Trump Administration Efforts to Reduce Spending on Consulting Services

The Trump Administration continues its pursuit to reduce federal spending at nearly every level, including spending on contracted goods and services.

A recent Federal News Network article highlighted the ongoing efforts to trim overall spending on consulting contracts, demanding that many of the largest consulting contractors restructure their existing contracts to be outcome based, including to be share-in-savings.

Identifying Federal Spending on Consulting

Looking at federal contract spending data within the Federal Procurement Data System (FPDS) provides a sense of the current market size for consulting services and what portion may be impacted by these restructuring requirements.

Included with agency submissions of their prime contract spending in FPDS are specific North American Industry Classification System (NAICS) codes which identify the primary type of service or product being procured. These consulting-specific NAICS codes are:

• 541611 - Administrative Management and General Management Consulting Services
• 541612 - Human Resources Consulting Services
• 541613 - Marketing Consulting Services
• 541614 - Process, Physical Distribution and Logistics Consulting Services
• 541618 - Other Management Consulting Services
• 541620 - Environmental Consulting Services
• 541690 - Other Scientific and Technical Consulting Services

While current efforts to re-assess consulting contract spending appear to go beyond the scope of these NAICS codes, they provide a valuable perspective into potentially the largest share of these types of contracts.

Identifying outcome-based and/or share-in-savings contracts within FPDS is a bit more challenging, since FPDS does not currently include fields to specifically identify contracts structured under such narrow terms. However, FPDS does include a means to identify performance-based contracting – or more specifically, performance-based acquisitions (PBA) – which encompasses outcome-based contracts. (See this article for more information on common federal procurement models.)

Federal Consulting Spending Trends

To get a sense of what may be driving the latest trimming effort, it may be illustrative to look at consulting contract data reported by agencies over the course of the first Trump Administration through the Biden Administration.

Federal contract data shows that between fiscal year (FY) 2016 and FY 2024 spending on these consulting NAICS accounted for $176.4B in federal contract spending. This consulting spending grew from just under $17B to more than $24B, or 42% over the period.

From FY 2017 through FY 2020 (1st Trump Admin.) total consulting spending grew by 12%. For comparison, from FY 2021 through FY 2024 (Biden Admin.) total spending on these same NAICS grew by 25%. Further, year-over-year growth from FY 2022-2023 reached 11%, the strongest yearly growth over the nine-year period, and yearly growth was sustained at 7% from FY 2023-2024.

In contrast to total consulting contract spending, the relative percentage of these dollars that were spent on PBA contracts (green line above) has been in decline. The percentage of BPA contracts fluctuated between 48-50% early in the period before declining to the 45-46% range over the last four fiscal years. Time will tell whether the latest Trump Administration push to both curb spending and increase the proportion of BPA-related contracts will produce the stated objectives.

Quarterly Consulting Spending Trends

Delving into how consulting spending has occurred across federal fiscal quarters provides a sense of spending trends across the two previous administrations and how things are progressing in the second Trump Administration to date. The chart below compares the average dollars spent by fiscal quarter from FY 2017 through FY 2020 (1st Trump Admin.), from FY 2021 through FY 2024 (Biden Admin.), and for FY 2025 to-date. As is common among many areas of federal contracting, a larger proportion of yearly spending falls in the latter quarters of the fiscal year, i.e., Q3 and Q4.

One important point to note is that each federal fiscal year begins on October 1st of the previous calendar year, i.e., Q1 FY25 was Oct.-Dec. 2024. This is particularly important in interpreting the data at the beginning of each presidential administration because Q1 of a new administration’s inaugural year falls under the previous administration. This means that Q1 FY25 spending (Oct.-Dec. 2024) fell within the Biden Administration. This likely explains the continued growth in spending in Q1 FY25 and the sharp decline in Q2 FY25 (Jan.-Mar.). However, given some traditional reporting delays by some agencies, especially the Department of Defense (DOD), we may see this Q2 FY25 level rise a bit in the coming months. Further, given that we are just a few weeks into Q3 FY25, we see little spending reported to date.

Top Consulting NAICS – Total vs. PBA

Slicing the data by each consulting NAICS reveals that 65% of the spending from FY 2016-2024 was categorized under 541611 - Administrative Management and General Management Consulting Services. Focusing on PBA contracts, less than half (45%) of the spending under this code was under PBA contracts. In fact, of the six NAICS consulting codes, only three had BPA contracting percentages above 50%: 541614 - Process, Physical Distribution and Logistics Consulting Services (60%), 541620 - Environmental Consulting Services (64%), and 541612 - Human Resources Consulting Services (59%). Taken together, PBA contracts under these three NAICS accounted for $7.6B (24%) of the total $83.5B in BPA contracts over the period. However, in total spending terms, these three NAICS accounted for less than 19% of total consulting spending over the period.

Spending on Consulting by Top Departments – Total vs. PBA

The top ten spending departments on consulting contracts accounted for $136.6B in total spending from FY 2016 to 2024, which represents 77% of the total government-wide spending on these NAICS over the period.

While aggregate PBA contract spending among these top ten accounted for $61.0B (45%) of the $136.6B, there was a wide range of BPA proportions among the top ten (green line below). This could indicate the potential for greater scrutiny of consulting contracts at agencies with lower BPA proportions.

Top Companies – Total vs PBA

Breaking down the spending data by prime contractor provides a snapshot of the top twenty companies receiving prime consulting contract awards over the period.

These twenty companies represent $55.6B (32%) of the total $176.4B in consulting spending over the period. Nine of these twenty companies had BPA contract proportions of 50% or greater. Several of the firms above are among the companies the General Services Administration (GSA) has named for consulting spending reductions by federal agencies, but it will take time for data to emerge on how much of this consulting work, and the related contract spending, is deemed “nonessential”
 by agencies. It is possible that some of the work under PBA contracts may weather scrutiny better than non-PBA contracts.

Final Thoughts

The latest examples of the Trump Administration’s economization efforts indicate just how wide a scope they have set to achieve cost reductions, and the challenging terrain that contracting companies are navigating. This is not an environment where one should be caught flat-footed, without the competitive intelligence necessary to thrive this rapidly changing market landscape.

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