The Social Security Administration has cut half of its outsourced information technology spending, slashing expenditures for private-sector contractors as part of an effort to keep full-time staff employed, the agency’s acting commissioner told employees Wednesday.
In the crosshairs of budget cuts are contractors Leidos Holdings Inc., which held $316 million in contracts with the agency in fiscal year 2024, and IT Concepts, which had another $98 million, according to historical spending data from Bloomberg Government.
SSA Acting Commissioner Leland Dudek outlined the cutbacks Wednesday in a call with top agency officials, the White House and congressional staffers, according to a person on the call.
In the meeting, Dudek said the actions were in response to reductions mandated by Elon Musk’s Department of Government Efficiency, which is spearheading deep staff cuts across the federal government.
Dudek said he was dismissing 200 Social Security employees, but would also terminate another 200 contractors by Friday, according to a person on the call who requested anonymity to discuss a private conversation. Dudek said he would try to maintain parity between employee and contractor cuts going forward.
The SSA in a statement sent to employees on Thursday said that it would soon implement “significant workforce reductions” as part of an agency-wide restructuring that could target functions not mandated by law and might involve involuntary reassignments to “mission critical direct service positions,” such as field offices and processing centers.
The emphasis on eliminating contractor roles in an effort to save federal worker headcount underscores how the cuts spurred by DOGE could mean major revenue drop-offs to private sector companies that conduct much of the work of the federal government. Leidos — which has about $11.9 billion worth of contracts across the government — is one of the largest service providers to US agencies, along with Boeing Co., General Dynamics Corp., McKesson Corporation and others.
A Leidos spokesman said on Thursday the company was unaware of the contract cuts. To add to the confusion, DOGE had previously claimed that it had cut $232 million of Leidos contracts, though the actual amount was just $560,000 — for a project to add “X” as an option for gender on forms.
But Chief Executive Officer Tom Bell told analysts earlier this month that Leidos is well positioned to take advantage of the new focus on efficiency.
“We view the new administration’s priorities as an opportunity for Leidos,” he said. “The new administration has signaled a focus on eliminating regulations, streamlining procurement, and moving to more outcome-based contracting, all of which are exactly in line with the mission and work of Leidos to make government smarter and more efficient.”
Neither the Social Security Administration nor IT Concepts responded to requests to comment.
The Social Security Administration, which provides old-age and disability benefits for more than 70 million Americans, is one of many agencies disrupted by DOGE. Earlier this month, its top two career leaders retired, and the White House elevated Dudek — who had been a relatively low-level employee and had been cooperating with DOGE’s anti-fraud efforts — to be acting commissioner.
It’s not clear how much spending DOGE has cut overall. Its website says it has saved $65 billion, but an itemized list of the spending cuts add up to magnitude less. That list has also been riddled with mistakes and overstatements, including one contract labeled as $8 billion, instead of $8 million, an error DOGE has since corrected.
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