Data Drop: Money Where Your Mouth Is: ACF Dramatically Reduced Contract Funding in FY 2025
Money Where Your Mouth Is: ACF Dramatically Reduced Contract Funding in FY 2025
By Robin Ghertner, Founding Director of Strategic Policy Intelligence, & Andrés Argüello, Founding Director of Narrative Intelligence
The Wonk team already broke down how grant funding has shifted during the first fiscal year of the Trump Administration.
This analysis is the second part of our FY 2025 ACF spending review—shifting from grants to contracts, the other half of the agency’s funding machinery.
BLUF
While ACF’s $64 billion in grants stayed largely intact, contract spending fell 70 percent year-over-year, from $1.9 billion to $569 million.
The cuts were both strategic and structural: large deobligations, early terminations, and cancelled procurement plans replaced routine adjustments.
These reductions mark a reorientation of federal capacity - to what isn’t yet clear - not just austerity.
They also match organizational structure and personnel changes at ACF; fFewer and smaller contracts now support more consolidated program offices with smaller staff.
Inside ACF’s FY 2025 Spending Shift: Contracts Take the Hit
Last month, we rolled out the first article in a two-part series examining how ACF spending changed under the Trump Administration’s “Defend the Spend” and Department of Government Efficiency (DOGE) initiatives.
That analysis focused on grants—the largest share of ACF’s budget—and found that nearly $64 bllion in grant funding moved largely untouched, despite HHS-wide directives to cut.
This week, we turn to contracts.
Although a much smaller piece of the ACF spending pie, the same directives that spared grants hit contracts hard—revealing a very different picture of how ACF absorbed the Administration’s push for efficiency.
A Note on Methods
As a refresher, federal agencies move money in two main ways:
Grants: The government funds others – such as states, tribes, or non-profit organizations – to carry out public purposes aligned with federal priorities.
Contracts: The government buys goods or services for its own use.
Using data from USASpending – which compiles all agency contract actions – we looked at the number of contracts issued and the amount of funding cut. We also approximated how much was cut by each program office in ACF.
Detailed data on contracts is tricky, so there are caveats.
Unlike with grants, federal procurement data systems don’t track the specific offices that issue a contract. This is partly because funding for contracts is fluid across offices.
One office may fund a contract issued by another office. Offices may also pool funds onto a single contract. As a consequence, we weren’t able to identify the office “owning” every single contract.
A Sharp Contraction in ACF Contract Spending
ACF reduced funding on contract awards by 70 percent - $1.3 billion - when comparing fiscal years 2024 to 2025. In 2025 ACF spent $569 million compared to $1.9 billion in 2024.
ACF reduced the number of contract awards by 15 percent – 439 in 2024 to 372 in 2025.
That’s a significant change.
It also means that contracts that were issued were on average much smaller: the average contract award amount was $774,100 in 2025 compared to $2.6 million in 2024.
Figure 1 shows the monthly funding obligations for fiscal years 2024 and 2025.
It shows that immediately after President Trump’s inauguration at the end of January, contracting decreased by $12 million. In every month except April, spending was less than in 2024.
Spending declined sharply again in September 2025, right before the end of the fiscal year. This likely reflects the agency letting funding lapse - meaning they did not spend all the money that Congress appropriated.
It is not uncommon for an agency to let some funding lapse at the end of the year - a contract may fall through at the last minute or contract awards may come in lower than expected, and remaining funds may not be able to be spent in time.
What is unusual is the magnitude; a lapse of this much is quite uncommon.
Breakdowns by Program Office: Who Bore the Brunt?
Figure 2 shows the breakdown of ACF contract funding by program office.
The Office of Refugee Resettlement (ORR)—which accounted for nearly 70 percent of ACF’s total contract spending in FY 2024—saw the steepest decline in FY 2025.
ORR’s contract obligations fell by 90 percent, from $1.3 billion to $129 million.This mirrors the pattern seen in the grant data from Part I of this series, where ORR’s grant obligations dropped by more than $1 billion.
