The Department of Veterans Affairs is preparing to issue what’s likely to become one of the largest service contracts in government history as it restructures its arrangements, aiming for rigorous management of the department’s role as a health care payer and greater competition among health care management firms.

The massive contract vehicle represents only the second time VA has signed large contracts with health plans to coordinate private sector care for veterans. The first was shortly after the MISSION Act was signed in 2018. Those contracts are now expiring, and in their place, VA is preparing one large indefinite delivery/indefinite quantity contract with a total potential value of $700 billion over the next ten years.

Among the changes the department is aiming for is a much more rigorous approach to program management in its “community care network,” said Richard Topping, VA’s assistant secretary for management and chief financial officer.

“This program has been unmanaged since its inception. None of the tools, none of the controls that we are talking about introducing here have been available,” he told the House Veterans Affairs Committee on Thursday. “VA had no ability to manage this program, to drive quality, to focus on the outcomes for veterans, to focus on cost. We’ve now got the ability to do that in this contract. The way we designed this unmanaged program also made it very difficult for industry to partner with us. It made it very difficult for community providers to serve our veterans, because it didn’t operate like any other payer program.”

The new contract, called Community Care Network Next Generation, is meant to change much of that. VA says the department intends to cast a wide net for vendors — creating an indefinite delivery/indefinite quantity contract that doesn’t only attract large, national health insurers.

“We are very intentionally not limiting it to the large vendors. The intention is to open this up to competition, to non-large vendors, to those who might bring regional capabilities, regional capacity, and that would not be able to operate on a national or semi-national scale,” Topping said. “They will incur a cost to bid and be awarded a spot on the vehicle. But once they do that, the vendors who are on the vehicle with us, large and small, have a seat at the table with VA, with our program management team to design the task orders. There are two initial task orders in the initial award, those look a lot like what we have now. But we are going to immediately partner with the vendors on the vehicle to begin to build the next more regional, more adaptable, more local models in our task orders.”

Value-based payment models and utilization management

VA plans to use the ID/IQ for its purchased health care for up to ten years. The contract includes a three-year base period, followed by three two-year option periods, and a final one-year option period. During that time, the department plans to use on-ramps and off-ramps to bring new vendors onto the contract — and remove ones that aren’t meeting performance standards.

And contract performance will be overseen and measured by VA program officials who plan to start implementing measures that value quality care over numbers of procedures performed, Topping said.

“VA will implement a comprehensive quality program for community care providers based on nationally recognized measures from the Agency for Healthcare Research and Quality. Contractors will track patient safety events, identify veterans at risk of avoidable visits and readmissions through predictive analytics, and while respecting their choice, guide veterans towards higher performing providers,” he said. “Next Gen will modernize how VA pays its contractors for the care furnished to veterans by implementing value-based payment models. We will begin with episode-based payments for lower extremity joint replacements. As we gain the data and the expertise to manage alternative payments, we will introduce at least three additional models over the performance period of the contract to continually improve care. These models will shift payment away from volume and toward outcomes and total cost of care, which aligns contractor incentives with veterans’ health and system sustainability. We will introduce utilization management. This includes active management of inpatient admissions, emergency department use, concurrent hospital reviews, and high cost drugs administered in clinical settings. This will reduce unnecessary hospitalizations and inappropriate care while protecting veterans’ access to medically necessary services.”

Questions from Congressional overseers

But the department faced bipartisan skepticism during the hearing, partly because VA officials have been slow to detail their plans for the CCN Next Gen effort to members of Congress. VA’s overseers on the House Veterans Affairs Committee say they found out the details of the contract at the same time vendors did — when the request for proposals was released a little over a month ago.

“I understand the VA finds it unprecedented to hold a hearing on an active contract solicitation. I appreciate the sensitivity of the contract, but it is also unprecedented to avoid Congress’s oversight of $1 trillion of spending,” said Rep. Mike Bost (R-Ill.), the committee’s chairman. “My staff and the ranking member’s staff have been told that some topics are off limits because of the sensitive nature of the contract and solicitation. We’ve tried to create a venue in which VA would feel comfortable to speak candidly to our members, but unfortunately, VA failed to assure us of such candor.”

Meanwhile, Democrats on the committee also worry that the new contract will serve as a way to further privatize VA health care — pointing out that more than 40% of veterans’ care is already delivered by private providers through the existing contracts.

Rep. Morgan McGarvey (D-Ky.) said he worried that the contract will lead to large, vertically-integrated conglomerates driving veterans into facilities they control, and away from smaller community-based providers.

“I don’t trust big insurance companies to take care of anybody. The sole thing that motivates them is profit. It’s not people, and it’s certainly not our veterans,” he said. “We have the right to be skeptical when we are talking about private insurance companies taking care of people, because right now they don’t.”

But Topping said the department believes it can avoid problems like the ones McGarvey is worried about through strong oversight and program management.

“The vendors, our health plan partners on this, don’t make the clinical referral from the direct care system to community care. VA does that,” he said. “They don’t make the referral to the provider or determine eligibility [for community care], VA determines that. VA drives where and how our veterans receive care, and we want to know what we’re buying. We want to steer our veterans to the highest quality, lowest cost providers. That goal is not unique to VA — it’s new to us, but we’re bringing this into this program.”

Vendors hoping for a spot on the contract have until March 16 to submit their proposals.

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Interview transcript

Terry Gerton We’re going to talk about one of everybody’s favorite topics, FedRAMP. It’s been around for years, but agencies are still struggling to get modern tools. So from your perspective, why is the process so hard for software and service companies to get through?

Irina Denisenko  It’s a great question. Why is it so hard to get through FedRAMP? It is so hard to get through FedRAMP because at the end of the day, what is FedRAMP really here to do? It’s here to secure cloud software, to secure government data sitting in cloud software. You have to remember this all came together almost 15 years ago, which if you remember 15 years ago, 20 years ago, was kind of early days of all of us interacting with the internet. And we were still even, in some cases, scared to enter our credit card details onto an online website. Fast forward to today, we pay with our face when we get on our phone. We’ve come a long way. But the reality is cloud security hasn’t always been the, of course, it’s secure. In fact, it has been the opposite. Of course, its unsecure and it’s the internet and that’s where you go to lose all your data and all your information. And so long story short, you have to understand that’s were the government is coming from. We need to lock everything down in order to make sure that whether it’s VA patient data, IRS data on our taxpayers, obviously anything in the DoW, any sort of information data there, all of that stays secure. And so that’s why there are hundreds of controls that are applied to cloud environments in order make sure and double sure and triple sure that that data is secure.

