DOD Issues New Restrictions on IT Consulting and Advisory Contracts!
There’s a new memo in town, and it’s got major implications for anyone doing IT consulting or management work with the Department of Defense. In a move that’s sending shockwaves through the GovCon world, Defense Secretary Pete Hegseth just dropped a directive that tells No new IT consulting contracts without serious justification. That’s right , no new task orders, no new awards, unless you can prove DOD personnel or direct service providers absolutely can’t handle the job. And even then? Deputy-level approval is needed.
So, what’s the big deal? Well, this directive targets contracts that include IT integration, implementation, advisory services . Basically, if firm designs, deploys, manages, or advises on IT systems, it’s now on DOD’s radar.
Actually the DOD wants to do more in-house and cut down on outside consulting, especially in areas like strategy, analysis, and digital transformation. The Pentagon already canceled $5.1 billion in contracts this year, and the Air Force just axed its largest management consulting program, claiming a $1 billion savings in the process.
So, the message is clear: “Do more with less” is becoming “Do more yourself.” This shift comes even as DOD is facing civilian staffing reductions of up to 8% and agencies like DISA brace for 10% workforce cuts. People kept scratching their heads: who’s actually going to do all this work in-house when the in-house teams are being downsized nd here’s the contradiction.
As former DOD acquisition official Stan Soloway puts it, “The contracts they’re targeting are actually reflective of where the human capital gaps are and they’re missing that whole piece.” Spot on.Also noteworthy? The memo warns agencies not to game the system by reclassifying contracts just to get around the rules. This one’s being monitored closely, and DOD’s acquisition and sustainment office is doing a full review of existing IT and consulting contracts to figure out which ones might get the axe next.
Exemptions do exist . Contracts under $10 million and those tied to defense weapon systems are safe for now. But everything else? Under scrutiny.Finally.the winners will be those who can adapt, prove their worth, and navigate a tightening procurement environment.
📜 COMPLIANCE AND REGULATION UPDATES
A decade ago, federal procurement was a chaotic circus, but category management has turned it into a hilarious, well-choreographed dance, teaching contractors the art of compliance. By 2024, 40 best-in-class contracts from rental cars to hearing aids captured $66 billion, or 13.6% of federal procurement spending.
Ignore federal procurement rules, and contractors might find themselves doing the “out-of-business” jig, especially with the Small Business Administration hitting 45.6% BIC usage. With $16.9 billion in savings twirled into federal procurement coffers in 2024, agencies want snappy, clear proposals, think less “snooze-fest forms,” more “Broadway blockbuster.” The State Department’s 15.5% BIC use and 78.5% of federal procurement spending under management show compliance is the star of this federal procurement show. So, contractors, grab your compliance boots, sync with market trends, and strut your stuff in this federal procurement extravaganza!
Unpacking the DFT Decision for Procurement Pros
Recent GAO’s DFT (B-423319) ruling clarifies what “derived from” means for SBIR Phase III awards, shaking up the procurement industry. DFT challenged the Air Force’s sole-source award to Clear Align, LLC for a tactical security system, arguing only one component was SBIR-derived, demanding competition. GAO disagreed, emphasizing that procurement decisions hinge on the work, not the requirement. If the solution, like Clear’s Z 320 MWIR camera, builds on prior SBIR efforts, it qualifies for Phase III, even if mixed with commercial tech. Partial SBIR lineage wasn’t the problem it was enough! Plus, procurement pros take note successor-in-interest status, as shown by Clear’s IP transfer from Computer Optics, Inc., holds up if documented. This ruling empowers innovators in procurement, ensuring flexibility in leveraging SBIR-derived tech for cutting-edge procurement solutions.
🔓 Contract Types and How to Know Which Is Best for You (Part 1)
Imagine you’re at a farmer’s market, picking out fresh produce. Some vendors sell fruits in pre-packaged bags at a fixed price, while others let you pick and weigh them, adjusting the cost based on weight. This is a lot like federal contracts—some are set in stone with a fixed price, while others depend on changing costs and circumstances. Choosing the right contract is like finding the perfect apple: it must suit your needs, budget, and risk tolerance.
Understanding Contract Types
The U.S. government uses different types of contracts based on project needs and budget constraints. The most common ones include:
Fixed-Price Contracts
Think of these as a prix fixe meal at a restaurant—you pay a set amount, no matter what. The government agrees to a fixed price, and contractors must complete the work within that budget. This works well when project costs are predictable. Example: Imagine a construction company bidding to build a government office. If they agree to a fixed-price contract, they must complete the project within that set budget, even if material costs rise.
