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Memo calls for review of $65 billion in contracts that go to Booz Allen Hamilton and other big firms that do government work

The Trump administration is looking to cut federal contracts. Few companies stand as exposed as Booz Allen Hamilton BAH -2.84%decrease; red down pointing triangle.

The venerable Washington, D.C., area firm works on projects across the U.S. government. It operates a website visitors use to reserve campsites at national parks. It is modernizing healthcare records for veterans, beefing up technology at the Federal Bureau of Investigation, and rolling out a suite of artificial-intelligence and cybersecurity tools across the Department of Defense and other federal agencies.

A memo sent this week from Stephen Ehikian, the acting administrator of the General Services Administration, calls on procurement officials at federal agencies to list and justify consulting contracts from 10 companies—including Booz Allen, Accenture, Deloitte and International Business Machines—that the agencies intend to keep. The responses are due March 7.

Booz Allen generates 98% of its roughly $11 billion in annual revenue from contracts in which the end client is a U.S. government agency or department. It has told investors that it sees the U.S. government as the world’s largest consumer of management consulting and technology services. Since the election of President Trump in November, its stock is down about 30%.

In the memo, viewed by The Wall Street Journal, Ehikian said the GSA has identified that the 10 highest-paid consulting firms are set to receive more than $65 billion in fees in 2025 and future years. “This needs to, and must, change,” Ehikian wrote, bolding the sentence for emphasis.

Some consulting firms say it is unclear how the $65 billion figure was calculated.

Ever since 1940, when Booz Allen took on a project advising the secretary of the Navy ahead of World War II, the company has had a foothold in the federal government. Booz Allen separated its corporate-consulting arm from its government-advisory business in 2008, with the government business retaining the original name.

Today, the company, which employs more than 34,000 people, operates not as a consulting firm but as a technology company, Chief Executive Horacio Rozanski said in an interview. Booz Allen says it now has one of the largest AI businesses in the federal government. About 70% of its employees work in technology today, up from about 20% in 2012.

Booz Allen has been through presidential transitions before, and will weather the reviews of federal contracts, Rozanski said. The company’s work also aligns with the Trump administration’s priorities, he said.

“We recognize that in the short term there could be some disruption to the market, but in the long term we are really well aligned,” he said. “If the government wants to operate with fewer people, it will need to operate with more technology, and technology that works. And our stuff works, and it works beyond the prototype.”

The Elon Musk-led Department of Government Efficiency has already claimed to cut a small number of Booz Allen contracts, including at the Labor Department and the Commerce Department. Some of the company’s competitors, such as Accenture and Deloitte, have also had contracts cut. Spokespeople for Accenture and Deloitte didn’t respond to requests for comment.

Accenture got 17% of its North American revenue from the U.S. government last year. Another big federal contractor, Leidos, got about 87% of its revenue from the government providing national security and technology services, including scanners at airport checkpoints.

The memo this week came after the GSA earlier asked federal agencies to explain why consulting contracts were necessary as part of the Trump administration’s “efforts to weed out fraud and waste,” a GSA spokeswoman said. “We determined a need for more in-depth responses, and are in the process of collecting additional information at this time.”

A range of government officials have recently taken aim at consultants. In a post on X Tuesday, Doug Collins, the Department of Veterans Affairs’ newly confirmed secretary, said the VA was canceling nearly $2 billion in contracts. “No more paying consultants to do things like make Power Point slides and write meeting minutes!” he wrote.

The VA said earlier this week that no final decisions have been made, but nonmission-critical contracts, in areas such as executive support and coaching, will be eliminated.

Booz Allen’s Rozanski said the company is already talking to Trump officials about how the government can deploy its technology on everything from space defenses to using AI to reduce fraud.

“We are not in the business of writing PowerPoints. We’re in the business of writing code and of using commercial technology to create real results in the federal government,” he said.

The GSA memo also asks that agencies justify consulting contracts by explaining why they are “mission critical” and provide substantive technical support. The exact impact of the review remains to be seen, said Stan Soloway, CEO of the consulting firm Celero Strategies, and the former head of the largest trade association of government-service contractors.

“There’s a lot of questions,” Soloway said.

It is unclear what “mission critical” means, and how it might align with existing agency budgets and goals, said Soloway, a former defense official under President Bill Clinton. Executives within firms are trying to meet with Trump administration officials or explain the value of their services, but see the potential cuts as a risk.

“A lot of these companies are doing serious technology work,” Soloway said. “Now they don’t even know what the next six months or year might hold. Nothing disturbs a market more than uncertainty.”

US shares in Valeo and Forvia fall sharply amid uncertainty over protectionist measures

Valeo and Forvia, two leading French car suppliers have warned they would be unable to absorb the costs of US President Donald Trump’s tariffs, which are set to hit Europe’s struggling automotive supply chain.

