Insight: How the unraveling of two Pentagon projects may result in a costly do-over
The reason for the unusual move: officials at those departments, who have so far put the existing projects on hold, want other firms, including Salesforce and billionaire Peter Thiel's Palantir, to have a chance to win similar projects, which could amount to a costly do-over, according to seven sources familiar with the matter.
Trump took office vowing to rid the government of what he calls waste and abuse. The website of the Department of Government Efficiency, the agency he created to spearhead those efforts, lists over $14 billion in Defense Department contracts it claims to have cancelled.
But seven months into his presidency, some of his own actions have complicated DOGE's work, from firing the Pentagon's inspector general to issuing an executive order prioritizing speed and risk-taking in defense acquisitions.
Coupled with high-level vacancies in the Navy and Air Force that persisted well into the summer, the moves limit oversight of the Pentagon's contracting process and risk wasting hundreds of millions of additional taxpayer dollars as old projects are thrown out and new projects are agreed to, Reuters reporting based on sources, internal emails and documents, shows.
'There is a very real sense that we are in the regulatory Wild West with this administration – and it should come as no surprise that the traditional limits of 'normal contracting' are repeatedly going to be pushed and pressed in this environment,' said Franklin Turner, a federal contracting lawyer at McCarter & English.
He said it is legal for the government to terminate any contract "for convenience," but said the Pentagon would be on the hook to reimburse the companies for wind-down costs plus take on the cost of any new replacement project.
Trump officials say the administration is striving to make the contracting process more efficient.
"Defense Secretary Hegseth is doing a great job restoring a focus on warfighters at the DOD while carrying out the American people's agenda to more effectively steward taxpayer dollars," White House Deputy Press Secretary Anna Kelly said in a statement.
Pentagon Press Secretary Kingsley Wilson said the agency is taking "swift action" to fix the "antiquated" defense contracting process by implementing Trump's executive orders. "This is how we will rebuild the military with necessary speed while ensuring taxpayer dollars are spent wisely in the process,' she added.
In 2019, Accenture said it had won a contract to expand an HR platform to modernize the payroll, absence management, and other HR functions for the Air Force with Oracle (ORCL.N), opens new tab software.
The project, which includes other vendors and was later expanded to include Space Force, grew to cost $368 million and was scheduled for its first deployment this summer at the Air Force Academy.
An April "status update" on the project conducted by the Air Force and obtained by Reuters described the project as "on track," with initial deployment scheduled for June, noting that it would end up saving the Air Force $39 million annually by allowing it to stop using an older system.
But on May 30, Darlene Costello, then-Acting assistant Secretary of the Air Force, sent out a memo placing a "strategic pause" on the project for ninety days and calling for the study of alternate technical solutions, according to a copy of the memo seen by Reuters that was previously unreported.
Costello, who has since retired, was reacting to pressure from other Air Force officials who wanted to steer a new HR project to SalesForce (CRM.N), opens new tab and Palantir (PLTR.O), opens new tab, three sources said.
Palantir co-founder Thiel was an early backer of President Donald Trump and has close ties with key Washington lawmakers, including Vice President JD Vance, whom he supported in a 2022 U.S. Senate race.
Palantir in April won a $30 million contract from the U.S. Immigration and Customs Enforcement to develop an operating system that identifies undocumented immigrants and tracks self-deportations, its largest single award from the agency among 46 federal contract actions since 2011.
The Air Force said in a statement that it "is committed to reforming acquisition practices, assessing the acquisition workforce, and identifying opportunities to improve major defense acquisition programs."
Accenture, Costello, Palantir and SalesForce did not respond to requests for comment.
Space Force, which operates within the Air Force, was set to receive the Air Force's new payroll system in the coming months. But it is also pulling out of the project because officials there want to launch yet another HR platform project to be led by Workday (WDAY.O), opens new tab, according to three people familiar with the matter.
The service put out a small business tender on May 7 for firms to research HR platform alternatives, with the goal of selecting a company that will recommend Workday as the best option, the people said.
Space Force did not respond to multiple requests for comment.
Now the Air Force and Space Force "want to start over with vendors that do not meet their requirements, leading to significant duplication and massive costs," said John Weiler, director of the Information Technology Acquisition Advisory Council, a government-chartered nonprofit group that makes recommendations to improve federal IT contracting.
Oracle said in a statement it was "working closely with DOGE to accelerate the government's transformation to modern technology at the best price for the taxpayer."
In 2022, the Honolulu-based Nakupuna Companies took over a 2019 project with other firms to integrate the Navy's payroll and personnel systems into one platform using Oracle software and known as "NP2".
The project, which has cost about $425 million since 2023, according to the Government Accountability Office, was set to be rolled out earlier this year after receiving a positive review by independent reviewer and consulting firm Guidehouse in January, according to a copy obtained by Reuters.
But the head of Navy's human resources, now retired Admiral Rick Cheeseman, sought to cancel the project according to a June 5 memo seen by Reuters, directing another official to "take appropriate contractual actions" to cancel the project.
Navy leaders instead mandated yet another assessment of project, according to a memo seen by Reuters, leaving it in limbo, two sources said.
Cheeseman's reason for trying to kill the project was his anger over a decision by DOGE earlier this year to cancel a $171 million contract for data services provider Pantheon Data that essentially duplicated parts of the HR project. In an email obtained by Reuters, he threatened to withhold funding from the Nakupuna-led project unless the Pantheon contract was restored.
"I am beyond exasperated with how this happened," Cheeseman wrote in a May 7 email to Chief Information Officer Jane Rathbun about the contract cancellation, arguing the Pantheon contract was not "duplicative of any effort."
"From where I sit, I'm content taking every dime away from NP2 in order to continue this effort," he added in the email.
Cheeseman did not respond to a request for comment. Rathbun and Pantheon Data declined to comment.
The pausing of NP2 was "unexpected, especially given that multiple comprehensive reviews validated the technical solution as the fastest and most affordable approach," Nakupuna said in a statement, adding it was disappointed by the change because the project was ready to deploy.
The Navy said it "continues to prioritize essential personnel resources in support of efforts to strengthen military readiness through fiscal responsibility and departmental efficiency."
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