The impact of the Homeland Security Department’s requirement for all contract awards and modifications worth more than $100,000 to get approval from the secretary’s office is having real world consequences.

Vendors are laying employees off and at least one is considering closing down altogether.

DHS components are in danger of having services turned off because approval is taking too long.

The entire review effort, kicked off in June, is causing a level of uncertainty rarely seen in the Homeland Security Department in the last 20 years.

“A very common story from members, both in terms of large companies, mid- tier companies and small companies is that they’re confronting a level of uncertainty that for many of my veterans who’ve been in the business 20-30, years, claim they’ve never seen anything like this,” said Rafael Borras, the president and CEO of the Homeland Security Defense and Business Council, a non-profit, non-partisan corporate membership organization of companies that support the homeland security enterprise with technology, product and service solutions. “What does uncertainty mean? What it means is uncertainty in respect to whether contract vehicles will remain in place, whether existing contract vehicles will actually be awarded, and if recent contract awards will be rescinded. If they sit with a contract, will they actually be issued any task orders, and will the task orders be at the level that they had originally, originally negotiated with the government? All of this is part of the uncertainty that’s being felt, and our members, much like the federal government employees, have to now make some business decisions about how many people they can keep on the bench, so we’re losing valuable employees from government contractors as a result.”

DHS said in June it would require Secretary Kristi Noem’s approval for all contract actions over $100,000.  Based on the last three fiscal years’ data, Noem’s office will have to approve more than 5,100 contract actions that are worth over $100,000 in the federal fourth quarter alone.

Number of contract awards down

For some vendors, especially small businesses, this uncertainty has turned into languishing and pain.

One small business executive whose company worked with DHS for the last two decades, and requested anonymity for fear of retribution, said they have already laid off more than 10 people out of a staff of 55 because of the agency’s delays and lack of communication about its plans. The executive said if things don’t turn around soon, they may be shutting their doors and laying everyone off by the end of 2025.

“We are under $10 million in revenue, so where mid-sized and large businesses can fare better, small businesses like us in the DHS space, it’s literally killing us,” the executive said. “It would be better if they just said we will scrap 50% of the expected procurements and told us to go away. But they aren’t saying anything, and I don’t know where to focus.”

The executive, whose company does business with FEMA and the Transportation Security Administration, said it’s not just the lack of awards, but the entire acquisition process, including requests for information or sources sought notices, have all but stopped.

“We’ve seen maybe one RFI from FEMA where we expected to see about 30. At TSA, we’ve seen maybe two RFIs where we expected to see about 15,” the executive said. “The bigger issue is the unknown. The DHS acquisition forecast, which is normally the most reliable, is unpredictable and unreliable. What we see there we can’t trust, and the procurement folks aren’t talking, so the unknown is killing us because we don’t know where to put our attention. This is supposed to be the busiest time of the year. I was thinking given the flux in the spring, I figured the summer would be extra crazy, but it’s not.”

DHS has traditionally been a friendly place for small businesses. In fiscal 2024, for example, DHS received an “A” grade from the Small Business Administration for beating its prime contract goal by awarding 62.2% of all prime contracts to small firms, which was 120% of its goal. It also increased the number of small firms who were prime contracts last year by almost 400 companies.

A small sampling of the numbers shows just how different 2025 is from 2024.

Deltek, the market research firm, said for the period of July 1 through July 28 awards appear down significantly.

Source: Deltek

“We’ve seen things take longer and people have even mentioned it in responses citing the reductions in force (RIF) or people just having bounce back e-mail responses saying they’ve retired. So simply fewer people will cause delays to all of this since there are less people to process the transactions, let alone run the procurements,” said John Slye, a senior advisory research analyst at Deltek, in an email to Federal News Network. “Recently we are seeing some contracts having expired, or approaching expiration, with ongoing procurement activity and no extensions or bridges executed.”

Slye said one example of that is TSA’s budget and finance support services (BFSS) that expired at the end of July. TSA issued an RFI on July 24 with responses due Aug. 8 and an award expected in mid-October.

Brian Friel, co-founder of BD Squared, a federal contract bid and proposal consulting firm, said the data isn’t better around task orders.