Terry Gerton You lived the challenge first-hand with your own company. What most surprised you about the certification process when you tackled it yourself? What most surprise me?

Irina Denisenko  When we tackled FedRAMP ourselves for the first time was that even if you have the resources and specifically if you $3 million to spend, you know, $3 million burning a hole in your pocket doesn’t happen often, but even if have that and you have staff on the U.S. Soil and you have the willingness to invest all of that for a three-year process to get certified, that is still not enough. What you need on top of that is an agency to say yes to sponsoring you. And when they say yes, to sponsoring you what they are saying yes to you is to take on your cyber risk. And specifically what they’re saying yes to is to spend half a million dollars of taxpayer money of agency budget, typically using contractors, to do an initial security review of your application. And then to basically get married to you and do something called continuous monitoring, which is a monthly meeting that they’re going to have with you forever. They, that agency is going to be your accountability partner and ultimately the risk bearer of you, the software provider, to make sure you are burning down all of the vulnerabilities, all of these CVEs, every finding in your cloud environment on the timeline that you’re supposed to do that. And that ends up costing an agency about $250,000 a year, again, in the form of contractors, tooling, etc. That was the most surprising to me, that again, even as a cloud service provider, who’s already doing business with JP Morgan and Chase, you know, healthcare systems, you name it, even that’s not enough, you need an agency sponsor, because at the end of the day, it’s the agency’s data and they have to protect it. And so they have do that triple assurance of, yes, you said you’re doing the security stuff, but let us confirm that you’re doing the the security stuff. That was the most surprising to me. And why, really, ultimately, we started Knox Systems, because what we do at Knox is we enable the inheritance model. So we are doing all of that with our sponsoring agencies, of which we have 15. Knox runs the largest FedRAMP managed cloud. And what that means is we host the production environment of our customers inside of our FedRAMP environment across AWS, Azure, and GCP. And our customers inherit our sponsors. So they inherit the authorization from the treasury, from the VA, from the Marines, etc., Which means that the Marines, the Treasury, the VA, didn’t have to spend an extra half a million upfront and $250k ongoing with every new application that was authorized. They are able to get huge bang for their buck by just investing that authorization, that sponsorship into the Knox boundary. And then Knox does the work and the hard work to ensure the security and ongoing authorization and compliance of all of the applications that we bring into our environment.

Terry Gerton I’m speaking with Irina Denisenko. She’s the CEO of Knox Systems. So it sounds like you found a way through the maze that was shorter, simpler, less expensive. Is FedRAMP 20X helping to normalize that kind of approach? How do you see it playing out?

Irina Denisenko  Great question. FedRAMP 20X is a phenomenal initiative coming out of OMB-GSA. And really the crux of that is all about machine-readable and continuous authorization. Today, when I talked about continuous monitoring, that’s a monthly meeting that happens. And I kid you not, we, as a cloud service provider, again, we secure Adobe’s environment and many others, we come with a spreadsheet, an actual spreadsheet that has all of the vulnerabilities listed from all the scans we’ve done over the last month, and anything that is still open from anything prior months. And we review that spreadsheet, that actual Excel document, and then after the meet with our agencies and then, after that meeting, we upload that spreadsheet into a system called USDA on the FedCiv side, eMass, DOW side, DISA side. And then they, on their side, download that spreadsheet and they put it into other systems. And I mean, that’s the process. I think no one is confused, or no one would argue that surely there’s a better way. And a better would be a machine readable way, whether that’s over an API, using a standard language like OSCAL. There’s lots of ways to standardize, but it doesn’t have to be basically the equivalent of a clipboard and a pencil. And that’s what FedRAMP 20X is doing. It’s automating that information flow so that not only is it bringing down the amount of just human labor that needs to be done to do all this tracking, but more importantly, this is cloud security. Just because you’re secure one second doesn’t mean you’re secure five seconds from now, right? You need to be actively monitoring this, actively reporting this. And if it’s taking you 30 days to let an agency know that you have a critical vulnerability, that’s crazy. You, you got to tell them in, you know, five minutes after you find out or, you know to put a respectable buffer, a responsible buffer to allow you to mitigate remediate before you notify more parties, maybe it’s a four day buffer but it’s certainly not 30 days. That’s what FedRAMP20X is doing. We’re super excited about it. We are very supportive of it and have been actively involved in phase I and all subsequent phases.

Terry Gerton Right, so phase II is scheduled to start shortly in 2026. What are you expecting to see as a result?

Irina Denisenko  Well, phase I was all about FedRAMP low, phase II is all about FedRAMP moderate. And we expect that, you know, it’s going to really — FedRAMP moderate is realistically where most cloud service offerings sit, FedRAMP moderate and high. And so that’s really the one that the FedRAMP needs to get right. What we expect to see and hope to see is to have agencies actually authorized off of these new frameworks. The key is really going to be what shape does FedRAMP 20x take in terms of machine readable reporting on the security posture of any cloud environment? And then of course, the industry will standardize around that. So we’re excited to see what that looks like. And also how much AI does the agency, the GSA, OMB and ultimately FedRAMP leverage because there is a tremendous amount of productivity, but also security that AI can provide. It can also introduce a lot of risks. And so we’re all collaborating with that agency, as well as we’re excited to see what, you know, where they draw the bright red lines and where they embrace AI.

Terry Gerton So phase II is only gonna incorporate 10 companies, right? So for the rest of the world who’s waiting on these results, what advice do you have for them in the meantime? How can companies prepare better or how can companies who want to get FedRAMP certified now best proceed?

Irina Denisenko  I think the end of the day the inheritance model that Knox provides — and, you know, we’re not the only ones, actually there’s two key players.; it’s ourselves and Palantir. There’s a reason hat large companies like Celonis like OutSystems like BigID like Armis who was just bought by ServiceNow for almost $8 billion. There’s reason that all those guys choose Knox and there’s a reason Anthropic chose Palantir and Grafana chose Palantir, because regardless, FedRAMP 20X, Rev 5, doesn’t matter, there is a massive, massive premium put on getting innovative technology in the hands of our government faster. We have a window right now with the current administration prioritizing innovative technology and commercial off-the-shelf. You know, take the best out of Silicon Valley and use it in the government or out of Europe, out of Israel, you name it, rather than build it yourself, customize it until you’re blue in the face and still get an inferior product. Just use the best and breed, right? But you need it to be secure. And we have this window as a country. We have a window as country for the next few years here to get these technologies in. It takes a while to adopt new technologies. It takes awhile to do a quantum leap, but I’ll give you a perfect example. Celonis, since becoming FedRAMPed on August 19th with Knox — they had been trying to get FedRAMPed for five years — since getting FedRAMPed on august 19th, has implemented three agencies. And what do they do? They do process mining and intelligence. They’re an $800 million company that’s 20 years old that competes, by the way, head on with Palantir’s core product, Foundry and Gotham and so on. They’ve implemented three agencies already to drive efficiency, to drive visibility, to drive process mining, to driving intelligence, to drive AI-powered decision-making. And that’s during the holidays, during a government shutdown, it’s speed that we’ve never seen before. If you want outcomes, you need to get these technologies into the hands of our agencies today. And so that’s why, you know, we’re such big proponents of this model, and also why, our agencies, our federal advisory board, which includes the DHS CISO, the DOW CIO, the VA CIO are also supportive of this because ultimately it’s about serving the mission and doing it now. Rather than waiting for some time in the future.

