*

Navy and Air Force projects, worth over $800 mln, poised

to be

axed-sources

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Trump's actions complicate Pentagon's contracting

oversight,

risking more taxpayer waste

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Air Force and Space Force seek new HR projects, risking

duplication and costs

By Alexandra Alper

WASHINGTON, Aug 13 (Reuters) - Donald Trump's Navy and

Air Force are poised to cancel two nearly complete software

projects that took 12 years and well over $800 million combined

to develop, work initially aimed at overhauling antiquated human

resources systems.

The reason for the unusual move: officials at those departments,

who have so far put the existing projects on hold, want other

firms, including Salesforce ( CRM ) and billionaire Peter Thiel's

Palantir ( PLTR ), to have a chance to win similar projects, which could

amount to a costly do-over, according to seven sources familiar

with the matter.

Trump took office vowing to rid the government of what he calls

waste and abuse. The website of the Department of Government

Efficiency, the agency he created to spearhead those efforts,

lists over $14 billion in Defense Department contracts it claims

to have cancelled.

But seven months into his presidency, some of his own actions

have complicated DOGE's work, from firing the Pentagon's

inspector general to issuing an executive order prioritizing

speed and risk-taking in defense acquisitions.

Coupled with high-level vacancies in the Navy and Air Force that

persisted well into the summer, the moves limit oversight of the

Pentagon's contracting process and risk wasting hundreds of

millions of additional taxpayer dollars as old projects are

thrown out and new projects are agreed to, Reuters reporting

based on sources, internal emails and documents, shows.

"There is a very real sense that we are in the regulatory

Wild West with this administration - and it should come as no

surprise that the traditional limits of 'normal contracting' are

repeatedly going to be pushed and pressed in this environment,"

said Franklin Turner, a federal contracting lawyer at McCarter &

English.

He said it is legal for the government to terminate any

contract "for convenience," but said the Pentagon would be on

the hook to reimburse the companies for wind-down costs plus

take on the cost of any new replacement project.

Trump officials say the administration is striving to make

the contracting process more efficient.

"Defense Secretary Hegseth is doing a great job restoring a

focus on warfighters at the DOD while carrying out the American

people's agenda to more effectively steward taxpayer dollars,"

White House Deputy Press Secretary Anna Kelly said in a

statement.

Pentagon Press Secretary Kingsley Wilson said the agency is

taking "swift action" to fix the "antiquated" defense

contracting process by implementing Trump's executive orders.

"This is how we will rebuild the military with necessary speed

while ensuring taxpayer dollars are spent wisely in the

process," she added.

'STRATEGIC PAUSE'

In 2019, Accenture ( ACN ) said it had won a contract to expand an HR

platform to modernize the payroll, absence management, and other

HR functions for the Air Force with Oracle software.

The project, which includes other vendors and was later

expanded to include Space Force, grew to cost $368 million and

was scheduled for its first deployment this summer at the Air

Force Academy.

An April "status update" on the project conducted by the Air

Force and obtained by Reuters described the project as "on

track," with initial deployment scheduled for June, noting that

it would end up saving the Air Force $39 million annually by

allowing it to stop using an older system.

But on May 30, Darlene Costello, then-Acting assistant Secretary

of the Air Force, sent out a memo placing a "strategic pause" on

the project for ninety days and calling for the study of

alternate technical solutions, according to a copy of the memo

seen by Reuters that was previously unreported.

Costello, who has since retired, was reacting to pressure from

other Air Force officials who wanted to steer a new HR project

to SalesForce ( CRM ) and Palantir ( PLTR ), three sources said.

Palantir ( PLTR ) co-founder Thiel was an early backer of President

Donald Trump and has close ties with key Washington lawmakers,

including Vice President JD Vance, whom he supported in a 2022

U.S. Senate race.

Palantir ( PLTR ) in April won a $30 million contract from the U.S.

Immigration and Customs Enforcement to develop an operating

system that identifies undocumented immigrants and tracks

self-deportations, its largest single award from the agency

among 46 federal contract actions since 2011.

The Air Force said in a statement that it "is committed to

reforming acquisition practices, assessing the acquisition

workforce, and identifying opportunities to improve major

defense acquisition programs."

Accenture ( ACN ), Costello, Palantir ( PLTR ) and SalesForce ( CRM ) did not respond to

requests for comment.

Space Force, which operates within the Air Force, was set to

receive the Air Force's new payroll system in the coming months.

But it is also pulling out of the project because officials

there want to launch yet another HR platform project to be led

by Workday, according to three people familiar with the

matter.

The service put out a small business tender on May 7 for

firms to research HR platform alternatives, with the goal of

selecting a company that will recommend Workday as the best

option, the people said.

Space Force did not respond to multiple requests for

comment.

Now the Air Force and Space Force "want to start over with

vendors that do not meet their requirements, leading to

significant duplication and massive costs," said John Weiler,

director of the Information Technology Acquisition Advisory

Council, a government-chartered nonprofit group that makes

recommendations to improve federal IT contracting.

Oracle said in a statement it was "working closely with DOGE

to accelerate the government's transformation to modern

technology at the best price for the taxpayer."

'BEYOND EXASPERATED'

In 2022, the Honolulu-based Nakupuna Companies took over a 2019

project with other firms to integrate the Navy's payroll and

personnel systems into one platform using Oracle software and

known as "NP2".

The project, which has cost about $425 million since 2023,

according to the Government Accountability Office, was set to be

rolled out earlier this year after receiving a positive review

by independent reviewer and consulting firm Guidehouse in

January, according to a copy obtained by Reuters.

But the head of Navy's human resources, now retired Admiral

Rick Cheeseman, sought to cancel the project according to a June

5 memo seen by Reuters, directing another official to "take

appropriate contractual actions" to cancel the project.

Navy leaders instead mandated yet another assessment of

project, according to a memo seen by Reuters, leaving it in

limbo, two sources said.

Cheeseman's reason for trying to kill the project was his

anger over a decision by DOGE earlier this year to cancel a $171

million contract for data services provider Pantheon Data that

essentially duplicated parts of the HR project. In an email

obtained by Reuters, he threatened to withhold funding from the

Nakupuna-led project unless the Pantheon contract was restored.

"I am beyond exasperated with how this happened," Cheeseman

wrote in a May 7 email to Chief Information Officer Jane Rathbun

about the contract cancellation, arguing the Pantheon contract

was not "duplicative of any effort."

"From where I sit, I'm content taking every dime away from

NP2 in order to continue this effort," he added in the email.

Cheeseman did not respond to a request for comment. Rathbun

and Pantheon Data declined to comment.

The pausing of NP2 was "unexpected, especially given that

multiple comprehensive reviews validated the technical solution

as the fastest and most affordable approach," Nakupuna said in a

statement, adding it was disappointed by the change because the

project was ready to deploy.

The Navy said it "continues to prioritize essential

personnel resources in support of efforts to strengthen military

readiness through fiscal responsibility and departmental

efficiency."