Federal Contracting Trends to Watch in 2026

The federal contracting landscape stands at a critical inflection point as contractors navigate unprecedented policy shifts, aggressive efficiency initiatives, and fundamental regulatory transformation under the Trump Administration's second term. Department of Government Efficiency (DOGE) contract terminations, broad acquisition policy changes, and aggressive agency workforce reductions and reorganizations are just some of the factors contributing to a complex landscape for federal contractors to navigate in 2026. Morphing agency priorities and structures, increased scrutiny of contract spending and growing compliance requirements all contribute to an intensifying competitive environment that will impact contractors’ operational costs, business development strategies and competitive positioning throughout 2026.

Key Trends to Watch

• Budgets and Spending: Post-shutdown contracting delays, DOGE-driven terminations and stark defense/civilian bifurcation ($831B+ defense vs. declining civilian budgets) have created unprecedented market volatility. Given the multiple continuing resolutions for FY 2025-2026, the final FY 2026 discretionary budget will provide much more insight into the administration’s real spending agenda.
• The Economy: The Trump Administration tariff agenda has contributed to some economic instability. Mixed economic signals show 3.8% GDP growth alongside rising inflation, wage pressures, and other costs that contractors cannot fully recover under fixed-price contracts.
• GSA Acquisition Reform: In its role as executive agent, GSA is tasked with contract consolidation, leveraging various strategies including the new Office of Centralized Acquisition Services (OCAS), OneGov direct-to-OEM purchasing, and pending mandates for the use of existing government-wide vehicles.
• FAR Overhaul: The Revolutionary FAR Overhaul (RFO) strips the FAR to statutory essentials, grants contracting officers broader discretion across set-asides and source selection, and mandates "commercial-first" approaches prioritizing existing vehicles over new procurements. Although agencies can incorporate RFO revisions now, formal rulemaking to codify the changes is expected to begin in earnest in 2026.
• Defense Reform: DOD’s broad acquisition reform strategy will take shape in 2026. The recently released Acquisition Transformation Strategy empowers new Portfolio Acquisition Executives (PAEs) with consolidated authority, mandates modular open systems approaches, and prioritizes Other Transaction Agreements (OTAs) and Commercial Solutions Openings (CSOs).
• Small Business: Small business participation continues declining, an existing trend exacerbated by the disproportionate impact of DOGE contract terminations in 2025. Facing a range of challenges – from category management consolidation and potential 8(a) program changes to increased fixed-price risk and cash flow pressures – small businesses will require robust strategies and relationships to drive success in 2026.
• Cybersecurity: Cyber compliance will continue to be a significant operational and financial consideration in 2026. CMMC phased rollout began in November 2025, requiring Level 1-2 self-assessments initially and progressing to Level 2-3 certifications through 2028. The proposed government-wide FAR CUI rule would extend NIST cybersecurity standards beyond DOD, and FedRAMP 20X aims to accelerate authorization processes.
• Artificial Intelligence: The White House AI Action Plan directed 90+ policy actions across innovation, infrastructure, and international leadership pillars in 2025. In 2026, contractors can expect more attention and a wide range of legislation focused on both government and private sector use of AI.
• Agency Reorganizations: Executive orders and policies early in the administration set the stage for government-wide Agency RIF and Reorganization Plans (ARRPs) consolidating duplicative functions, the elimination of offices and the centralization of administrative functions such as HR, IT, and procurement. Agency structures will continue to evolve and take root in 2026, requiring contractors to expand and adjust customer intelligence strategies.
• Federal Workforce: Workforce reductions have been a key priority for the Trump Administration, resulting in the elimination of 317K federal employees and several executive orders designed to “right-size” both the civilian and defense workforce. The true state of the federal workforce remains unclear due to stagnant reporting, but 2026 is likely to provide more insight, particularly in areas that cause procurement bottlenecks, such as contracting, program management and IT.

Critical Insight for Vendors

This report provides a view of diverse factors shaping the federal contracting market landscape for 2026 and that will impact opportunities, competition, and the cost of doing business. The report provides recommendations to guide solution providers in maximizing their market positioning to best take advantage of federal business opportunities.

Deltek’s Federal Contracting Trends to Watch in 2026 is delivered in PowerPoint® presentation format, including an Executive Briefing presentation summarizing the key findings and an Excel® workbook with select data behind the report analysis and other key findings.