Deloitte Cuts Darken Outlook for US Government Consulting Work

Federal spending cuts that triggered a layoff announcement at Deloitte LLP have not yet reached Big Four firms with smaller public sector consulting practices but they have placed the industry on guard.

The US government has canceled 63 of Deloitte’s federal contracts for professional services, collectively worth $4 million, since Jan. 20, the first day of President Donald Trump’s new administration. That sum is a drop in the bucket compared to the $2.6 billion that agencies including the Treasury Department spent on professional services from Deloitte in 2024, but the firm is bracing for impacts from the cuts and possible further government consulting reductions to come.

Last week, Deloitte announced that it is planning to undertake “modest” staff reductions in response to shifting demands.

Deloitte is among 10 contractors singled out by the federal government’s central procurement agency—the General Services Administration—for a review of their consulting work. GSA sought information about how their projects benefit federal agencies and urged the firms to propose cuts themselves. Deloitte declined to discuss its response to the request.

Deloitte’s Big Four competitors Ernst & Young LLP and KPMG LLP, which account for relatively less federal consulting spend, were not on the list of 10 targets, but they too would be at risk if the agency decides to reach deeper for cuts.

“It’s easy to pick on consultants,” said Tom Rodenhauser, managing partner with Kennedy Intelligence, which tracks the consulting industry. “They’re always an easy target because no one knows what they really do.”

Consulting Scrutiny

Government contractors, along with the federal workforce, have been a focus of the Trump administration’s broader efforts to eliminate what it considers to be wasteful spending.

GSA told Deloitte and nine other top consulting firms in March to explain their services and outline how they would cut the costs they charge taxpayers for their services.

In response, contractors offered a range of concrete suggestions and more generalized ideas. The procurement office plans to seek input from federal agencies on the firms’ proposed cuts before taking additional steps, a person familiar with the agency’s strategy said.

Deloitte is among the US government’s top professional services providers, with contracts worth $2.6 billion in fiscal year 2024, according to Bloomberg Government procurement data. Only Booz Allen Hamilton, also on GSA’s list of firms targeted for cuts, earned more from its 2024 professional services contracts.

Deloitte has built up a large but varied US government contracting business—providing computer system design work as well as managed services and other administrative support. The firm also has delivered a steady supply of management consulting work and has partnered with agencies now facing spending cutbacks.

Deloitte’s canceled contracts so far total more than any of the other firms pressed by GSA since Trump took office in January, the latest federal spending disclosures show. The majority of those cuts hit the firm’s work with the Department of Health and Human Services, which fired thousands of workers last week.

The firm’s government consultants are now also bracing for layoffs. Deloitte said in a statement last week that it will take personnel actions based on its public sector clients’ “evolving needs” among other factors.

Other Firms at Risk

Deloitte has built up a larger federal contracting service compared to its accounting and consulting industry peers, hauling in $4 billion across all of its agency contracts in 2024. Overall, the firm brought in $33 billion in US revenue last year.

In comparison, EY and KPMG each brought in less than $650 million in fees from federal contracts last year, according to Bloomberg Government procurement data. PwC LLP previously spun off its public sector business.

“They’re definitely more exposed to changes in political exposure or this intense scrutiny that’s coming with the shifting nature of the political landscape,” Liz Cowle, an assistant accounting professor at Colorado State University, said of Deloitte.

Consulting cuts come as the US industry grapples with an already sluggish market that has dragged down Big Four revenue.

Federal government contracts generate $40 billion of the $318 billion US consulting market, according to Kennedy Intelligence.

While Source Global Research has predicted the US consulting market will grow 6% this year, that forecast may worsen as government work shrinks, said Fiona Czerniawska, founder and CEO of the research firm. She said she expects to see more growth in private sector consulting.

As the Trump administration further probes how much agencies spend with consulting firms, companies need to have a clear focus on the outcomes the government wants and structure their contracts accordingly, said David Berteau, president and CEO of the industry trade group the Professional Services Council. Both Deloitte and KPMG are members of the trade group.

As for the government, officials should preserve the private sector’s ability to “deliver those results when you need them,” Berteau said.