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Interview transcript

Terry Gerton We’re going to talk about this case, Siemens Government Technologies. But before we dive into the case and the court’s decision, walk us through the basic premise here, which is about energy savings performance contracts. How do they work?

Zach Prince Sure, so the government, you know, it has a lot of facilities around the country and around the world. Many of those facilities are a little dated, let’s put it nicely, where they waste huge amounts of energy just because the infrastructure is built decades and decades and decades ago. So as part of a way to try to modernize and save energy, they’ve developed two different mechanisms that are the real workhorses of modernizing in this regard. There are what we’re dealing with here, which are energy savings performance contracts, and then their utility energy savings contracts, or UESCs. This is more of the former, not the latter, but those are really the two mechanisms. So the way that these work is there’s an IDIQ that will be held by a number of energy savings companies. Here Siemens is one of them. The interested agency will go out and ask for quotes to put together a preliminary audit, or a preliminary assessment rather, which is really a high level review of the federal facility and suggestion of ways that the government can save money and the cost of doing it. This always has to be not just cost neutral, but has to have an actual savings to the government. And that savings is passed on then to the contractor. The preliminary assessment is itself an expensive process, but it’s not nearly as expensive as the next part of this, which is if the government is interested in the preliminary assessment, they’ll ask for an investment grade audit or IGA, which is part of the task order award for the work itself. That can be millions of dollars. I mean, it takes tons of engineering time and real work from the contractor. And work that sometimes doesn’t always get compensated if there’s no ultimate award.

Terry Gerton So it sounds like there are a lot of ways that these projects could get derailed. What specifically went wrong in the Siemens case?

Zach Prince Well, it’s hard to tell reading just from the court’s decision, but it appeared that DLA, which was administering this large project at the Goodfellow Air Force Base in San Angelo, Texas, changed some requirements after that they had already received the first round of the investment grade audit from Siemens. They seemingly changed a ton of the assumptions that were used by Siemens to calculate the actual cost savings. And, as Siemens put it, required a full scale investment grade audit to be conducted again with a number of iterations that ended up costing somewhere north of $2 million.

Terry Gerton That change in assumptions is interesting, because as I read the case, it was almost two years from the initial request to Siemens’ submission of their audit. And so many things could have changed. Does that make these kinds of projects a risky proposition?

Zach Prince They make them complicated. And the agency really needs to be focused on getting these projects done, getting the investment grade audit to be based on facts, not things that could rapidly change, which is I think what happened here, so that they understand what they’re getting or what they might be getting and can execute the project.

Terry Gerton So Siemens brought the case in the Court of Federal Claims. What was their argument?

Zach Prince So as sort of the background to this, the IGA often is not compensated when there’s not a task order and companies know that this is a risk that they’re taking. The preliminary assessment is almost never compensated unless there’s a task order. So they know it’s a risk, but this is an unusual case because of how many iterations they went through with DLA just to then have the project totally canceled with nothing. So, they brought some pretty interesting challenges here. They frame this as a bid protest, primarily, as well as a breach of contract. So there was a contract, this IDIQ, with a task order for the preliminary assessment. That’s where they brought a contract claim under. They said the government breached its obligations to administer a task order for the work itself under that IDIQ, so that’s a contract dispute. They also said this was an improper administration of a task order award process where the government breached implied obligations to proceed in good faith and breached a variety of other statutes that really weren’t discussed in the case. But they framed it as both contract disputes and a bid protest.

Terry Gerton Speaking with Zach Prince, he’s a partner at Haynes Boone. How did the government respond to those allegations?

Zach Prince Well, the government just asked for the whole thing to be dismissed, which it often does. The bid protest issues are the ones that they really focused on and I thought were of particular interest for this case because it was really a novel approach to try to get compensation by Siemens. The government argued that there can’t be a bid protest here under the court’s bid protest jurisdiction because of what’s known as the FASA task order bar. It is, there is some limit to the jurisdiction of the Court of Federal Claims to hear disputes, bid protest disputes involving task orders. They either have no jurisdiction anywhere to have such bid protests or they have to go to GAO. But that limit has been hotly disputed and the subject of several Federal Circuit decisions and the government lost that claim here.

Terry Gerton And what else did the court have to say about Siemen’s creativity?

Zach Prince The court was more focused on the government’s attempt to trap Siemens by saying that either, if there’s a contract, an express contract, then they can’t bring an implied in fact contract, which is one of their arguments they had brought as a bid protest, essentially. But also the government said there is no express contract that gives rise to relief. So as the court put it, it’s heads, I win, tails you lose-type argument the government’s trying to make and it wasn’t going to pass muster here at least. The government might ultimately prevail, but this is a very preliminary stage and the court was not willing to dismiss here.

Terry Gerton So as you look at this case, what lessons do you draw for agencies and contractors around these kinds of projects?

Zach Prince Yeah, it’s really tricky and I’ve dealt with several of these contracts before. The contracting agencies often just don’t have money to fund the preliminary assessment and maybe don’t money to fund the investment grade audit either, hoping, everybody’s hoping together, that it will ultimately turn into a task order for the work. And these task orders might be massive, $50, $100+ million. We’re talking about multi-year projects for modernizing large, large facilities. But you can’t just proceed on hope. It always makes me as outside counsel nervous, but you as a government contractor or as a government agency, you have to have a good relationship with your contracted counterparts. And those relationships can really carry the day to get folks compensated when they otherwise might not have. You find money at the end of a fiscal year and you come up with some mods and make the contractor whole because you know you have to do business with them again. And you appreciate the fairness of it. On the contractor side, you have to recognize that there is risk here. And if you’re not gonna get an actual written commitment from the government, and not just the government of course, the authorized person from the government, to fund one of these projects, you might be left holding the bag. So they can be lucrative projects for sure, but there is risks. And, as always, the government has to proceed in good faith, which is Siemens’ primary argument here is, the government just kept shifting around requirements, ignoring the fact that it was going to cost millions to do that, and then tried to leave Siemens with nothing. But you have to proceed with these projects with eyes wide open.