Why should you consider it:
- Predictable earnings.
- Easier to manage for experienced contractors.
Why shouldn’t you consider it:
- High risk if unexpected costs arise.
- No flexibility for changes or extra expenses.
Cost-Reimbursement Contracts
Now, picture ordering à la carte—paying for each item separately. That’s how a cost-reimbursement contract works. The government covers approved expenses and adds a fee for the contractor’s time and effort.
Example: A software company developing a cybersecurity system for the government might use a cost-reimbursement contract. Since the project requires research and development, costs could vary over time.
Why should you consider it:
- Reduces financial risk for contractors.
- Allows flexibility for evolving project needs.
Why shouldn’t you consider it:
- Requires detailed record-keeping.
- Government oversight is stricter.
Indefinite-Delivery Contracts (IDCs)
Think of this like a subscription box—items are delivered as needed, rather than in one large shipment. IDCs provide flexibility, allowing agencies to order supplies or services over time.
Example: If a government agency needs office supplies regularly, they might sign an IDC with a vendor to receive supplies every month instead of placing multiple separate orders.
Why should you consider it:
- Provides stability over long periods.
- Avoids repetitive bidding for similar tasks.
Why shouldn’t you consider it:
- Can be complex to negotiate.
- Uncertainty about total workload.
How to Choose the Right Contract
Picking the best contract type isn’t just about preference—it’s about understanding your strengths, risks, and financial situation.
Assess Your Experience – If you’re new to government contracting, fixed-price contracts might be risky unless costs are clear. More experienced companies might handle cost-reimbursement contracts better.
Evaluate Financial Risk – Ask yourself: “Can I handle unexpected expenses?” If not, avoid fixed-price contracts, where overruns can eat into profits.
Consider Project Complexity – If the job is simple (building a fence), a fixed-price contract is fine. If it’s complex (developing military technology), a cost-reimbursement contract is better.
Think About Long-Term Relationships – If your business thrives on ongoing government work, IDCs create consistent revenue streams and partnership stability.
Choosing a contract type is like picking a business strategy – you must balance risk, revenue, and project scope. Understanding these contracts helps businesses navigate federal opportunities with confidence.In Part 2, we’ll explore negotiation tactics and how to structure your proposals for success. Stay tuned!
💰 NorthStar Maritime Takes on the Final Mission of the Legendary USS Enterprise!
A big win has been announced! The U.S. Department of Defense has officially awarded a $536.7 million firm-fixed-price contract to NorthStar Maritime Dismantlement Services LLC for one of the most historically significant dismantling projects in U.S. naval history.The complete recycling and disposal of the USS Enterprise (CVN-65). Known as the “Big E,” Enterprise was the world’s first nuclear-powered aircraft carrier and served in nearly every major naval conflict from the Cold War through the post-9/11 era. The contract marks the final chapter in a process that began after the ship’s decommissioning in 2017, as the Navy sought a long-term solution for her complex disposal.
So, what’s the big responsibility? Under this contract (N00024-25-C-4135), NorthStar will be responsible for the full dismantling of CVN-65, including the proper handling and disposal of hazardous materials and low-level radioactive waste. Work will be carried out in Mobile, Alabama, with completion expected by November 2029. Actually the contract was competitively solicited through the Procurement Integrated Enterprise Environment (PIEE), with NorthStar beating out other contenders from Newport News, Virginia, and Brownsville, Texas. Notably, NorthStar Maritime is a joint venture between NorthStar Group Services and Modern American Recycling and Radiological Services (MARRS). This project is as technical as it is symbolic. The Enterprise, at 1,123 feet in length and displacing roughly 94,000 tons, was present at some of the most defining moments in U.S. Navy history including the Cuban Missile Crisis, Vietnam War, Persian Gulf operations, and even space tracking for John Glenn’s orbital flight. Big impacts are coming! The impact of this contract extends beyond national defense strategy and also expected to bring significant economic activity to Mobile, Alabama. Though there was early opposition from local officials and environmental advocates, NorthStar’s assurances and federal oversight appear to have mitigated concerns.
So, it’s a moment in naval history. For NorthStar Maritime, it’s a massive responsibility and a historic honor. And for the Navy, it’s a critical step in modernizing its fleet and responsibly closing the chapter on one of its most iconic vessels.
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🗣️ UPCOMING EVENTS
Event: How Do I Get Paid When They Stop Paying? Strategies for Construction Contractors?
Date: Aug 01, 2025
Event: Navigating the FAR/DFARS: The Most Confusing and Little-Known Clauses
Date: Aug 13, 2025
