At-Risk NAICS Codes in the Era of DOGE: What Federal Contractors Need to Know
The Department of Government Efficiency (DOGE), established by executive order on January 20, 2025, has quickly become a transformative force in federal contracting. Led by presidential adviser Elon Musk, DOGE's stated mission is "modernizing federal technology and software to maximize governmental efficiency and productivity." In its first few months of operation, DOGE has cancelled thousands of federal contracts as part of its cost-cutting initiatives, claiming billions in savings.
This aggressive approach to contract termination has left many federal contractors wondering: which industries are most at risk, and what can companies do to prepare for potential cancellations? This article examines the NAICS codes most affected by DOGE's actions and offers insights for contractors navigating this changing landscape.
Most Affected NAICS Codes
Based on comprehensive analysis of DOGE's contract terminations, several NAICS codes have emerged as particularly vulnerable to cancellation:
1. Management Consulting Services (NAICS 541611)
Management consulting contracts have been among the hardest hit by DOGE's cost-cutting measures. These contracts, which often involve providing advice and assistance to agencies on administrative and management issues, have been characterized by DOGE as "nonessential" expenditures. According to industry data, NAICS 541611 (Administrative Management and General Management Consulting Services) has been impacted more than any other code.
2. Research and Development Services (NAICS 541712, 541715)
Research contracts, particularly those not directly tied to core agency missions, have faced significant scrutiny. This includes contracts for various research studies, educational improvements, and scientific evaluations across multiple agencies.
3. Training Services (NAICS 611430)
Professional and management development training contracts have been systematically targeted, especially those related to diversity, equity, and inclusion (DEI) initiatives. DOGE has terminated numerous training contracts across multiple agencies.
4. IT Consulting and Services (NAICS 541512)
While some technology modernization efforts continue, many IT consulting contracts have been cancelled, particularly those focused on planning rather than implementation. Contracts for software acquisition, system planning, and technology consulting have all faced termination.
5. Administrative Support Services (NAICS 561110)
Contracts for administrative support, including office management, document preparation, and clerical services, have also been frequent targets of DOGE's cost-cutting efforts.
Types of Contracts Most Vulnerable to Cancellation
Analysis of DOGE's "Wall of Receipts" and public statements reveals specific types of contracts that appear most vulnerable to termination:
DEI-Related Contracts: Contracts related to diversity, equity, and inclusion initiatives have been among the first targeted by DOGE, with over 104 DEI contracts totaling approximately $1 billion cancelled in the first few weeks.
Consulting Services: Contracts categorized as "merely generating a report, research, coaching, or an artifact" have been designated as "nonessential" by the General Services Administration.
Blanket Purchase Agreements (BPAs): Many of the contracts on DOGE's termination list are Blanket Purchase Agreements, which represent potential rather than actual spending.
Contracts with Already-Obligated Funds: Interestingly, about 40% of contracts cancelled by DOGE are expected to yield no actual savings because the funds have already been fully obligated.
Geographic Impact of Contract Terminations
DOGE's contract cancellations have had a widespread geographic impact:
Washington, D.C. Metropolitan Area: As expected, contractors in the D.C. metro area have been most affected due to the concentration of federal contractors.
State Department and USAID International Contracts: Overseas contracts, particularly those administered by the State Department and USAID, have faced significant cuts.
Regional Federal Offices: DOGE has also targeted leases and contracts associated with regional federal offices across the country, potentially affecting local contractors in those areas.
Strategies for Federal Contractors
For contractors concerned about potential contract terminations, consider these strategies:
Diversify Your Contract Portfolio: Reduce dependence on high-risk NAICS codes and contract types.
Emphasize Direct Mission Support: Contracts directly supporting agency core missions appear less likely to be terminated.
Monitor DOGE Communications: Stay informed about DOGE's evolving priorities and targets through their website and social media.
Prepare for Termination Procedures: Understand your rights under the "termination for convenience" clauses in your contracts.
Explore Recompetes and New Opportunities: As agencies adjust to DOGE's directives, new contracting opportunities may emerge that align with the administration's priorities.
Conclusion
The federal contracting landscape is undergoing significant change under DOGE's influence. By understanding the NAICS codes and contract types most at risk, contractors can better position themselves to weather this period of transition. While certain sectors face heightened scrutiny, others may find new opportunities in an environment focused on efficiency and cost reduction.
For federal contractors, staying informed and adaptable will be key to navigating the evolving priorities of the federal procurement system in the DOGE era.
Keywords in DOGE Cancelled Contracts
Top NAICS Codes in Cancelled Contracts
Data visualization based on analysis of DOGE contract terminations reported through March 2025. Source: GovSpend, Federal Procurement Data System, and DOGE "Wall of Receipts"
