Vivek Ramaswamy arrives at the U.S. Capitol on Dec. 5, 2024, in Washington, D.C. The Department of Government Efficiency co-lead has said the advisory initiative will target spending on federal contracts.

Vivek Ramaswamy arrives at the U.S. Capitol on Dec. 5, 2024, in Washington, D.C. The Department of Government Efficiency co-lead has said the advisory initiative will target spending on federal contracts. Andrew Harnik / Getty Images

Trump’s proposed cuts to the federal workforce could increase dependency on contractors, experts say

Conversely, Trump’s advisory Department of Government Efficiency plans to push for decreasing spending on federal contracts.

President-elect Donald Trump’s goal to shrink the government workforce, which is being championed by the advisory Department of Government Efficiency, could give a boost to federal contractors who otherwise face a tough outlook under the incoming administration. 

“DOGE has forecast that if they decrease regulations, there'll be less agency activity, so you'll need fewer government employees. But at the same time, there's still going to be certain tasks that the government needs to do,” said Aaron Ralph, a government contracts and disputes partner at Pillsbury law firm, during a Tuesday webinar. “In the past, when we've seen the government cut the federal workforce, we've seen an increase in government contractors.” 

The law firm pointed to research from 2008 and 2017 that shows the number of government contractors in recent decades has increased while the number of federal employees has mostly stayed the same. 

Likewise, political scientist Paul C. Light, writing for the think tank 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 time Trump’s first administration ended. In contrast, the federal workforce remained at a little more than 2 million individuals. 

Overall, however, Ralph contended that an effort to reduce contractor spending is trending. 

“We expect a continuing focus on trying to make sure that contractors aren't profiting more than people believe they ought to be, which is a controversial issue as to what is an appropriate profit,” he said. 

The lawyers, for example, warned that DOGE could spotlight government contracts the Trump administration deems wasteful. 

“DOGE is going to be this vehicle of exerting some high-profile, with a megaphone, oversight,” said Aimee Ghosh, a Pillsbury government law and strategies partner. “If there are concerns —‘We don't think that this program was being administered correctly. We don't think this contract was being administered correctly’ — there could be ways in the actual terms and conditions of all of these to stop a contract, to stop an award or even claw back funds if there was a concern that the funds were spent inappropriately or for unallowable expenses.”

DOGE co-lead Elon Musk showed his ability to influence spending decisions when his objections temporarily derailed a government funding bill in December. Also, Vivek Ramaswamy, the other co-lead, previously said the Trump administration would cut federal contracting

Ralph argued that current law gives the government latitude to end contracts for any reason and that it’s difficult to overturn terminations. 

“The government generally has a wide discretion to terminate for convenience. The Federal Acquisition Regulation doesn't generally provide guidance on the factors that the contracting officer has to consider or should consider when deciding whether to terminate a contract for convenience, and generally the courts have given the contracting officer wide discretion to make this termination decision, absent bad faith,” he said. “Usually, the contract provides for some recovery for the contractor in the event of a termination for convenience, but it's not a perfect process, and contractors are obviously worried about losing their contracts.”

The federal government spent $759 billion on contracts in fiscal 2023, according to the Government Accountability Office, which was a $33 billion increase from the previous year. The government spent a total of $6.1 trillion that same year, $1.7 trillion of which was discretionary.