Deloitte Layoffs Highlight Impact of Government Efficiency Cuts

WASHINGTON, D.C. — Deloitte LLP is preparing to lay off employees from its government consulting team as a result of significant contract terminations by the Department of Government Efficiency (DOGE), led by Elon Musk. Since January 20, 2025, DOGE has eliminated over 124 contracts with Deloitte, collectively worth more than $1 billion, prompting concerns about job security and revenue stability within the firm.

According to an analysis by Fortune, the largest contract cut involved $51 million support for the Department of Health and Human Services. The agency claims these cuts have saved taxpayers approximately $371.8 million; however, some economists have cautioned that these savings could be overstated.

Other consulting firms are also feeling the strain. Booz Allen Hamilton has seen 61 contracts terminated, estimated to save $207.1 million, while Accenture reported the loss of 30 contracts totaling $240.2 million. IBM similarly faced a reduction of 10 contracts, amounting to $34.3 million.

Despite DOGE’s claim of overall savings totaling $140 billion, Bank of America has raised concerns regarding the accuracy of these figures, suggesting that they may not account for newly awarded contracts or the inflated values of canceled projects.

Deloitte’s restructuring process was discussed in an internal call led by CEO Jason Salzetti, who indicated that a small percentage of employees would be separated by the end of April 2025. With over 15,000 employees generating approximately $5.5 billion in annual revenue, the company is facing a significant operational shift.

Jonathan Gandal, a managing director at Deloitte, confirmed the layoffs, attributing them to “moderating growth in certain areas and our government clients’ evolving needs.” However, he did not specify the number of employees impacted.

The ramifications of DOGE’s policies extend beyond Deloitte, with the General Services Administration (GSA) requesting cost-cutting plans from major consulting firms. In fiscal 2023, the government spent about $759 billion on contracts, prompting these firms to reassess their spending and service offerings.

Accenture has also reported losses in its Federal Services sector, which contributes significantly to its global revenue. CEO Julie Spellman Sweet noted the challenges posed by the new administration’s goal to operate the federal government more efficiently, which included a slowdown in new procurement actions.

Oracle has not been immune, facing reductions of $580 million specifically tied to the Department of Defense. Analysts warn that ongoing contract reductions could impact the financial health of firms that heavily depend on government contracts.

Despite impending layoffs, Deloitte executives maintain a cautiously optimistic outlook for the current fiscal year ending May 31, 2025. Performance bonuses are still expected to be distributed in June, even though employees anticipate a restraint in bonuses in the following year.

Amidst this shifting landscape, the caution exhibited by firms may impede innovation and growth, according to Abigail Blanco, an associate professor of economics at the University of Tampa. She emphasized the need for proactive business strategies, stating, “The way that we get economic growth is when people are doing things and trying stuff. Adopting this wait-and-see kind of approach is stagnant.”

As the industry navigates these transitions, the future of consulting firms hinges on their ability to adapt to the new realities imposed by the GSA and the federal government’s tightening budget. With multiple firms reevaluating their operations, the consequences of DOGE’s actions will likely be felt across the broader ecosystem of businesses supporting government operations.