What Happened?

The Department of Homeland Security (DHS) said canceling government contracts would save taxpayers $10.5 billion, but a federal watchdog says that number doesn't hold up. The Government Accountability Office (GAO), the nonpartisan agency that audits how the federal government spends money, published a report Sept. 3 finding that DHS is unlikely to realize most of those projected savings. The reason: the agency is still buying many of the same services, just through different contracts. The GAO report covers activity through Sept. 30, 2025.

Why Does it Matter to Me?

The GAO found that DHS actually reduced its net contract spending by about $92 million on the terminated contracts, not $10.5 billion. Meanwhile, DHS obligated $1.7 billion through other existing contracts to cover the same technology needs it said it was cutting. This comes as the U.S. national debt surpassed its GDP in late March.

Both Sides, Now

The Trump administration directed federal agencies in early 2025 to review and cut contracts to reduce spending. DHS reviewed more than 17,000 contracts, working with the world's richest man, Elon Musk, and his now-defunct Department of Government Efficiency (DOGE), to help agencies carry out their cost-cutting priorities.

DHS and the GAO also count the terminations differently. DHS reported canceling 521 contracts worth more than $1.2 billion in obligated value. The GAO's independent review of federal procurement records counted 438 terminations. The GAO says the gap comes from differences in how each entity categorized the contracts. The GAO report identifies two reasons the $10.5 billion figure overstates actual savings:

The figure represents the maximum that could ever have been spent on those contracts, not what would have actually been spent. DHS mostly kept buying the same goods and services through other contracts, so those costs were not avoided, just moved.

About 95% of the claimed savings came from canceling 30 large technology contracts that ran through 2034. DHS then turned around and spent $1.7 billion in fiscal year 2025 through government-wide contracts to meet those same technology needs. The GAO report does not include a formal response from DHS disputing its findings. DHS's own public figures differ from the GAO's, but the report does not include an on-record statement from the department explaining the discrepancy.

What Happens Next?

DHS had required deputy secretary approval for all contract terminations starting in March 2025. That requirement was rescinded, removing an oversight step that could have slowed future terminations. As DHS continues filling its technology needs through alternative contracts through 2034, the GAO says actual cost avoidance will shrink further. Congress, which controls federal appropriations, could hold hearings or request additional audits in response to the findings.

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