A federal watchdog found that DHS significantly overstated the savings expected from hundreds of contract terminations because much of the canceled work remained necessary and was shifted to other government contracts.
By yourNEWS Media Newsroom.
The Department of Homeland Security will not realize the full $10.5 billion in potential savings it projected from hundreds of contract cancellations carried out during the Trump administration’s government-wide cost-cutting initiative, according to a new federal watchdog report.
The Government Accountability Office concluded in its Sept. 3 review that “DHS will not fully achieve the amount of reported potential cost avoidance,” finding that the department’s calculation represented the maximum value of contract spending that theoretically could have occurred rather than money certain to have been spent.
GAO said DHS’s estimate “overstates the total amount of costs avoided” and that “actual cost avoidance will be less than the amount that DHS has reported as potential cost avoidance.”
The distinction is significant because terminating a federal contract does not necessarily eliminate the government’s underlying need for the goods or services it provided. In numerous cases, DHS continued obtaining those services through different federal contracting mechanisms, meaning some of the spending was transferred rather than eliminated.
Of the $10.5 billion DHS identified as potential cost avoidance, nearly $10 billion — approximately 95% — came from just 30 terminated indefinite-delivery, indefinite-quantity contracts covering information technology equipment and services. Those agreements were structured to operate for 10 years, from fiscal 2025 through fiscal 2034.
After terminating them, DHS continued meeting information technology requirements through General Services Administration and other government-wide contracts. GAO found that DHS obligated more than $1.7 billion through those alternative contracts during fiscal 2025 alone.
That $1.7 billion therefore represented spending that had been included in the potential avoidance calculation but was ultimately incurred elsewhere, according to GAO. Additional spending for the same requirements through 2034 could further reduce the amount ultimately saved.
“GAO found that 95 percent of DHS’s reported $10.5 billion in potential cost avoidance was attributable to 30 terminated indefinite delivery/indefinite-quantity contracts in place for DHS to meet information technology requirements,” the report stated. “These contracts had a 10-year period of performance, from fiscal years 2025 through 2034.”
The findings followed a broad review of DHS contracting conducted after President Donald Trump issued a series of executive orders during the first half of 2025 directing federal departments to examine contracts and terminate or modify those considered appropriate for reducing or reallocating government spending.
Trump also directed federal agencies to publicly disclose information about terminated programs, grants and contracts. DHS began publishing information about its contract cancellations in late February 2025.
As part of the initiative, DHS conducted a department-wide examination of more than 17,000 contracts, categorizing them according to whether they were mission critical, mission essential or otherwise potentially suitable for modification or termination.
GAO’s examination of federal procurement records found that DHS fully or partially terminated 438 contracts between Jan. 20 and Sept. 30, 2025. More than $1.6 billion had already been obligated under those agreements before the terminations occurred.
Since then, DHS has deobligated a net total of more than $92 million.
Those deobligations “represent cost savings in that they reduce federal obligations and may be available for other purposes,” GAO said.
The watchdog cautioned, however, that even those savings could shrink if DHS later uses other contracts to purchase similar goods or services.
If DHS “should subsequently obligate additional funds to perform similar work associated with terminated contracts, the amount of cost savings or avoidance would be further diminished,” according to the report.
GAO also emphasized an important difference between contract ceilings and actual expenditures. The $10.5 billion figure represented the maximum amount DHS could potentially have obligated under the affected contracts, including unexercised options and contract line items that were not fully funded when the contracts were terminated.
It therefore remains unknown how much of that maximum DHS would actually have spent if the contracts had remained active.
The watchdog further noted that ending a federal contract can itself generate expenses.
“The government often incurs a cost when it terminates a contract for convenience,” the report states.
Contractors can generally submit settlement proposals following such terminations, potentially including costs already incurred, certain profits and expenses stemming directly from ending the agreement.
The new findings do not conclude that DHS realized no savings from the contract reductions. GAO identified more than $92 million in net deobligations and found that some terminated or reduced contracts reflected genuine decreases in government requirements.
Rather, the watchdog concluded that the widely reported $10.5 billion represented potential cost avoidance and cannot be treated as the amount taxpayers ultimately saved.
Because DHS continued purchasing some of the same necessary services through other contracts — and could continue doing so for years — GAO said the final savings will necessarily fall below the department’s original projection.
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