• In 2019, Oracle won deal for cloud HR management software

• Tech has been on alert for canceled federal contracts

The US Department of Defense said it will terminate a plan to use Oracle software to manage its civilian workforce as part of the Pentagon’s cost-cutting efforts.

U.S.-listed shares of the company fell 2% in premarket trading.

“This program was intended to streamline a significant portion of the department’s legacy human resources information technology stack — an important mission we still need to achieve,” Defense Secretary Pete Hegseth said in a memo released last week. More spending on the project “would be throwing more good taxpayer money after bad,” he said.

In 2019, Oracle said its cloud HR software was selected by the Defense Department for management of the Pentagon’s 900,000 civilian employees. In 2020, Leidos Holdings Inc. said it would provide services and support for the initiative, with a total potential value of about $75 million.

Hegseth wrote that the program and other associated contracts are six years behind schedule and more than $280 million over budget. Now, the department has 60 days to develop a new plan for streamlining HR technology operations, Hegseth wrote.

The Pentagon didn’t provide details on the contract or further comment despite repeated requests. Bloomberg News identified Leidos and Oracle through a search of contracts and defense websites.

Oracle didn’t respond to a request for comment. A Leidos spokesperson declined to comment.

It hadn’t been previously reported that the initiative was based on Oracle software. Maintaining the current DOD civilian HR system and developing the new solution was estimated to cost about $92 million for fiscal year 2025.

Oracle’s stock fell 1.9% in premarket trading in New York on Friday. Leidos shares declined 2.2%.

Oracle has longstanding relationships with federal agencies, with flagship deals including a $16 billion contract to modernize health records for the Department of Veterans Affairs. The company’s executives also have relationships with the Trump administration: Chairman Larry Ellison has donated to Republicans, including Trump, and is also close with Elon Musk, a central figure in Trump’s orbit and head of his cost-cutting effort. Oracle Chief Executive Officer Safra Catz served on Trump’s transition team ahead of his first term.

Software makers that sell to the US government have been on high alert for any impact from federal cost-cutting efforts. Trump has sought to slash spending and reduce the government workforce. His executive order establishing the Musk-led Department of Government Efficiency within the purview of the White House specifically referenced an effort to modernize technology.