Terry Gerton You mentioned risk there, especially for the bidders, but it seems like there’s risk for all the parties and it’s not always clear that the potential revenue down the line will offset some of that risk. Is there a better way to structure these kinds of projects that would help everybody in the long run?

Zach Prince That’s a great question. And I’m not just stalling because it’s really complicated and I don’t know the right answer. This is a really interesting mechanism to fund these types of projects. And the government likes it because they’re not really left paying for anything. If they save money and those savings pay the contractor ultimately, and even in the utility version of these types contracts where it’s structured a bit differently, it’s still not coming out of present appropriations generally. It is a savings that the government’s getting ultimately on its energy bills, and that’s being passed on to pay for the project. That’s a great way to do business. If the government doesn’t have to actually pay for anything, they’re not subject to ongoing appropriation problems, and they still can get what they need, that’s fantastic. The problem is just at the outset of these projects, there are all sorts of complications that really need to be considered carefully by all parties.

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The Small Business Administration suspended more than 1,000 companies in the 8(a) program. SBA made the decision after it deemed those small businesses non-compliant with its financial data request from December.

“Suspended firms have 45 days to appeal the suspension,” said Maggie Clemmons, an SBA spokesperson in an email to Federal News Network. “SBA will release further information on the suspensions in the coming days.”

The suspension comes after SBA sent a letter to more than 4,300 8(a) firms in December seeking 13 different data, ranging from a list of the company’s employees to bank statements for the last three fiscal years to a copy of all 8(a) contracts, as part of its ongoing audit of the program.

Data compiled by GovContractPros, an advisory services firm specializing in federal procurement, found that SBA admitted 753 companies into the 8(a) program in fiscal 2024. Of those 753 firms, the company says SBA suspended 156 of them.

In fiscal 2025, SBA says it admitted only 65 companies into the 8(a) firm. GovContractPros says SBA suspended 10 of those firms, including nine which joined the program after the Trump administration began leading SBA.

Lawyers that represent small businesses say SBA issued the suspensions on Wednesday based on the fact that the 8(a) firms either failed to submit their responses on or before the Jan. 19 deadline or submitted incomplete responses.

“At least some firms that submitted complete data call responses only one day late — on Jan. 20, and before any suspension notices were issued — often due to errors in the government-operated MySBA Certifications portal, nonetheless received suspension notices, indicating that SBA is taking a strict approach to alleged non-compliance with the filing deadline,” wrote Meghan Leemon and Matt Feinberg, partners with the law firm Piliero Mazza, on a blog post. “Firms subject to 8(a) suspension are not permitted to receive new competitive or sole-source 8(a) awards. However, firms are required to complete existing 8(a) contracts, and federal agencies may exercise options on those contracts, even while a firm is suspended, unless otherwise prohibited by statute or regulation.”

SBA’s new clarifying guidance

The suspensions are part of a broad Trump administration effort to audit the 8(a) program and address allegations of fraud and abuse. SBA’s data call was one of several ongoing audits to now include the Treasury Department, the General Services Administration and, as of last week, now the Department of Defense.

“The Biden administration expanded and then abused the 8(a) program to hand out billions in taxpayer-funded government contracts to favored minorities at the direct expense of honest small businesses, which is why we ended the practice on day one,” said SBA Administrator Kelly Loeffler in a press release. “Since then, the Trump SBA has been working to reverse the damage – and today, we’re reiterating one simple fact: the Biden-era practice of discriminating against white Americans is over, and reforms to enshrine that fact are well underway. The SBA is ending diversity, equity and inclusion (DEI) in federal contracting – and our programs will remain open to all eligible job creators in compliance with federal law.”

In addition to suspending nearly a quarter of the 8(a) program participants, SBA issued new guidance today clarifying that the small business development program “is open to job creators of every race – consistent with court orders, notices from the U.S Department of Justice (DOJ), and President [Donald] Trump’s broader effort to eliminate DEI across the federal government – and that any race-based presumptions of social disadvantage have been inoperative since 2023.”

The guidance outlines new ways the SBA will manage the program.

It says it will administer the 8(a) program based on race neutral requirements and there will be no presumptive preference given to anyone.

SBA also will no longer approve the use of “socially disadvantage narratives” as a way to get into the program. It removed from its website the Biden-era “Guide for Demonstrating Social Disadvantage.”

Finally, SBA will consider several factors when determining eligibility for the 8(a) program, including whether the individual has been a “victim of illegal or radical DEI policies or illegal affirmative action policies or has otherwise been the victim of discriminatory practices such as race-based quotas, set asides or hiring targets, in each case by government and non-government actors.”

SBA says these steps are in reaction to the “dramatic expansion” under the Biden administration of companies in the 8(a) program.

Since January 2025, SBA accepted just 65 new 8(a) firms into the program, compared to over 2,100 who were accepted during the four years of the Biden administration.

Undermining the 8(a) program?

Jackie Robinson-Burnette, a former SBA associate administrator in the Office of Government Contracting and Business Development during the Biden administration, wrote on LinkedIn that this change isn’t a small tweak, but it’s re‑anchoring of the program’s foundation.

“It’s important to reform the 8(a) program without crushing the firms the program was designed to help,” wrote Robinson-Burnette, who now is the CEO of Senior Executive Strategic Solutions. “Are we dismantling and putting a sledgehammer to the program to curtail spending $20 million-plus on 8(a) sole source contracts or is it about something else?”

John Shoraka, a former associate administrator of government contracting and business development at SBA and now the co-founder and managing director of GovContractPros, said the SBA and now DoD’s audits are part of a concerted effort to undermine the confidence in the 8(a) program.

“It seems to be one initiative after another initiative, sort of in a very sequenced flow of events to undermine the program and sort of put the brakes on the program,” he said. “I think there’s a perception, and, it’s the wrong perception, that the 8(a) program is, at its core, a DEI program. I honestly don’t think that the administration believes there is significantly more fraud in the 8(a) program than any other contracting program. In fact, the data shows, if you look at inspector general cases or if you look at Department of Justice cases, the instances of fraud in the set-aside programs and particularly the 8(a) program, are actually significantly lower as opposed to across the entire federal government. So when we focus on fraud, waste and abuse in the 8(a) program, I think it’s just raising the flag. They can’t really say we want to kill this program because it’s DEI, they need to identify some sort of red flag to point to and say, ‘Ah-a, we told you this program was fraudulent, and therefore we need to terminate or put the brakes on this program.’”

