Government Fires 317,000, Pays Contractors for Same Services

Workforce Cuts via VERA and DRP

The federal government has shed more than 317,000 positions through the Voluntary Early Retirement Authority (VERA) and Deferred Resignation Program (DRP), a 13.7% reduction since September 2024, creating a talent vacuum that is driving a surge in contractor spending. Agencies hired roughly 68,000 new workers, but the net loss opened capability gaps across nearly every CFO-Act agency in the first half of 2025, pushing them to rely more on contractors for essential services.

GSA's 2025 IT Modernization Plan

GSA's OneGov initiative reshapes federal buying from isolated purchases to a shared enterprise model that powers citizen services and national security. A key component is the SAP agreement announced Dec 2, 2025, which delivers up to 80% discounts on SAP databases, integration, analytics, and cloud tools for all agencies. The deal, alongside other OneGov pacts, supplies the cloud services needed to support the White House AI Action Plan and positions the U.S. as a global benchmark for digital modernization.

Parallel to the software discounts, GSA is tightening the Multiple Award Schedule (MAS) for 2025-2026. An Executive Order issued March 20, 2025 directs every agency to buy common goods and services through GSA, making it the central procurement authority. OPM, Education, SBA, and HUD have begun the shift; eleven more agencies will follow. Currently about 20% of common spend flows through GSA, and MAS rightsizing plus OneGov consolidation aim to raise that share and cut redundant costs.

The OneGov IT vendor office, the SAP discount pact, and the MAS rightsizing framework together form GSA's 2025 IT modernization plan: a centralized, compliance-driven approach that aligns with the AI Action Plan and readies the government for the 2027 infrastructure deadline.

Contractor Responses to GSA's Talent Gaps

Since April 2025 GSA has signed 19 agreements with technology leaders—including Microsoft, Google, AWS, and ServiceNow—to centralize purchasing and streamline access to IT solutions. These OneGov agreements standardize terms, stress security and cost efficiency, and create concentrated demand for contractors who can deliver cloud-first infrastructure, AI-driven platforms, and cybersecurity expertise.

The FY2025 federal contracting outlook forecasts spending above $700 billion, driven by IT modernization and cloud migration. Contractors holding FedRAMP-certified platforms are especially well-positioned as agencies adopt cloud-first models under OneGov. For example, the ServiceNow deal uses its AI platform to boost workflow efficiency, showing how vendors blend advanced tech to meet federal needs.

GSA's 2,224 layoffs stripped internal capacity to manage complex modernization projects, prompting contractors to fill the void. By consolidating hundreds of fragmented agency contracts into streamlined OneGov agreements, GSA hopes to lower redundant costs and ensure uniform service delivery. Vendors are highlighting interoperability and adaptability in proposals, seeking to become indispensable partners for the 2027 deadline. The centralization also sharpens competition, as agencies increasingly turn to a smaller pool of pre-approved contractors for critical IT work.

Effects on the Federal IT Workforce and Contractor Market

The loss of roughly 2,200 GSA employees creates a noticeable IT capacity gap, pushing technology work—system maintenance, cybersecurity oversight, software development—onto contractors on a temporary or project basis. This shift intensifies rivalry among firms for the limited pool of professionals who hold federal security clearances and understand legacy government systems.

Contractors now advertise roles that stress familiarity with GSA procurement platforms, cloud migration initiatives, and compliance frameworks tied to the 2027 deadline. Because the internal workforce is shrinking, rates for specialized skills—enterprise architecture, data analytics, zero-trust security—are rising, while smaller vendors find openings to offer niche expertise or agile delivery models. Remaining federal IT staff often see their duties expand to cover contractor oversight, contract management, and integration tasks, blurring the traditional line between civil service and contracted support and calling for updated training and clearer governance.

Financial and Operational Risks of Accelerated Modernization

The drive to meet the 2027 IT modernization deadline heightens financial and operational pressure on GSA as it shifts work to contractors amid workforce cuts. While GSA-specific budget figures are unavailable, recent hiring spikes at other agencies signal a tight labor market for technical and administrative talent. In the most recent month the Department of Veterans Affairs added 1,936 employees, the Department of Homeland Security brought on 1,465, and the Department of Defense hired 1,032. These numbers reflect strong demand for nurses, medical support staff, criminal investigators, and IT-related roles, indicating that the pool of skilled workers is being drawn across the government.

When multiple agencies hire simultaneously, contractors face upward pressure on rates and may strain to absorb extra work. For GSA, this environment risks contractor costs outpacing initial forecasts, stretching modernization funds. Operationally, reliance on external vendors introduces integration challenges: disparate systems, varying security protocols, and mismatched timelines can hinder seamless deployment of IT infrastructure needed to satisfy compliance mandates. Moreover, as VA, DHS, and DoD expand their own workforces, competition for specialists in cloud migration, cybersecurity, and legacy system modernization may worsen talent shortages, potentially delaying critical milestones.

As the 317,000 positions cut and the resulting contractor surge have turned the 2027 modernization push into a high-stakes race, every missed integration point could expose millions of citizens' data to risk, making the promise of modernization a ticking security concern.