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Booz Allen Hamilton, one of the biggest consultants to the US federal government, signalled lower than expected profits and announced thousands of lay-offs after being targeted for cost cuts by President Donald Trump’s administration.
Booz Allen is one of 10 firms subject to a federal government “consultant spend review” aimed at saving US taxpayers billions of dollars by cancelling or renegotiating contracts.
The company on Friday provided revenue and earnings guidance for the current financial year for the first time since the review began, saying that its non-defence work would shrink by a double-digit percentage and that it would cut about 2,500 staff.
“All presidential transitions create some degree of near-term disruption, followed by opportunity,” chief executive Horacio Rozanski said on a call with analysts. “We now see that these dynamics are indeed in play, at a rate and speed that is beyond what we originally expected.”
Booz Allen is already among the firms hardest hit by the Trump administration’s determination to slash spending on sprawling IT contracts and other consulting work, led by Elon Musk’s so-called Department of Government Efficiency (Doge).
Rozanski said Booz Allen would cut staff in the parts of its company that work for the non-defence agencies of the US government because of reduced spending under existing IT contracts and a slowdown in new business.
“The dynamism of our business typically allows us to move our highly skilled talent quickly to new opportunities,” he said, “but at a time when procurements are moving much slower than normal, this has been challenging.”
Chief financial officer Matt Calderone said the company’s 36,000 workforce would be cut by 7 per cent in the next three months. The US government accounted for 98 per cent of Booz Allen’s $12bn in revenue for the year to March 31.
Alongside latest annual results, Booz Allen said its revenue growth would be 4 per cent or lower in the financial year that began April 1. Its forecast range for adjusted earnings before interest, tax, depreciation and amortisation was $1.32bn to $1.37bn, about 5 per cent below a consensus of analysts’ forecasts compiled by Bloomberg.
Booz Allen shares closed 16.5 per cent lower on Friday, taking their decline since Trump’s presidential election victory in November to almost 42 per cent.
Booz Allen last month offered to give up or alter contracts to provide the US government with savings of more than $1bn as part of the spending review conducted by the General Services Administration (GSA), which helps co-ordinate government procurement.
The company had been pinning its hopes on the federal government eventually turning back to consultants to upgrade IT systems and help make other areas of the public services more efficient. The review had helped government procurement agencies “get to know us better”, Rozanski said.
Doge claims to have saved $3bn from 362 contract cancellations and modifications involving the 10 consulting firms targeted by the GSA.
The actual savings are hard to calculate and certainly lower. Doge values cancelled contracts on the basis that they always cost the legal maximums. It has also altered estimates after errors have been noted in the media.
A Financial Times analysis of federal contracts database confirms a marked increase in cancellations for the 10 companies, which have been running well above historical norms since Trump’s presidential inauguration in January.