Leemon and Feinberg, from the law firm Piliero Mazza, said companies caught up in the suspension should consider sending an informal appeals to SBA to lift the suspension.

“If informal channels are unsuccessful, a suspended 8(a) company may — and should — appeal SBA’s decision within 45 days of the date of the Notice of Suspension to SBA’s Office of Hearings and Appeals. This process can be time consuming, and appeals decisions can be delayed for months or even years,” the lawyers wrote.

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Interview transcript

Terry Gerton You’ve published some interesting analysis lately. You looked at stock closing prices from January 21st to November 25th for the 100 largest publicly traded federal vendors. Why? What were you looking for?

Paul Murphy Well, what we wanted to do was get an indication of whether all the procurement changes and budget turmoil that occurred during President Trump’s first year affected the attractiveness of the large publicly traded vendors as investments. So what I did was I used Bloomberg’s contracts database, which I’m in every day, I use it to rank all the vendors by their fiscal 2024 obligations, and then I merged this list with Bloomberg’s terminal data. To assign company tickers and pull the historic trading price data to compare closing stock prices in January and December. Then we assign each company to their GICS market. GICs is an acronym for Global Industry Classification Standard. It’s not like the government to define markets like category management or product service code. Wall Street uses its own market definitions. And that’s how we analyze the price differences. We included stocks traded domestically and overseas, and we used the terminal data to convert prices into US dollars. It’s been a crazy year, as you know, for companies. And the last year, we’ve seen spending pauses, agency closures, contract terminations, clawbacks and consolidations, big markets like consulting targeted for reductions, various efficiency initiatives, particularly at GSA and DOD. There’s been an year-long CR and an extended shutdown, even tariffs. So we wondered, you know what’s the impact of all these events on investors?

Terry Gerton Pretty hard to do market planning and business modeling with that kind of turmoil. What’s the big headline? What were the big trends that you found as you looked at the data?

Paul Murphy Well, among the top companies, as you read, the average stock price went up, but let me back up a second and say, even though we have all this data, it’s important to keep in mind that federal contracts are just one indicator of a company’s financial health and its desirability as an investment. Many factors, as you know, contribute to stock price fluctuations, such as state and local contracts, commercial sales, earnings, profitability, debt load, interest rates. So the trend we wrote about broadly aligns with the Trump administration’s prioritization of big defense contracts and cuts to certain civilian agencies. And so what we’re seeing from our year end data, which we have in hand now, and we’re about to come out with a new year end analysis, is despite all of this financial turmoil, fiscal 2025 will go down as a strong year for contract spending. Certain parts of professional and IT services have taken hits, but there’s been steady spending, let me say, across a broad range of sectors, including defense aircraft, shipbuilding, missiles, satellites and surveillance, as well as strong spending by the VA, DOE, NASA, and DHS. So, we don’t want to go into too much detail to give away what we’re about to come out with, but, yeah, it’s been a strong spending year, and it’s not surprising to me that stock prices reflect that.

Terry Gerton It looked like about two-thirds of the vendors that you analyzed averaged returns of 23%, which is significantly higher than the broader market. When you look at the details, kind of, who came out on top as the big winners?

Paul Murphy Well, I think the companies that did the best, kind of looking at it from a broad lens, the companies that did the best were the ones that benefited from these numerous executive orders and directives that we’ve seen, as well as through actual contract spending. I mean, there is multi-year spending that sustains companies year to year without having to endure the ups and downs of the annual appropriations process. But the Trump administration has sent numerous signals to industry, which companies might be attractive as investment targets. For instance, January’s executive order to remove barriers to the deployment of AI, a June executive order to relax cyber mandates, the July triple directive AI action plan to remove regulatory barriers all send signals that companies like Palantir, Oracle, and Microsoft are in the mix for having a strong year. The April executive order about restoring America’s maritime dominance. And the recently successful review of the AUKUS security agreement with Australia and the UK sends signals that companies like General Dynamics, Huntington Ingalls, and even Fincantieri, although that’s an interesting company, are, you know, in the mix again for strong spending. But again, it’s important to keep in mind that contract revenue is just one indicator of a company’s investment attractiveness. And a government spending fundamentally is a political decision. So, you know, there’s risks, even as companies are doing well, there’re risks there that, you know, the seats in Congress or the presidency can change, policy and spending priorities can change as a result. So, these equity returns can change quickly, but this has been the snapshot since from January to December.

Terry Gerton I’m speaking with Paul Murphy. He’s a senior contracts analyst with Bloomberg Government. Paul, you mentioned Fincantieri. Talk to us a little bit more about the shipbuilding sector broadly and what’s going on particularly with that company.

Paul Murphy I think what’s happening broadly in the shipbuilding sector is that there’s a kind of a fundamental shift going on in national security strategy from one focused on land-based war fighting in Europe and the Middle East to a more naval focus covering the broad expanse of the Pacific Ocean in order to counter especially China and the Far East. And so you see the U.S. building relationships with countries like Australia and strengthening alliances with Japan and the Philippines. And there’s been big buildouts of base infrastructure at Guam. So companies in the shipbuilding sector, in the sectors that support shipbuilding, you know satellite surveillance, C2, uncrewed drones, there’s a big shift going on in the Navy’s dependence on heavy ships, you know, which can be disabled through the swarms of drones. I mean, there’s a real fundamental shift going on in their thinking. And, so I think companies in these sectors are — you’re seeing spending going there.

Terry Gerton You talked a little bit about the upside, companies that did really, really well. What’s your takeaway from folks who may be underperformed?

Paul Murphy Well, it’s interesting, even in periods of spending growth, and even when you have big companies, you can have, you know, underperforming contracts. I think it helps to be able to dig deep into, you know, company financials and, you know, descriptions of contract performance. And one company, obviously, that stands out as Lockheed. Their stock was down 10.5 percent from January to December. After flagging sales and lower profits mid-year, they were working on the big upgrade, what’s called the F-35, their big fighter contract, the big F- 35 Block 4 upgrade. And they were years behind schedule. They were experiencing difficulties upgrading and integrating the software. And so a pause was initiated in April and Lockheed attributed the decline in stock in part to this pause in F-35 spending. And they worked out a phased modernization approach with DoD and F-35 spending has picked back up as of December. So we may see a reversal of this trend. But even in periods of growth, you can see big companies struggle. And again, you know, with Fincantieri, similar kind of a story, except in shipbuilding. They had four of the six planned Constellation class frigates canceled after they experienced up to three years of delay. And they were three years behind on the second frigate in this six-boat contract. And so the Navy announced it was pulling the plug on the remaining four boats. And so Fincantieri’s stock late in the year plunged in double digits. And interestingly, they blamed their delays and problems in part in the inability to hire enough trained shipyard workers. So I think that’s actually an area, I think, of potential growth, training the workforce in advanced technology, both in shipbuilding but also in other technologies as well.