The reason is not administrative alone. Early in the Trump Administration, the refugee cap was sharply reduced, new restrictions were placed on the entry of unaccompanied children, and multiple ORR-funded services—such as legal representation and post-release supports—were curtailed or defunded.
Those policy shifts directly reduced the demand for contracted services like shelter operations, case management, and transportation, producing an immediate contraction in obligations.
Other ACF offices saw smaller but still significant declines. The Office of Child Care and the Family and Youth Services Bureau each spent over 60 percent less in 2025.
The Children’s Bureau spent 28 percent less on contracts—a reduction of nearly $70 million—while Head Start contracts fell more modestly, reflecting a broader retrenchment rather than program elimination.
ACF Cut Contract Spending Visibly…
ACF cut funds in three ways that are transparent to the public:
Reduced Obligations on Active Contracts.
The agency modified existing awards to reduce the amount obligated on them.
In 2025, ACF reduced funding obligated on contracts by 86 percent, compared to 11 percent in 2024. Reductions in obligations – called deobligations – mean reductions in the amount of commitments on an award.
Deobligations are often routine, if the actual spend down on a contract is less than the anticipated amount. Deobligations can also reflect contract modifications.
While we cannot identify which deobligations are a result of a decision by ACF to cut funding, the magnitude of deobligations is well beyond routine.
Early Terminations
ACF terminated 69 contracts early in 2025, compared to just one in 2024.
Over 40 percent of those terminations happened within the first two months of taking office – likely reflecting DOGE-directed efficiency targets.
DOGE leaders gave program offices both numeric goals for cuts and specific lists of contracts to review.
Cancelled Procurements
Every year, ACF plans on procuring a number of services and products through new contracts.
A substantial proportion of the gap in the contract spending between 2024 and 2025 was likely due to procurements that were planned but not ultimately completed.
ACF posted contract solicitations that were not ultimately funded. We can’t unfortunately systematically count these, but we know of a number of procurements that ended before they even could start.
…And Quietly
Beyond visible reductions, ACF also trimmed contracts in quieter ways—by ending planned procurement actions.
Looking at the gap in funding between 2024 and 2025, and discounting the known deobligations, as much as $860 million in contract funding was cut through changed procurement plans.
This includes plans to issue new contracts and plans to exercise contract options.
Agencies create their annual procurement plan, usually at the start of the fiscal year, and can issue procurement notices at any time.
Often these notices are made public later in the fiscal year, well after January (that is, after the start of the Trump administration).
The large-scale reexamination of contracts meant that every new procurement required an efficiency review, and many were canceled.
Most federal contracts include optional tasks or additional performance periods the agency can activate later. Choosing not to exercise those options effectively ends a contract early without formally terminating it.
The exact number of abandoned procurement actions - whether for new contracts or options - can’t be quantified.
But internal accounts suggest that not issuing planned requests for proposals and skipping options represented a substantial share of the overall reduction.
What Can We Expect for 2026
The 2025 reductions point to two possible realities for the year ahead.
First, given this trend and broader Administration priorities, it’s reasonable to anticipate that the agency will continue with a lower number and dollar value of contracts in 2026.
Second, with staffing reductions and consolidated services across program offices, the agency may lean more on contract support for tasks that were previously done by federal employees. That could either mean expanded contracts in 2026, or more deliverables per dollar for contractors.
What we know is that we are at a structural shift in the contract environment in 2026. Whatever the ecosystem looks like going forward, it will not look like what we saw in 2024.
This is an obvious and immediate concern for firms that rely on contracts for revenue, but it’s also something that state and local agencies need to pay attention to.
ACF also uses contracts to provide services to child welfare and related agencies.
These are services that many grantees rely upon to do their work, like technical assistance and training, data collection and evaluations, and provision of direct products and services.
Federal procurement of those services makes the work of state grantees easier. Reduced funding on these contracts may indirectly affect the stability of grant-funded work, even if grants remain stable.
It may not be clear to states what support was provided by federal contracts. This can make it hard for state and local leaders to strategically adapt to the new environment.
The Wonk will be keeping a close eye on emerging gaps in federal support, to understand what programs may be most affected and what types of federally-funded services jurisdictions may no longer be able to rely upon.