Trump on Thursday threatened to impose 25 per cent tariffs on EU goods, including on the car sector. The threat comes as the industry waits for a US decision on similar duties on goods from Canada and Mexico.

“There are no margins in the car industry and in particular among car suppliers to absorb even a part of these tariffs . . . I don’t know what the carmakers will do,” said Christophe Périllat, Valeo chief executive, on Friday.

He added that the costs would be passed on to clients, a point reiterated by Patrick Koller, his counterpart at rival Forvia.

Koller said at a results presentation that Forvia faced significant tariff risk for its operations in Mexico. “We’re almost absent in Canada . . . but we’ve got significant flows from Mexico to the US,” he said.

The tariffs threaten to hit an industry already weighed down by a slowdown in demand for cars and an expensive transition towards battery-powered vehicles, amid growing competition from Chinese EV start-ups.

Shares in Valeo dropped 15 per cent and Forvia fell almost a fifth on early trading on Friday. The businesses reported falling profits on Thursday evening and Friday morning respectively. Both businesses said that they expected largely flat sales in 2025.

Shares in German automotive suppliers Continental and Schaeffler, which in recent years have shed thousands of jobs, on Fridays sunk nearly 2 and 3 per cent, respectively.

Both business leaders said there were limits to how much they could adapt to tariffs, if Trump follows through on his threat to raise trade barriers with America’s closest neighbours.

Despite the warnings from the executives, it is unclear to what extent the companies could negotiate higher prices with the carmakers they supply. They both work with European, Asian and American carmakers.

“We can’t adapt in terms of industrial footprint or the footprint of our suppliers in the space of a few days or months; that takes years. In the US, we’ve got a historic base with experienced factories,” said Périllat.

“Today, we’re trying to understand because it’s complicated and it changes every day,” he added.

Europe’s automotive supply chain has seen increasing levels of job cuts as companies have turned to cost-cutting for survival. Lay-offs by European car suppliers doubled across the continent in 2024, according to figures from the European Association of Automotive Suppliers. Some 11,000 jobs were last year lost in the German sector alone, according to industry group VDA.

Margins for traditional automotive suppliers fell an average of between 3 and 5 per cent in the five years to 2022, according to analysis by Lazard and Roland Berger, as companies took on large costs to develop products for electric cars and sales in Europe slowed drastically amid higher living costs.

Launching a stand-alone app suggests that CEO Mark Zuckerberg has realized the existing distribution strategy of making Meta AI available through the company’s various social media apps isn’t enough to get people to use it. Consumers now have so many choices of AI chatbots—with similar capabilities—that it’s difficult to choose. At some point, there’ll be a shakeout. Who will be the survivors?

If you’re watching the latest season of the HBO drama “The White Lotus,” you’ll know that the aging cable channel (represented on streaming through Max) can still capture the zeitgeist. That’s not so true of HBO’s owner, Warner Bros. Discovery, whose fourth-quarter results on Thursday—showing revenue fell 2% for the quarter and 5% for the year—demonstrated the sorry state of the traditional TV business that makes up much of WBD.

The company’s streaming operations are doing fine, expanding its subscriber base 20% in 2024, mostly overseas where Max is moving into new markets. But as the slowly shrinking cable channels account for half of WBD’s revenue, streaming’s growth can only do so much. Things would be much easier if WBD spun off the cable channels, as Comcast’s NBCUniversal is already doing. WBD’s streaming business is profitable, and a new company composed just of streaming, HBO and the Warner film studio should prosper—drawing a much better valuation than the company does now.

Consider that WBD’s stock price has been bobbing around the $10 level for the past 17 months, giving the company an enterprise value now of just $61 billion. That’s roughly one-seventh the value Netflix enjoys, even though the two companies had the same revenue last year. Netflix deserves a good premium, no question. Apart from anything else, it’s much more profitable: Netflix generated free cash flow of $6.9 billion last year compared with WBD’s $4.4 billion. But the valuation difference is mostly owing to the fact that half of WBD is steadily shrinking.

Recent signals from WBD suggest a spinoff of the cable channels may just be a matter of time. After the Financial Times reported last summer that management was contemplating such a step, executives didn’t exactly shoot the idea down when asked about it later. WBD has introduced a new corporate structure that separates the cable channels from streaming and the studio, seeming to make a split-up along those lines more likely. On Thursday, CEO David Zaslav said the new structure would “enhance our strategic flexibility and also create potential opportunities to unlock additional shareholder value.” That translates from corporate gibberish into plain English as: “Yes, we might dump these slowly dying channels the first chance we get.”

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