Terry Gerton Well, your analysis of 2025 is pretty deep as you turn your eyes toward 2026. What will you be watching for?

Paul Murphy Well, of course, we’re going to be watching defense and national security. I think shipbuilding, shipyard infrastructure, related training services, command and control modernization, drones, uncoupled vehicles, satellite communications, you know, they’re trying to build an integrated defense capability that will span  particularly the Pacific — but we’re not going to end relations with Europe, but it’s, it’s going to change fundamentally and I think they’re going try and rely on a lot more advanced technology to interconnect the services and tie more closely to the allies. President Trump just announced he was seeking a big increase in the fiscal 2027 budget, so we’ll see if he’s able to implement that if Congress goes along. Enterprise IT, and cybersecurity, still very resilient. Big emphasis on AI, zero trust, and secure cloud. Expect continued consolidation, I think, in the software licensing under OneGov, and GSA has this big OneGove initiative, and they’re one by one, they’re negotiating enterprise agreements with the big IT companies. And that will, you know, spread their software across the government. And civilian agencies, I think watch for Veterans Health Services, continued strong spending with Veterans Health Service. The VA has reinitiated the electronic health records deployment, Oracle’s big software contract. Space commercialization, we’re seeing in our top 20 every couple of weeks, you know, new elements of NASA’s commercialization of near space and deep space. Moving ahead, there’s, you know, energy plants, mobile energy plants going to be deployed on the moon. So that’s going to involve not only space companies, but energy companies and so there’s a lot of prototyping going on. There’s the national big national airspace modernization initiative by FAA. Right now they’re involved in a huge procurement to replace 600 radars across the country to better protect towers and airports. Border security, obviously a big area of spending. There’s a lot going on, not just in defense. I think it’s important to emphasize that the civilian sector continues to show strong spend signals.

The post Market data shows surprising winners and losers among top federal contractors after a year of turmoil first appeared on Federal News Network.

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Interview transcript:

Terry Gerton Deltek has a new report out that’s looking ahead for federal contractor intelligence for 2026. But before we look forward, I want to look back a little bit. When you think of everything that happened in the contracting space in 2025, what stands out for you as the biggest trends?

Kevin Plexico Well, chaos reigns supreme this past year, for sure. And what I find just super interesting is that some companies happen to find themselves in really good places and align to the goals of the new administration and did really well. And others that happened to be in sort of the wrong place at the wrong time had profound impact. I think 2025 was a year where companies had to really take stock of the organizations that they’re selling to and their offerings to make sure they’re aligned to the goals of the administration and the mission that the government agencies have been asked to take on by that administration. That’s probably, to me, the biggest change. There’s been so much movement of money, in some cases money coming out of certain agencies. We’ve all heard about Agency for International Development and Department of State and Education. But then you look at organizations like the VA, DHS, and DoD that have continued to do really well. So, a lot of haves and have-nots this year, and I think for companies it’s just trying to figure out, based on this new administration, where should we really be aiming to be able to capitalize on it going forward?

Terry Gerton Every administration comes in with different priorities, but it seems like this one was able to make the pendulum swing really fast, and that may have caught companies off guard. What are some of the hard conversations that had to happen inside those boardrooms?

Kevin Plexico Well, early on, it was all about DOGE and the DOGE organization really putting some unprecedented pressure on some vendors. I mean, some of the letters I saw sent to professional services companies and some of demands that were made of value-added resellers were not anything I’ve seen a federal agency communicate to a vendor that was otherwise performing to the jobs that they were asked to do. And I think it’s, in some respects, a bit surreal that the administration was asking companies to identify wasteful spending. It’s just an awkward situation to be in if you have a customer, and the customer already hired you to do the work, and you’re now being asked to identify where there’s wasteful spending in that and sort of serve up cuts. So I think that was the early part of the year. We did see that start to sunset a bit and fade as we got into the summertime. But then all of a sudden, all eyes were turning to appropriations and funding for 2026. And we all know where that’s landed, which it hasn’t. We’re still waiting for full-year 2026, with just a couple agency exceptions. We bought some time ending the shutdown, which was, as you know, the longest on record. But there’s nothing to say that we might not have another shutdown here at the end of January. I still think where there’s that bit of uncertainty, the one silver lining this past year for the contracting community is the One Big Beautiful Bill, just because it had so much opportunity in it for contractors that really cut across the gamut of aerospace, defense, professional services, training, architecture, engineering, construction. There was literally something in there for everybody, but it does require really an honest assessment by a company to figure out, okay, how do we get after this? Because that might not be in the agencies that they’re used to doing business in.

Terry Gerton Right. And a lot of those funds haven’t been dispersed yet. So they’re still maybe in the RFP or RFQ stage. This unpredictability of funding flows is something you don’t normally see in government contracts. Everything from stop-work orders and termination notices earlier in the year to unpaid bills at the end of the fiscal year and the CR. Has that caused the GovCon community to sort of re-evaluate and re-adjust their planning for predictable cash flows?

Kevin Plexico I think this year, while it was a record-setting shutdown, is not an unusual year in that we don’t have a line of sight on what line appropriations are going to get done. I think industry has become used to that scenario. And while shutdowns are certainly not good for anyone, they’re usually relatively short-lived because of what happens. The pain gets so severe that finally Congress is like, we’re inflicting a lot of pain on rank-and-file Americans, we need to resolve this. I’m hoping that cooler heads will prevail the next time that this comes around. What I think is perhaps different this time versus what we’ve seen, say, the last decade or so is we’ve always had a bipartisan budget agreement or resolution that sort of set the top line that appropriators were negotiating towards. I think we’ve had that literally for about a decade, since back during the Budget Control Act, and we don’t have that for ’26. So there was no goalpost that Congress was working towards on a bipartisan basis that that they agreed on previously. And I think that’s the same for 2027. That’s what’s unique about this, is there’s nothing that says, here’s the goal that we’re working towards, and then how do we allocate it by the different appropriations bills that are negotiated?

