Trump administration targets tech firms as it cuts more contracts

The Trump administration is moving its spending review beyond consulting firms such as Accenture and Deloitte to now scrutinize contracts at a collection of companies providing sometimes obscure technology services to federal agencies.

The General Services Administration on Wednesday sent a letter to 10 technology contractors, including Dell and the IT provider CDW, asking executives to justify their work and find areas to cut. The U.S. spends $82 billion annually on IT products and services, and complex procurement processes have led to “excessive markups and increased costs to the taxpayer," the letter notes. “This must change."

The letter, a copy of which was viewed by The Wall Street Journal, was sent by Josh Gruenbaum, commissioner of GSA’s Federal Acquisition Service, who is overseeing the review of federal contractors. Responses by the companies are due June 11.

Dell and CDW didn’t respond to requests for comment.

The Trump administration’s review of contracts has rattled companies that serve the government and has already led to job losses inside some contractors. Booz Allen said last week that it would cut 2,500 jobs as the administration cracks down on spending.

Though Elon Musk is stepping away from the Department of Government Efficiency, officials within the administration say the broader effort to reduce waste will continue.

Since January, the federal government has canceled 11,297 contracts across 60 agencies, leading to $33 billion in overall savings, according to a person with knowledge of the GSA’s efforts. Those cuts include everything from project management within federal agencies such as the Treasury Department to IT services no longer deemed necessary at the Education Department.

For weeks, the GSA has been going back and forth with companies—including Booz Allen, Deloitte, Guidehouse and others—to pare back and reprice some consulting contracts. The government has terminated 2,809 consulting-specific contracts to date, according to a person familiar with the GSA review. Some meetings with consulting companies will continue in the coming weeks.

The latest effort within the GSA is aimed at third-party technology firms known as value-added resellers, who often piece together different technology products and services for the government.

President Trump signed an executive order in mid-April calling on the government to buy more off-the-shelf products directly from the companies that make them. The letter from the GSA to the 10 tech companies this week suggests that the government wants to cut out middlemen, when possible. It asks the firms to provide a detailed breakdown of their costs and markups on products.

“Evaluate whether the offered pricing is appropriate given best commercial industry comparables," it states.

The GSA has been working with federal agencies to insist that existing government employees can take on projects—with not as much work necessarily needing to go to a federal contractor.

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

Write to Chip Cutter at chip.cutter@wsj.com