Government inefficiency has been a long-term gripe in America. Seemingly to the rescue is the Department of Government Efficiency (DOGE), headed by Elon Musk. DOGE is moving rapidly to cut costs, by eliminating some organizations, like USAID, entirely and slashing the workforce of others. Though many lawsuits have been filed to stop the slashing and burning, DOGE continues, setting its sights on “optimizing” federal agencies. These moves will likely affect tech sales and contracts, as well as the relationships between federal agencies and tech vendors. DOGE is also siphoning highly-sensitive information from various federal organizations that could compromise individuals, and potentially, the entire country.
“The speed with which Musk and his team are moving to extract information from sensitive government databases and affect longstanding government programs is unprecedented and potentially illegal. We still don’t know the policy implications,” says Rita McGrath, Columbia University Business School professor and C-suite strategist, in an email interview. “We can expect disruptions in what would otherwise be ‘normal’ procurement, contracting and payment processes. Bills will not get paid in a timely way and with dismissals and employee buyouts on the horizon, a government already hard-pressed to provide essential services is going to function even less well.”
Relative to the size of the US population and economy, the federal workforce has been in decline since the Reagan administration basically declared war on it, she says.
“The doctrine that high-functioning, effective government is worth making investments in, that followed the post-World War II ‘golden age’ has largely disappeared and the workforce remaining is often overworked and frustrated at accomplishing even basic tasks in a timely way,” says McGrath. “Government procurement processes are already glacially slow and complex, which means that larger firms with staffs that can cope tend to have an advantage in government procurement.”
Whether Musk’s team will be able to override traditional protections against theft of government resources in the name of ‘efficiency’ is an open question.
“It really comes down to whether institutional rules will intervene,” says McGrath. “There is, however, likely to be a permanent shift in how services, such as consulting, are being managed. We’ve already seen a shift in demand for management consulting and legal services to depart from a time-based model to more of a value-based model, which would have huge implications for the billing structures and organizational forms of these [companies] – from a leverage model to some kind of outcome-focused approach. We’re watching it as a potential inflection point very closely.”
Ben Walker, CEO at transcription services provider Ditto, says DOGE budget cuts will probably cause federal agencies to be more cautious about tech purchases and consulting contracts, which could lead to longer procurement cycles and stricter requirements for vendors.
“To adapt, my company is looking at offering flexible contract structures and more ways to provide long-term value. Strong performance and trust will matter more than ever as agencies justify their spending,” says Walker in an email interview. “One way to think of it is that the federal government is becoming more like a private-sector company. Agencies may demand clearer return-on-investment metrics and push for performance-based contracts. Vendors that can clearly articulate the necessity and efficiency of their services will have an edge.”
Tips to Weather the Storm
Columbia University’s McGrath believes enterprises should do several things to protect themselves. For example, it’s important to have cash on hand.
“You don’t want to be caught in a cash flow crunch if suddenly your invoices aren’t getting paid. So, work proactively with your bank or other customers to make sure you have some buffers in the bank,” says McGrath.
Also lean into existing relationships to better understand the potential impacts.
“[T]his will be a scary time for those under the microscope by DOGE and it could be an opportunity to both learn what’s going on and deepen trust in existing relationships,” says McGrath. “Connect with peers — perhaps lightning check ins — to keep on top of what is really going on. Something like a daily call where you share information about what you’re learning and what they are learning could be helpful.”
And finally, don’t assume that business as usual will return any time soon. Following the USAID purge, agencies that have existed for many decades are facing instant changes that will disrupt their operations. Processes, however efficient or inefficient, will change and tech companies need to be prepared for the financial impacts.
Bottom line, proceed with eyes wide open and caution, and embrace scenario planning. Such efforts helped organizations weather the whipsaw effects of the pandemic. Such scenario planning is even more important at a time when virtually anything can happen, especially under a cloak of opacity.
It’s also important to nurture current relationships and to monitor how procurement processes and requirements are changing. Once again, agility will be critical to navigating the changes.