Increased Reliance on Contractors Likely due to Trump's Proposed Reduction in Federal Employees, Experts Predict
The federal government's spending for the year under review totalled $6.1 trillion, with $1.7 trillion being discretionary. This spending includes $759 billion on contracts, marking a $33 billion increase from the previous year, according to the Government Accountability Office.
The Department of Government Efficiency, led by co-leads Vivek Ramaswamy and Elon Musk, is championing President-elect Donald Trump's goal to reduce the government workforce. Ramaswamy, in a statement on November 20, 2024, outlined a vision for the reduction of government contracts. This potential reduction in the government workforce could lead to an increase in federal contractors.
Aaron Ralph, a government contracts and disputes partner at Pillsbury law firm, contends that an effort to reduce contractor spending is trending. He also stated that less agency activity due to reduced regulations would require fewer government employees. This could be a concern for contractors, who are worried about losing their contracts due to potential terminations for convenience.
The Federal Acquisition Regulation does not provide specific factors for the contracting officer to consider when deciding to terminate a contract for convenience. Courts generally give the contracting officer wide discretion to make the termination decision, absent bad faith. However, the termination of a contract for convenience may not provide a perfect recovery process for the contractor.
Aimee Ghosh, another partner at Pillsbury law firm, predicts that the DOGE (Digital Accountability and Transparency Act) could highlight potentially wasteful government contracts. This could lead to increased scrutiny and potential changes in the way contracts are awarded and managed.
In recent decades, the number of government contractors has increased while the number of federal employees has mostly stayed the same. According to research from 2008 and 2017, this trend continues. Paul C. Light, writing for the Brookings Institution in 2020, found that the number of employees supported by federal contracts and grants increased from 4.8 million in 2017 to 6.8 million by the end of Trump's first administration, while the federal workforce remained at around 2 million individuals.
Ramaswamy, in his statement, also mentioned a focus on ensuring contractors aren't profiting more than believed appropriate, which is a controversial issue. This focus could lead to increased scrutiny and potential changes in the way contracts are awarded and managed.
In December, DOGE co-lead Elon Musk temporarily derailed a government funding bill, highlighting the potential influence of these leaders in shaping government spending and contracting policies. As these developments continue to unfold, it will be interesting to see how they impact the federal government's spending, workforce, and contracting landscape.
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