Secretary of Defense Pete Hegseth has launched another major initiative aimed at transforming the way the Department of Defense operates by issuing a comprehensive memorandum that imposes strict limits on the use of outside IT consultants and contractors.
The memo, dated Tuesday, marks a sweeping policy shift toward in-sourcing talent and relying more heavily on the Pentagon’s internal expertise.
The directive is being hailed as a bold step toward streamlining federal operations, maximizing taxpayer value, and honoring the talent and dedication of America’s civilian defense workforce.
The new policy reflects Secretary Hegseth’s broader vision for what he calls a “leaner, sharper, and more disciplined Department of Defense.”
It also aligns with the executive order issued earlier this year as part of President Donald Trump’s broader Department of Government Efficiency initiative — an ambitious second-term effort to eliminate wasteful spending and reduce federal reliance on costly outside consultants.
That vision, championed by both Hegseth and Elon Musk through the Department of Government Efficiency (DOGE) structure, is steadily becoming institutionalized in the Pentagon’s day-to-day operations.
Hegseth’s memo delivers a clear message to DOD components: they may not proceed with new information technology consulting or management services contracts with private-sector integrators or outside consultants unless they can first demonstrate, with rigorous justification, that no part of the required services can be fulfilled by current DOD personnel, by other federal agencies, or through direct service providers.
This is not a recommendation — it is a binding directive.
To enforce the new requirement, the memo mandates that any DOD office seeking to enter into a new IT consulting agreement must first submit a detailed justification package for approval to the Deputy Secretary of Defense.
This package must include a full cost-benefit analysis, documentation of a thorough assessment of available internal alternatives, and a formal statement proving that in-house execution of the contract’s objectives is not possible.
This process must be completed and submitted no less than thirty days before the intended contract execution date.
But Hegseth doesn’t stop at IT contracts. His memo expands the scope of the new policy to cover a wide range of advisory and assistance services — a category that includes consulting, strategic planning, organizational assessments, policy development, technical expertise, and operational decision-making.
Under the new rules, these types of contracts may not be executed without express prior approval from the Deputy Secretary of Defense. Furthermore, if a DOD component receives approval to execute such a contract, it may face a cut in funding for internal personnel positions that would otherwise have provided overlapping expertise.
In other words, if a unit chooses to outsource what could be done in-house, it risks losing the budget to maintain that in-house capability altogether.
This clause is a powerful incentive to think twice before looking outside the department for answers that may already exist within it. For Hegseth, this policy is about more than just cutting costs — it’s about empowering the highly skilled workforce already serving within the Department of Defense.
By directing components to “optimize the utilization” of internal personnel, Hegseth is asserting that the Pentagon’s workforce has untapped potential that must be prioritized over external contracting.
The memo specifically lists a set of “broad functions” that are especially vulnerable to redundancy and inefficiency when carried out by both DOD personnel and contractors simultaneously.
These functions include information technology, analytical research, human resources, administrative support, reporting, compliance, and education and training.
Hegseth’s policy directs department leaders to maximize the use of DOD employees for these duties whenever possible and to eliminate duplicative outsourcing that undermines the department’s internal capacity.
For decades, critics of federal contracting practices have raised alarms about the government’s increasing dependence on consultants and third-party firms.
These outside entities often come with hefty price tags, and while many provide valuable expertise, their services can also result in unnecessary duplication, inflated costs, and diminished internal capability.
Hegseth’s memo tackles this problem head-on by creating a structural barrier to such outsourcing, forcing every unit within the Department of Defense to carefully evaluate whether they are genuinely unable to handle their needs internally before turning to the private sector.
The Under Secretary of Defense for Acquisition and Sustainment will be responsible for monitoring compliance with the new directive. This oversight mechanism ensures that the policy is not merely aspirational, but enforceable.
It also gives Hegseth’s office a direct line of sight into how DOD components are implementing the reforms on the ground.
The political context behind this memo cannot be ignored. Since rejoining the Trump administration in 2025, Pete Hegseth has emerged as one of the most forceful reformers in the federal government.
A vocal proponent of fiscal conservatism and military readiness, Hegseth has used his position as Secretary of Defense to aggressively cut bureaucratic fat and restore decision-making authority to leaders who are closest to operations.
His insistence on in-sourcing, streamlining, and holding units accountable for their contracting decisions is a direct challenge to the long-standing norms that have favored bloated spending and unquestioned reliance on defense contractors.
And it’s not just policy documents — Hegseth has taken his message directly to the American people and to the men and women who serve in uniform.
In a recent video posted to social media, Hegseth said the Pentagon had already saved more than $10 billion through similar reviews of over 50 major contracting vehicles. He pledged that this was “just the beginning,” signaling that even more reforms are on the way.
The decision to crack down on IT consultants also reflects a broader understanding of where government inefficiencies tend to thrive. IT services, while vital, are often outsourced with little regard for internal capability, leading to long-term dependency on expensive integrators who may not always be aligned with the department’s strategic goals.
By putting the brakes on this practice, Hegseth is steering the department toward greater digital sovereignty — and ensuring that internal staff are trained, trusted, and funded to handle essential technological work themselves.
The memo is not without its critics, especially within industries that rely heavily on DOD contracts. Some observers have argued that the policy could slow innovation or delay service delivery in the short term.
But supporters of the reform say that such fears are overblown and that the long-term benefits of in-house capability far outweigh the temporary discomfort of change.
Indeed, many within the Pentagon have welcomed the move. Career civil servants who have long felt sidelined by the rise of consultants now see a renewed recognition of their expertise and value.
For them, this is not just a policy change — it’s a morale boost and a sign that the department is serious about rebuilding internal capacity.
In many ways, this memo is a culmination of the Department of Government Efficiency’s broader vision. Musk may have left his formal government role, but his influence lives on in policies like this one — policies that challenge outdated assumptions and push agencies to do more with less.
Hegseth’s decision to institutionalize these principles at the Pentagon ensures that the DOGE legacy continues to shape the future of federal governance.
With this directive now in place, every DOD component is on notice: the era of defaulting to outside consultants is over. From this point forward, internal talent must be the first resource considered, and external contracts must pass through a high-level review before they see the light of day.
It’s a bold shift. It’s a disciplined shift. And it’s a shift that once again proves that under Pete Hegseth’s leadership, the Department of Defense is not just preparing for tomorrow’s battles — it’s reforming the way it fights them today.
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