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Analyzing Federal Contractor Intelligence for 2026

Introduction to Deltek’s Insights

Terry Gerton: Deltek has recently published a report that projects federal contractor intelligence for 2026. Before diving into future predictions, let’s take a moment to reflect on the significant shifts that occurred in the contracting landscape during 2025. What major trends have emerged?

Key Trends and Challenges of 2025

The Impact of Political Dynamics

Kevin Plexico: Without a doubt, 2025 was characterized by chaos. It’s fascinating to observe how some companies managed to align their strategies with the goals of the new administration and consequently thrived. Conversely, others found themselves adversely affected due to misalignment with the prevailing governmental priorities. This year emphasized the need for companies to carefully evaluate their target clients and refine their offerings to ensure they resonate with the administration’s objectives and the missions assigned to different government agencies.

Financial Fluctuations Among Agencies

Interestingly, we observed substantial shifts in funding streams across various agencies this past year. While certain agencies, such as the Agency for International Development and the Department of Education, saw cuts, others like the Department of Veterans Affairs, the Department of Homeland Security, and the Department of Defense continued to perform robustly. As a result, we’ve entered a dichotomy of "haves" and "have-nots." This situation necessitates that companies reassess where they should focus their efforts in light of the new administration’s direction.

Internal Struggles in Boardrooms

Adapting to Unexpected Pressures

Terry Gerton: Each new administration sets different priorities, yet this one seems to have shifted gears remarkably fast, catching many companies off balance. What challenging discussions were likely unfolding inside corporate boardrooms?

Kevin Plexico: Early in the year, the DOGE organization put immense pressure on various vendors, making demands that were quite unprecedented. Some letters sent to professional service companies were unlike anything seen in the past, which caused significant tension. Companies suddenly found themselves in a surreal predicament: being asked to identify wasteful expenditures in projects they were already contracted to execute. This created a rather uncomfortable dynamic.

As we navigated through the year, there was a noticeable transition; as summer approached, the focus shifted towards securing funding for 2026. As you’re aware, full-year appropriations for 2026 are still pending, with only a couple of exceptions. Moreover, the prolonged government shutdown that we just witnessed could potentially recur as we near the end of January.

Identifying Opportunities Amidst Uncertainty

Despite this unpredictability, one silver lining for the contracting community has been the introduction of the One Big Beautiful Bill. This legislation holds the potential for numerous opportunities across a wide variety of sectors, including aerospace, defense, professional services, training, architecture, engineering, and construction. However, capitalizing on these opportunities requires companies to conduct honest assessments and strategize on how to effectively pursue this funding, especially since the pertinent agencies may differ from traditional focal points.

The Re-evaluation of Funding Processes

Navigating Cash Flow Instability

Terry Gerton: As many of these funds remain undistributed, currently lingering in the RFP or RFQ phase, how has this inconsistency in funding impacted the GovCon community? Have they begun to reassess their strategies for managing cash flow?

Kevin Plexico: While the recent shutdown was certainly record-setting, a lack of clear appropriations isn’t a completely unfamiliar scenario for the industry. Companies have adapted to this challenge over time. Although shutdowns are far from ideal, they tend to be short-lived due to the unavoidably severe consequences they impose on the general public, prompting Congress to act.

However, what makes this situation unique compared to previous years is the absence of a bipartisan budget agreement—a common framework we have relied upon for nearly a decade. In the absence of a clear target for appropriators, we’re left uncertain about the future allocation of funds for 2026 and 2027.

Looking Forward: Insights from Deltek

Predicting Opportunities for 2026

Terry Gerton: With the disruptions of 2025 in the rearview mirror, what are the highlights of Deltek’s intelligence report as we look toward 2026?

Kevin Plexico: I believe 2026 will present better opportunities compared to 2025, primarily due to the provisions in the One Big Beautiful Bill. The funding initiated through this legislation isn’t confined to just one fiscal year; it allows for spending commitments to be made until the end of 2029, providing companies a valuable timeframe to strategize.

This "long runway" means that we won’t see the frantic rush often associated with emergency appropriations. However, the challenge lies in balancing increased defense spending with necessary reductions in civilian budgets—something previous administrations have struggled with, especially in the Senate where bipartisan approval is essential.

Addressing Small Business Concerns

Terry Gerton: Small businesses have notably faced significant challenges this past year. What does the future hold for them?

Kevin Plexico: This topic is quite complex. While the government has made strides in engaging small businesses, there’s been a concerning decline of nearly 30% in small businesses participating in prime contracting. A troubling trend is observed in the administration’s reliance on best-in-class contracts, which inadvertently benefits established companies while putting small businesses at a disadvantage in entering the market.

The Slow-moving legislative processes surrounding programs like SBIR and STTR further complicate matters. Small businesses, heavily dependent on cash flow, face heightened vulnerability during government shutdowns. The recent FAR overhaul could bring unpredictable changes that differentially affect businesses, including service-disabled veteran-owned firms and women-owned enterprises.

The FAR Overhaul and its Implications

GSA’s Centralization Efforts

Terry Gerton: Discussing the FAR reforms, the GSA has taken steps to centralize buying strategies and contracts. What should contractors anticipate from these changes?

Kevin Plexico: The GSA’s approach has led to confusion. Traditionally, FAR updates follow a structured rulemaking process which now seems disrupted. Agencies are adopting FAR revisions with class deviations, resulting in varied adherence across entities. It’s essential for the contracting community to stay vigilant about differing regulations, as the landscape is no longer uniformly governed by a single FAR version.

Strategic Recommendations for Contractors

Navigating the Future Wisely

Terry Gerton: If you could offer contractors one crucial piece of advice for developing their 2026 business strategies, what would it be?

Kevin Plexico: I suggest focusing on what we refer to as the four Cs: Customers, Contracts, Compliance, and Competitiveness. Assess the right customers to target and which contracts can facilitate access to them. Compliance requirements will continue to be complex, with key focus areas including CMMC standards and the latest FAR changes. It is imperative for businesses to analyze their current situations, identify their target market, and devise thorough strategies to position themselves effectively, as these shifts require thoughtful and strategic pivots.

How AI Can Optimize Business Strategies

The Role of AI legalese decoder

In this evolving environment, AI legalese decoder can be instrumental for businesses navigating complex contracts and compliance requirements. By simplifying legal jargon and ensuring clear understanding, this tool enables contractors to focus on strategic positioning and adapting their business models to align with the new rules and opportunities in government contracting. It equips them with actionable insights that improve their decision-making process and ultimately helps them capitalize on available funding more effectively.

Conclusion

Overall, as we head into 2026, companies will need to stay agile, continuously assess their alignment with governmental priorities, and leverage tools that provide clarity and strategy in navigating the intricacies of federal contracting. By using technology like AI legalese decoder, businesses can mitigate risks and improve their operational adjustments in this dynamic landscape.

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