How Will the New Administration Impact Government Contracting?

With every new presidential administration, government contractors brace for shifts in policy, spending priorities, and regulatory changes that could affect their businesses. Now that the Trump administration has taken office, the question on everyone’s mind is: How will federal contract spending change under the new administration?

The good news for government contractors is that, regardless of political shifts, federal spending continues. The challenge is understanding where that spending will be directed and how to pivot accordingly. While Trump’s policies suggest certain reductions in government programs, they also indicate increased spending in areas like defense, border security, and infrastructure.

In this article, we’ll break down the anticipated changes in government contracting under the new administration and provide insights on how businesses can adapt.

What We’ve Seen Before: Lessons from Trump’s First Term

Looking back at Trump’s first term in 2017-2021 can give us clues about what to expect moving forward. When Trump took office in 2017, overall federal contract spending increased rather than decreased. Despite talk of reducing government size, agencies continued to award billions of dollars in contracts. However, where the money was spent changed.

• Defense Spending Increased: The Department of Defense (DoD) saw a budget boost to strengthen military capabilities.
• DHS Funding Grew: Border security and immigration enforcement received significant investment.
• Cuts to Domestic Agencies: The EPA and the Department of Education experienced budget reductions.

Now, with the Trump administration back in office, we see similar themes emerging. The administration is expected to follow a playbook that includes increased defense and security spending while scaling back diversity, equity, and inclusion (DEI) initiatives and restructuring federal agencies.

Potential Decreases in Federal Spending

Some government programs are expected to see funding cuts under the new administration. Here are key areas that may be impacted:

1. Reduction in DEI and Small Business Certifications

One of the most discussed changes is the rollback of DEI programs in government contracting. Under Biden, there was an increased focus on awarding contracts to Disadvantaged Business Enterprises (DBEs) and other socio-economic groups. Trump’s new executive orders are expected to reduce federal emphasis on diversity-focused procurement.

What does this mean for small business certifications like 8(a), HUBZone, and WOSB? While these programs cannot be eliminated by executive order, the goals and preferences associated with them may shift. For instance, the Biden administration had set a 15% target for federal contracting with small disadvantaged businesses. This is expected to revert back to the historical 5% under Trump.

2. Cuts to Department of Education and EPA

Trump has historically pushed for decreased funding for the Department of Education and environmental programs under the EPA. If your company provides services or products to these agencies, it’s essential to reassess contract opportunities and consider expanding into other agencies.

3. Foreign Aid and International Assistance

The administration has signaled a shift in foreign aid spending, with a preference for keeping federal dollars within the U.S. This could impact USAID contracts and State Department initiatives focused on international development.

4. IRS and Tax Enforcement

Under Biden, the IRS received increased funding to enhance enforcement and auditing capabilities. Trump is expected to scale back IRS funding, which could affect contracts related to tax enforcement and agency modernization.

Potential Increases in Federal Spending

Despite reductions in some areas, there are key industries that are expected to see increased government contract opportunities under the new administration. If you are a government contractor, now is the time to follow the money and pivot accordingly.

1. Defense and National Security

As with his first term, Trump has indicated a focus on military expansion and national security. Contractors serving the Department of Defense (DoD), intelligence agencies, and cybersecurity should expect continued growth in spending.

Additionally, with increased geopolitical tensions, there will likely be more opportunities in defense technology, AI, and space exploration, including contracts with NASA and military contractors working on classified projects.

2. Border Security and Immigration Enforcement

One of the administration’s top priorities is border security and immigration enforcement. The U.S. Customs and Border Protection (CBP) agency is set to receive more funding for border patrol, detention facilities, and technology infrastructure.

Companies involved in security technology, surveillance, personnel training, and construction for border facilities will see more contracting opportunities.

3. Infrastructure and Manufacturing

While the previous administration focused on green energy and infrastructure modernization, Trump is likely to emphasize traditional infrastructure projects, such as:

• Roads, bridges, and transportation
• Domestic manufacturing expansion
• Buy American initiatives (prioritizing U.S.-made products in government contracts)

Construction firms, manufacturing companies, and logistics providers will benefit from these domestic-focused initiatives.

4. Staff Augmentation and Federal Workforce Changes

The Trump administration has suggested a potential hiring freeze in federal agencies, which means that many government offices may turn to staff augmentation contracts to fill critical roles. This presents an opportunity for government contractors providing:

• IT and cybersecurity personnel
• Administrative and operations support
• Compliance and consulting services

What Should Government Contractors Do Now?

With these anticipated changes, government contractors must be proactive in their approach. Here’s what businesses can do to stay ahead:

• Monitor USA Spending Data: Use USAspending.gov to track where federal dollars are flowing. Watch for trends in contract awards and agency budget changes.
• Reassess Your Market Position: If your business has primarily focused on agencies expected to face funding cuts, explore new opportunities in defense, infrastructure, and security.
• Update Your Capability Statement: Make sure your Capability Statement aligns with shifting government priorities. Agencies receiving increased funding should see how your business fits into their objectives.
• Engage in Market Research: Utilize FedBiz Access’ Market Intel Database to identify upcoming contract opportunities and government buyers who need your services.
• Diversify Revenue Streams: Don’t rely on a single agency or contract type. If your main customer is affected by budget cuts, pivot to adjacent markets.
• Stay Connected with Federal Decision-Makers: Engage with federal acquisition officers on LinkedIn, attend industry conferences, and participate in networking events to stay informed on agency shifts.

FedBiz Access: Helping Businesses Succeed in Government Contracting

For over 24 years, FedBiz Access has been the leading government business development firm, assisting small businesses in the government marketplace from registration to award. If you need help with:

• Optimizing your SAM.gov and DSBS registrations
• Expediting socio-economic certifications (8(a), HUBZone, WOSB, SDVOSB, etc.)
• Market research to identify the right opportunities
• Direct marketing to government buyers

Schedule a complimentary consultation with a FedBiz Specialist today and ensure your business is positioned for success under the new administration.