“There’s been a 30% reduction in the number of RFPs issued year to date by DHS on the major contract vehicles, including GSA’s OASIS/OASIS+, STARS III, VETS 2 and NITAAC’s CIO-SP3. In 2024 by the end of July there were 69. This year there are 45,” he said. “Simultaneously, we are seeing delays in getting approvals for option years that historically have occurred fairly quickly. The requirement for reviews of actions above $100,000 by the secretary’s office is creating a backlog in contracting actions. My understanding is that the requests for additional information from the secretary’s office are reasonable, but things are moving much more slowly.”

Part of the reason for fewer contract and task order awards can be attributed to agencies receiving their funding later in the fiscal year than in 2024. DHS, like many agencies, also initiated contract reviews, which led it to cancel its FirstSource III and PACTS III solicitations in June.

Invoice payments also slowed

Federal News Network asked DHS six specific questions about this review initiative, the impact it’s having on mission areas as well as vendors and how the secretary’s office is prioritizing contract approvals.

A DHS spokesperson offered only this response, which was nearly identical to what the agency said in June.

“Under Secretary Noem’s leadership, DHS is rooting out waste, fraud, abuse, and is reprioritizing appropriated dollars. Secretary Noem is delivering accountability to the U.S. taxpayer, which Washington bureaucrats have ignored for decades at the expense of American citizens,” the spokesperson wrote in an email to Federal News Network.

Krista Sweet, vice president of civilian agencies for the Professional Services Council, said the delays are introducing unnecessary risks into the procurement process and creating a challenging business environment for companies.

“The delays in contract approval and invoice payments have real consequences to the companies trying to deliver mission-critical services and innovative solutions to DHS. Although the memo references a five-day turnaround for review, we are hearing from members that the process often takes significantly longer,” she said in an email to Federal News Network. “One small business, for example, has waited more than 30 days for a previously planned and budgeted funding addition to a current DHS contract. The company has had to stop work, lay off employees and estimates $1 million in lost revenue per month. These disruptions risk a delay in the delivery of mission essential solutions.”

Another small business executive, who also requested anonymity for fear of retribution, said with any new awards, even including contract continuations, that are all stuck in a black box, DHS is just making the environment untenable for small firms.

“As a small business, I’m getting crushed because keeping people on the bench and incurring heaving overhead costs every day is a crippling business state to maintain, as you can imagine,” the second executive said. “And the DHS program customers are also suffering because many are losing their support teams overnight when one period of performance (PoP) ends and the next option period is supposed to begin the next day. Instead, everything comes to a screeching halt exposing these applications and systems to security breaches and causing costly technical and programmatic debt.”

And as the delays continue and the calendar ticks further into the fiscal year, DHS mission areas will feel the brunt.

One former DHS executive said if the secretary’s office doesn’t begin to solve the backlog of approvals, the mission challenges will only grow bigger.

“The wheels are starting to rattle on the infrastructure and on the mission,” the former official, who also requested anonymity, said. “There is a buildup of unspent funds and typically agencies try to get their discretionary spending done by the end of the fiscal year. None of that seems to be going on, and couple that with need for the secretary’s signature, everything becomes an issue for the mission areas.”

A related problem, industry executives said, is there are far fewer people to call at DHS these days to ask for help.

DHS reduced the number of employees who work in the Office of Small and Disadvantaged Business Utilization. The Undersecretary for Management role remains unfilled, with the White House recently pulling the nomination of Karen Evans.

PSC’s Sweet said the industry association is actively engaged with DHS leadership to address the concerns.

Homeland Security Defense and Business Council’s Borras said he’s told his members to stay the course as much as possible, not to give in to requests to lower contract prices or step outside the scope of the contract.

“If you’ve entered into a contract, you’ve got an agreement. The worst thing that you can do is begin to come up with side deals that are outside of the scope of the contract because you offer yourself no legal protections if something down the road happens or performance objective is not met, and you made a change on a wink and a nod, but then you’re going to be held accountable  for performance or insufficient performance. You can’t then come back and say, oh, wait a minute, but there’s nothing on in writing to support that. So be very, very cautious,” he said. “This is a time because of all the uncertainty, the best advice I give people is the rules are in place for a reason. Play by the rules. It’s the safest bet.”

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