The Government Accountability Office recently issued a report on the Department of Defense’s civilian workforce reductions. It offers a concrete record of how DoD has reduced staffing, where those reductions have occurred, and how the Department has assessed their effects. GAO’s report matters not only as a workforce-management review, but also as a practical resource for companies that depend on DoD procurement, oversight, audit, logistics, finance, and program-management functions. For defense contractors, the report suggests that delays, capacity constraints, and operational friction may persist—and that these issues are likely to receive increased congressional and internal DoD attention.
GAO’s Report Shows That DoD’s Civilian Workforce Reductions Were Swift, Broad, and Operationally Significant
GAO found that DoD’s workforce reductions did not begin in 2025. Some components had already programmed reductions in FYs 2023 through 2025. But the report makes clear that the reductions became much broader and more substantial in 2025, especially through actions taken outside the PPBE process and in the FY 2026 budget request.
According to GAO, roughly half of the DoD components—22 of 40—programmed civilian workforce reductions in at least one fiscal year from FY 2023 through FY 2025, although many of those reductions were uneven and comparatively modest. A sharper shift appears in the FY 2026 budget request, which included a decrease in civilian full-time equivalent (FTE) positions for most components. In total, 28 of 40 components programmed lower civilian FTE levels and DoD requested approximately 48,400 fewer civilian FTEs than in FY 2025, about a 5.9% reduction.
For contractors, those figures matter not only because of their aggregate scale, but also because of the organizations involved. GAO’s discussion includes components such as the Defense Contract Management Agency (DCMA), Defense Contract Audit Agency (DCAA), Defense Logistics Agency (DLA), Defense Finance and Accounting Service (DFAS), and major military departments. Those organizations play central roles in contract administration, audit support, logistics execution, payment and finance functions, and acquisition oversight. Consequently, the report concerns more than DoD’s internal personnel posture; it has direct implications for government functions on which defense contractors rely every day.
GAO also describes a second category of reductions: workforce actions taken outside the formal planning, programming, budgeting, and execution (PPBE) process. As we previously noted, in 2025, DoD used several mechanisms to reduce its civilian workforce, including the government-wide deferred resignation program, a DoD-specific deferred resignation program, voluntary early retirement authority, probationary employee terminations, and a hiring freeze. By September 2025, DoD had approved approximately 53,200 deferred resignation applications. By the end of 2025, GAO counted 46,229 separations under the deferred resignation programs and 6,650 early retirements under VERA. During the same January-to-December 2025 period, DoD hired only about 33,781 civilians—roughly 59,456 fewer hires than the historical average—and the overall civilian workforce fell by approximately 78,375 employees, or 9.9%, as of January 1, 2026.
Although GAO does not take a normative position on whether the reductions were ultimately beneficial or harmful, it reports that selected components identified both preliminary benefits and challenges resulting from the reductions. GAO found that DoD did not consistently perform or document the analysis required by law for programmed civilian workforce reductions. As summarized in report, federal law requires DoD to analyze the effects of programmed reductions on seven factors, including workload, readiness, lethality, operational effectiveness, stress on the military force, military force structure, and fully burdened costs. Yet, among 14 selected components, GAO found that only 11 said they conducted such analysis for FY 2023 through FY 2025 programmed reductions, and only one component provided documentation addressing all seven statutory elements. GAO also found especially limited documentation for the “lethality” and “stress on the military force” elements. GAO found similar inconsistency for the 2025 reduction actions outside the normal programming process. Components sometimes conducted analysis when deciding whether positions should be exempted from deferred resignation programs or the hiring freeze; but that analysis varied considerably in quality, format, and scope and often did not map cleanly onto the seven statutory elements. In GAO’s view, the result was a lack of the “quality information” needed to understand the operational consequences of these workforce reductions.
Key Takeaways for Federal Contractors
Procurement and Contract Administration Delays May Continue
The most immediate implication for contractors is continued capacity risk on the government side. We have previously warned that reductions in DoD’s civilian workforce could produce slower solicitations, awards, contracting officer determinations, payments, audits, and related contract administration functions. GAO’s report does not focus on individual procurements or disputes; but it reinforces the basis for those concerns by documenting substantial workforce losses, sharply reduced hiring, and inconsistent evaluation of operational effects. For contractors, that combination points to continued risk of slower procurement processing and less predictable contract administration.
These risks may be particularly acute where performance depends on timely government action. Short-staffed offices coping with turnover or redistributing responsibilities after personnel losses may respond more slowly and provide less continuity in agency engagement.[1] GAO’s identification of affected organizations—including DCMA, DCAA, DLA, and DFAS—underscores the operational significance of these capacity constraints.
At the same time, DoD is also pursuing broader adoption of AI tools and agents across enterprise workflows, and its public strategy documents expressly frame those technologies as a means to improve business-operation efficiency and decision speed—developments that may well blunt some of the effects of staffing losses at least in certain functions.
Oversight Gaps Can Increase Compliance and Performance Risk
GAO specifically notes that DCAA repeatedly sought hiring-freeze exemptions for contract auditors and warned that reduced audit capacity could increase noncompliance risk, financial losses, operational inefficiencies, strained relationships, and workload pressures. That point is notable not because contractors might expect muted audit scrutiny, but because uneven or delayed oversight can itself increase risk. Reviews may be postponed, compressed, reassigned, or conducted by personnel with less institutional familiarity. Routine matters may also take longer to resolve, and unresolved issues may accumulate over time.
Contractors should not treat workforce disruption as a reason to relax standard protocols and other internal controls. If anything, the more practical lesson is the opposite: where the government’s administrative capacity is strained, contractors should expect less predictability and should maintain stronger internal documentation, closer performance tracking, and better issue-escalation processes.
Watch for Shifts in Priorities and Demand Signals
A further implication is that workforce disruption may affect what gets prioritized inside DoD. If civilian staffing shortfalls impair support functions, components may narrow their focus to mission-critical requirements, defer lower-priority procurements, or seek greater flexibility in how work is executed and supported. GAO does not recommend replacing civilians with contractors, and the report does not indicate that DoD will do so. But the report’s repeated references to lost expertise, strained capacity, and mission-impact concerns suggest that some organizations could face increased pressure to rely on contractor support in specialized or understaffed areas, subject to workforce-mix rules and inherently governmental constraints. For some companies, that may create opportunities. For others, it may create a more volatile operating environment marked by uneven demand, delayed procurements and award cycles, or shifting government expectations about support, responsiveness, and execution.
[1] These challenges can be even more pronounced when contract issues require escalation to Department lawyers. As recently reported by The New York Times and others, this exodus includes nearly 1,000 attorneys across DoD and Veteran Affairs.