- Government contractors told BI that DOGE could bring both challenges and benefits to their industry.
- Reducing the federal workforce could open opportunities for government contractors.
- They said DOGE could help make federal contracting more efficient, though uncertainty remains.
The looming changes expected to be recommended by Elon Musk’s Department of Government Efficiency mean swirling uncertainties for federal employees.
However, government contractors — those who work with the US government but are not directly employed by it — told Business Insider they feel secure in their jobs, even if some have fears over how things will ultimately play out.
“I still view it as 100% very stable,” government contractor Wes Fisher told Business Insider about the wider industry.
“Without a doubt, we are a little scared,” said Tyler Pinson, CEO of Navarre Corporation, a company that provides non-emergency medical transportation to VA hospitals.
Pinson said there’s uncertainty in the contracting industry and he’s curious about where federal cuts will be directed. However, he said he thinks “services are less likely to be interrupted” or eliminated, and past administrations haven’t impacted demand for Navarre’s services.
BI spoke to more than half a dozen business owners and consultants in the government contracting space about how they feel DOGE could impact their work. Many of them said they see it as an opportunity, even if it comes with uncertainties and challenges, such as potentially lower contract amounts or more ambitious deadlines.
“We envision a lot more contracts coming out to outsource to government contractors,” said Derek Hoyt, CEO of government contracting platform GovSignals.
Deniece Peterson, senior director of federal market analysis at Deltek, which provides enterprise software for government contracting and other project-based businesses, told BI that if federal workforce reductions occur and specialized expertise is still required, it could create opportunities for other contractors. She said areas of opportunity depend on the particular market government contractors are working in.
For example, contractors working in federal offices might face challenges from agency budget cuts or return-to-office mandates. However, Peterson said the return-to-office mandates could also result in additional IT, maintenance, catering, and janitorial service contracts awarded.
“When there’s gaps in the federal workforce, that can be an opportunity for contracts,” Peterson said.
Limits on how much federal agencies can rely on outside contracts have already emerged as more details about President Trump’s federal hiring freeze are distributed. A government memo sent to the heads of executive departments and federal agencies on Monday said that contractors can’t be hired to take on the work that would have normally been filled by the roles in impacted job listings.
“Agencies shall not acquire by contract with a commercial vendor services that are substantially similar to those that would have been provided by a Federal civilian in a vacancy covered by the [presidential memorandum],” the memo said in reference to Trump’s executive order.
Hoyt said the directive ensures that “a prospective federal civilian hire could not be brought in as a contractor” to fulfill the original role. Peterson said that the instruction “may not make much difference” since contracts “to replace certain functions could take longer to put into place” than the length of the current hiring freeze.
Symoné Berry, a tech worker in government contracting, said she doesn’t think federal cuts will happen “in one fell swoop,” but even if there are some reductions, there will always be “work to be done” in the realm of government contracting. She said that when it comes to modernizing technology or making upgrades, tasks in line with DOGE’s new mandate, government contractors are often hired to do the work.
A more efficient government could remove a ‘major pain point’ for contractors
Rich Weber, a partner for advisory firm Moss Adams, which works with government contractors, told BI in an interview ahead of Trump’s inauguration that there will likely be a push for efficiency that begins with federal workers and trickles down to contractors.
Adaptability will become “critically important” for government contractors as will being able to expand into needed areas, he said.
Hoyt, who runs a platform that helps clients win government contracts, said DOGE’s push for operational efficiency could accelerate the contract award process, helping to remove “a major pain point for our clients.” Speedier processes could also open up opportunities for smaller businesses, he added.
Hoyt said that with the current system in place, it can take up to 18 months to win a contract, which could create national security risks in situations where agencies can’t get access to what they need fast enough. He added that the extensive processes, rules, and regulations surrounding government funding awards often lead to lengthy timelines, especially given the many procurement opportunities that can arise daily.
“For almost 20 years I’ve seen the compliance around the entire contracts life cycle kind of grow into this massive mountain of paperwork and documentation and bureaucracy,” Weber told BI.
Weber said DOGE could help simplify procurement procedures, speed up project initiation, and standardize requirements across agencies. He also said “accelerated funding allocations” could “improve cash flow,” especially for small business contractors.
Higher standards, increased competition, and doing more with less
Ripple effects from DOGE could work their way to government contractors in the form of smaller federal budgets to fund contract work and pressure to fulfill contracts for less money.
Vivek Ramaswamy, who was co-leading DOGE with Elon Musk before backing out ahead of an expected run for Ohio governor, previously said he anticipates “massive cuts among federal contractors and others who are over-billing the government.” The US Government Accountability Office posted in June 2024 that the federal government committed about $759 billion in contracts in the 2023 fiscal year, a roughly $33 billion year-over-year increase when adjusting for inflation.
Weber said it’s possible that the government could place “increased scrutiny” during the bidding phase of contracts. He also said there could be “stricter evaluation criteria” on projects.
“That would be the whole idea behind the agency,” Weber said, which is “trying to bring up the quality and efficiency of government projects.”
Weber said cost efficiency will likely become a higher priority, and delivering results under budget and ahead of schedule will become increasingly important. He added that there’s a high potential that the number of contracts awarded could decrease.
“Let’s say the overall budget decreases, then each individual line item may decrease and then you’re going to have potential increased competition and cost cutting,” Weber said.
If the overall budget for contracts gets reduced, Weber said contractors could see more competition and cost-cutting. That could also mean getting the job done with fewer individuals staffed on a project, or doing it for less money in a shorter span of time.
Some government contractors have also shared concerns about the future of minority set-aside funding for small businesses, which directly award contracts to certain subsets of qualifying small businesses.
Weber said set-asides could remain a key part of initiatives given the “entrepreneurial spirit” of the administration. However, Hoyt said it’s possible that the panel puts an “emphasis on different types of set-asides.”
While many in the government contracting space struck an optimistic view about their industry’s future, it is clear they are bracing for change.
After all, the potential trickle-down impacts on the sector sound right out of Musk’s playbook: Do more with less — and faster.
Are you a government contractor or a DOGE worker? Contact the reporter from a non-work email and device at aaltchek@businessinsider.com
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