role is not inherently governmental
- No existing DoD employees have the capacity or skills to meet the need
- Internal hiring, training, or resourcing is not feasible
- Consolidating contracts, including General Services Administration (GSA) contracting mechanisms, does not yield better pricing
Consolidation of Non-Defense Specific Acquisitions
The final policy implements President Trump’s March 20 Executive Order, “Eliminating Waste and Saving Taxpayer Dollars by Consolidating Procurement.” DoD will be required to prioritize the use of GSA procurement vehicles and personnel, when more cost-effective, to support DoD requirements for common goods and services. This change underscores a broader federal movement toward consolidated, cost-efficient procurement for non-mission-specific acquisitions.
Takeaways
- Size Matters: Contracts and task orders under $1M or $10M may qualify for exemptions, depending on the policy area.
- Expect Scrutiny: The DoD will conduct regular reviews of existing and new contracts. Non-compliant agreements are subject to termination. Make sure you proactively speak to your Contracting Officers (KOs) to help them understand why your contract is subject to the exceptions noted above and also why your work makes DoD more efficient and saves the government money over insourcing.
- Legality?: There are questions about how this policy will comply with the Office of Management and Budget Circular No. A-76 rules. There may be claims, protests, or other disputes as a result of the actions DoD may take consistent with this order, so we will be evaluating those situations for clients on a case-by-case basis. Further, for 8(a) contracts there may be other legal issues with DoD’s plans.
PilieroMazza continues to monitor shifts in the procurement marketplace. If you have questions about the DoD’s new procurement policies, please contact Cy Alba, Krissy Crallé, or another member of PilieroMazza’s Government Contracts Group. Also visit our Government Contract Executive Orders resource center for additional coverage.
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