Terry Gerton Kevin Plexico is senior vice president of information solutions at Deltek. Kevin, let’s turn our attention to the windshield and not the rear-view mirror now. With all of that disruption in 2025, what is at the top of Deltek’s intelligence report for 2026?

Kevin Plexico Well, I think 2026 is going to be a better year than 2025, thanks primarily to the One Big Beautiful Bill. As you pointed out, it’s not a single-year appropriation. The funding in that legislation lasts through, I think it has to be committed in contracts essentially by the end of 2029; then expenditures can take longer. So that gives us a bit of time and it certainly doesn’t mean that it has get rushed out the door like we’ve seen — some emergency supplemental appropriations have had that shape. And so that provides some longer-term opportunity and ability for companies to reposition, to get after some of that money. The biggest challenge on the base-level appropriations, we’ve got this ambitious goal of growing defense spending, paid for by significant cuts in civilian spending, and we saw that under the prior Trump administration. But they were never able to get appropriators to buy off on that. And I think that’s the dynamic that we have in the Senate, where it has to get 60 votes to get past the filibuster. It does really need a bipartisan-level agreement to get appropriations done. That’s particularly challenging in these contentious times, but I do think it helps prevent those draconian cuts that could be put in place for some civilian agencies that we’ve seen this and the prior Trump administration ask for that usually have not been enacted.

Terry Gerton One of the sectors that’s really struggled this past year is small businesses. What do you see in the future for them?

Kevin Plexico This is an interesting one, because on the one hand, the government has done a really good job of spending money with small business. But if you look at the level of participation in terms of prime contracts, it’s going down. The number of small businesses I think has declined by close to 30% over the last several years in terms of prime contracting. And I think that’s a problem that the administration really has to take a look at. Unfortunately, some of the things that we’re seeing them do around relying on best-in-class contracts, don’t create a new contract if there’s already an existing contract that you can place a task or delivery order under — those really favor the companies that already have those prime contracts. I think it makes it challenging for small businesses to enter the market. On the research and development side, we’re still waiting for Congress to extend the SBIR and STTR programs, which are Small Business Innovative Research-related work. So it’s a challenging market for all companies, but in particular for small businesses. They’re dependent on cash flow; shutdowns particularly impact small businesses. The rule changes that are being made in the FAR overhaul are pretty profound in terms of their impact on small business. I think it’s unpredictable to understand how much is it going to affect a service-disabled veteran-owned business versus an 8(a) company versus a women-owned business. It seems like they’re gravitating more towards a preference of just small business set-asides and trying to get away from sole-source awards. And that’s a big change for the small business community for sure. So I think getting smart about the new rules and how they’re going to be applied agency by agency is going to be super important for small businesses.

Terry Gerton Well, speaking about the FAR overhaul, let’s talk about GSA for a minute. They’ve really worked over this last year to centralize a lot of buying strategies, centralize lot of contracts. They’ve updated the OASIS contract. What are you seeing and what should contractors be expecting to hear from GSA?

Kevin Plexico Well, I think the thing that’s created a lot of confusion is the way they’re rolling it out. Usually when FAR changes are rolled out, they go through a rulemaking process, they issue drafts, take comments and then go to a final rule or interim rule. What they’ve done in this particular situation is instead of approaching it in that traditional way, they’ve rolled out the revised FAR and basically said that agencies can adopt it if they get a class deviation. So, you have to literally go to the FAR overhaul website and see which agencies have adopted these FAR clauses. And right now you basically have different agencies using different versions of the FAR. The DoD is still using the traditional FAR and DFAR. They don’t have any class deviations that I’m aware of, but many civilian agencies do. So it just puts a lot of onus on the contracting community to really be mindful of what regulations are being followed by the agency you’re selling to, because it’s not the same as everybody’s following the FAR anymore. Which version of the FAR? Is it this class deviation or is it the traditional FAR? And that’s just an example of the chaos that we talked about.

Terry Gerton If you could give contractors one piece of advice as they’re trying to put their 2026 business strategies together, what would it be?

Kevin Plexico I go to what we call the four Cs. Customers: Who are the right customers that you’re going to be focused on selling to? Contracts: What vehicles are they going to be using to get access to those providers? Compliance: What do you need to be able to comply with, and I know the CMMC is a big one, but even with all the FAR overhaul changes, I haven’t seen what I would call a deregulation of compliance requirements. There’s pressure on agencies to use more fixed-price; that would potentially take away some of the accounting requirements that come along with a cost-plus contract. I think I might have missed a C in that, but you get the gist of it, right? It’s really just being more strategic and being more thoughtful about how you’re going to go to market. You can’t just afford to live off the agencies you’ve been doing business with, because they might be starving for money going forward. So you really have to take an honest assessment of where you are today, where you want to play, and how are you going to position yourself to get there? Because it’s not a quick pivot by any stretch.

The post New year, new opportunities? Here’s where contractors should focus in 2026 first appeared on Federal News Network.

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The 8(a) small business contracting program is coming under the microscope of its biggest user.

The Defense Department is joining a growing list of agencies auditing the use of sole source contracts through the 8(a) program.

Experts warn that DoD’s decision to launch this new audit signals that this 40-year-old small business development program is teetering further on the edge.

“It’s not a death knell, but it’s absolutely going to leave a mark. It’s absolutely going to hinder our ability to bring some of that new technology, that new manufacturing capability to the federal marketplace. That’s probably my bigger concern,” said Norm Abdallah, executive vice president at Hui Huliau, a Native Hawaiian-owned firm in the 8(a) program, in an interview with Federal News Network. “We’re behind in terms of the ability to manufacture here in the U.S., and have outsourced that beyond what one should in the defense of their own country, and so hindering the ability for us to help bring some of that to bear in the U.S. marketplace is probably the biggest concern.”

Abdallah said the 8(a) program is an avenue for companies to enter the market, obtain past performance experience in the federal sector and learn the ropes so DoD, and really every agency’s, ongoing distrust and scrutiny of the program is likely going to impact the government in bigger ways than expected.

Secretary Pete Hegseth posted a video on X on Friday explaining that the Pentagon is worried about two main things: The 8(a) program is a diversity, equity and inclusion (DEI) program, and it’s wrought with fraud.

