Walt Disney once said, “It’s kind of fun to do the impossible.”
For many organizations, especially in today’s cost-constrained environment, the “impossible” is maintaining growth and margins while expenses quietly drift upward. From a CFO’s seat, that challenge often comes down to one thing: contract discipline.
The Pentagon’s recent review of its 8(a) contracting program has sparked political debate, but underneath the rhetoric is a lesson every CEO and CFO should recognize as basic financial management. Strip away the headlines, and what remains is a case study in CFO contract discipline applied at scale.
What’s Actually Happening at the Pentagon
Defense Secretary Pete Hegseth has ordered a review of the Department of Defense’s use of the Small Business Administration’s 8(a) program—the federal government’s oldest DEI-related small-business contracting initiative.
The review focuses on whether contracts:
- Align with core warfighting priorities
- Deliver value at competitive prices
- Are actually being performed by the contracted party, rather than passed through to larger, ineligible firms
Special scrutiny is being placed on sole-source and set-aside awards over $20 million, where competition and pricing discipline are often weakest.
In plain terms, leadership is asking the same question any CFO should ask:
Are we buying the right services, from the right vendors, at the right price—and are they actually doing the work?
Politics Aside: This Is CFO Contract Discipline
Remove the culture-war framing and what’s left is a set of non-negotiable financial controls:
- Annual contract reviews
Long-tenured vendors should periodically justify their value relative to the market. - Rebid by default
Large or long-running contracts should go back out to bid, even when the incumbent is well liked. - Pricing benchmarks
Key contracts should be compared against at least two or three alternatives to validate rates, scope, and service levels. - Performance verification
The party being paid should be the party doing the work—not quietly subcontracting at a margin.
In government, this shows up as a high-profile review. In business, it should show up as a disciplined, recurring vendor and contract audit owned by finance.
The Hidden Cost of “Set It and Forget It” Contracts
Most organizations don’t overspend because of fraud. They overspend because of inertia.
- Vendors become “part of the family,” and no one wants to rock the boat
- Contracts auto-renew with escalators that are never challenged
- Scope creep accumulates: extra modules, add-ons, or services no one actively uses
- Leadership assumes, “We negotiated this hard years ago, so it must still be good”
The Pentagon’s concern about pass-through contracting is simply an extreme version of a common private-sector problem. The entity you think you’re paying for value may not be the one actually creating it.
In practice, this shows up as stacked consultants, redundant software tools, and reseller markups that no one is monitoring.
A CFO’s Playbook for Contract Discipline
You don’t need a multi-billion-dollar budget to apply CFO contract discipline. You need a repeatable operating rhythm.
For mid-market companies, a practical playbook looks like this:
1. Annual Contract Inventory
- Maintain a centralized list of all recurring contracts above a material threshold (for example, $10,000 per year)
- Include vendor, internal owner, term, renewal dates, pricing, and escalation clauses
2. Risk- and Spend-Based Triage
- Flag high-value, high-dependency, and sole-source contracts
- Prioritize these relationships for deeper annual review
3. Structured Rebid and Market Checks
- Run formal RFPs or competitive market checks every two to three years for critical spend
- Require apples-to-apples comparisons on scope, SLAs, and total cost of ownership
4. Performance and Compliance Review
- Measure actual service delivery against contractual commitments
- Confirm who is performing the work, where data is handled, and whether regulatory requirements are still met
5. Governance and Documentation
- Assign clear ownership (CFO, controller, or procurement lead)
- Document why you retained an incumbent, paid a premium, or consolidated vendors
This is not procurement theater. It is a control environment that protects margin, reduces waste, and aligns incentives.
Turning Controversy into a Leadership Moment
For founders and executives, the Pentagon review is a useful internal conversation starter. Ignore the politics and ask three simple questions:
- Which of our long-standing vendors would survive a true “sledgehammer” review?
- Where are we relying on sole-source or no-bid relationships purely for convenience?
- If we had to defend every major contract to an external stakeholder tomorrow, could we prove it is market-competitive and strategically aligned?
Whether you support or oppose what’s happening in Washington, the operational lesson is the same.
Final Thought: Discipline Protects Strategy
Complacency is expensive. CFO contract discipline is not about cutting for the sake of cutting—it’s about ensuring that every dollar spent supports strategy, performance, and accountability.
Sacred-cow programs, favorite vendors, and legacy relationships should all be periodically tested against reality. Financial discipline demands nothing less.