We are taking a sledgehammer to the oldest DEI program in the federal government—the 8(a) program. pic.twitter.com/c9iH8gcqG7

— Secretary of War Pete Hegseth (@SecWar) January 16, 2026

“Providing these small businesses with opportunities is a laudable goal, but over the decades, as it happens, the 8(a) program has morphed into swamp code words for DEI, race-based contracting. And here’s the worst part, in many, many instances, these socially disadvantaged businesses, they don’t even do work. They take a 10%, 20%, sometimes 50% fee off the top, and then pass the contract off to a giant consulting firm, commonly known as beltway bandits. For decades, this program, 8(a) has been a breeding ground for fraud, and this administration is finally doing something about it,” Hegseth said. “Effective immediately, I’m ordering a line-by-line review of every small business sole source, 8(a) contract that is over $20 million, and we’ll look at everything smaller than that too. The Department of War has the biggest chunk of 8(a) spending by far, 10 times more than any other agency. So our cleanup, it’s going to be 10 times tougher.”

DoD’s audit will include two phases. Hegseth said if a contract doesn’t make meet the DoD’s goal of increasing lethality, they will terminate it.

“We have no room in our budget for wasteful DEI contracts that don’t help us win wars, period, full stop. Second, we’re doing away with these pass through schemes. We’ll make sure that every small business getting a contract is the one actually doing the work, and not just some shell company funneling your money to a giant consulting firm,” he said. “This approach is, of course, not meant to hurt small businesses, and that’s not the point. America is full of great, amazing small businesses. This is part of a larger effort to transform our acquisition ecosystem into one that makes sense for the threats we face in the 21st century.”

An email to DoD seeking more details about the audit and a timeline for the audit wasn’t returned.

Experts say Hegseth’s decision to review sole source contracts worth at least $20 million is directed at Native American, Alaskan Native, Hawaiian Native and other tribal companies. Congress raised the sole source threshold for these firms to $100 million from $22 million in 2020. Firms not belonging to one of these groups have a sole source threshold of $5.5 million for manufacturing and $8.5 million for non-manufacturing contracts. These non-tribal or native firms can receive a sole source contract up to $20 million with certain justifications and approvals.

While experts say Congress may not act to change the law, the ongoing audits by the Small Business Administration, the Treasury Department, the General Services Administration and now DoD are sending signals that, at least for sole source contracts, the program doesn’t work.

A former DoD acquisition executive, who requested anonymity because their current company still does business with DoD, said he believes federal small business goals are at risk across the board, and while they may not be affected this year, in two to four years, agencies will see a huge reduction in their industrial base.

The former DoD executive said the administration is sending an inconsistent message to the federal contracting community. The audits and the reduction of staff in small business offices are sending one message that small businesses aren’t important. But then the White House, and DoD particularly, are expressing the desire to attract new participants to the federal market, including non-traditional companies. The executive said these companies typically depend on small business offices and programs like 8(a) to help them get a foot in the door.

John Shoraka, a former associate administrator of government contracting and business development at SBA and now the co-founder and managing director of GovContractPros, an advisory services firm specializing in federal procurement, said DoD’s audit is part of a concerted effort by the administration to undermine the 8(a) program.

“I think if you look at the dollars in the 8(a) program, especially at DoD, some will point to the fact that they actually went up in 2025. But the challenge that we saw across a lot of our clients was that offer letters that have to go through the district office in order for a sole source award to happen were being held up and or never being processed. So we saw a slowdown in sole source awards,” he said. “I think given what we’ve seen with respect to the SBA audit, given what we’ve seen with respect to the number of 8(a)s being approved, in 2024 there was something like 500 plus 8(a)s approved. In 2025, I think the last count I saw was 66 approved. So given the audits, the slowdown in processing, I think contracting officers are looking over their shoulders. I think in the short term, given the current administration and the current congressional makeup, if you will, we will see a trend away from the 8(a) program.”

DoD’s decision to audit the 8(a) program comes after Treasury and SBA announced similar audits earlier this fall. SBA is looking at the entire program and companies had to submit data to the agency by Monday.

The SBA general counsel’s office is driving the audit, which is unusual because usually these things are either done by the inspector general or program office.

Fraud, DEI concerns unfounded

Shoraka said while the questions being asked by SBA, and now eventually DoD, are legitimate questions, the approach is causing some chaos.

“A lot of our clients reached out to their district office and the district office was actually unaware that those letters had originally gone out with respect to the audit, so there was a disconnect there. The field offices aren’t sure how the data is going to be used, or who’s going to use it, or what they’re looking at,” he said. “From my perspective, given the types of questions that were asked, I think it leads to the question, are there pass throughs happening? Because there was a lot of questions with respect to, who are your subcontractors, who are your vendors, et cetera. So the question is, and I think what SBA was looking at is, are there pass throughs and who’s really in control? Is the disadvantaged individual really owning, operating and benefiting from the 8(a) company? And I think those are legitimate questions. But again, there are legitimate processes and mechanisms to monitor that, including the annual review, which occurs every year on every single 8(a) company.”

The former DoD acquisition executive said while there are concerns about the use of sole source awards over $20 million to tribal companies, the allegations of fraud and the belief that the 8(a) program is a DEI program are unfounded. He said DoD should go to Congress and change the law to reduce the risk of large sole source contracts turning into pass throughs.

Experts agreed that while no program is perfect and there probably are some challenges, the 8(a) program is typically well overseen and maintained.

In fact, Abdallah, from Hui Huliau, said most 8(a) firms spend a lot of time meeting the compliance requirements. But he said it’s also a shared responsibility for oversight with the government.

“There are several folks that have responsibility in there. The first one is the contracting officer. In some cases, they’ve got to approve subcontracts. But more basically, with SBA, we go through a review every year where we have to submit our financials, what work did we do and what work happened?” he said. “They worry about the business mix, how much of your work was set aside versus not set aside? Quite honestly, what means you got the work by some means other than the 8(a) program, be that a subcontractor to another straight commercial, et cetera. So there are lots of hooks to watch it. Do they audit the books, per se, to check for percentages? That’s less common. But it’s part of your overall review.”

Shoraka added there are a significant number of regulations or requirements to mitigate the risk of pass throughs, and most rules allow for legitimate subcontracting.

One thing all of the experts pointed out is that the program is set up to help the 8(a) firm grow and learn, but they still have to do at least 51% of the work under services contracts and 15% of the work under construction contracts.

Shoraka said what is being lost in this entire discussion is there is more fraud in non-small business socio-economic programs across government than there are in the 8(a) and other small businesses initiatives.

The post 8(a) program pushed further to the edge by DoD audit first appeared on Federal News Network.

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Interview transcript:

Terry Gerton I want to start with Secretary Hegseth’s Arsenal of Freedom tour. He’s taking his pitch on the road and recently spoke at the Lockheed Martin Air Force plant in Fort Worth, Texas. I know you’ve been following this, the developments in defense procurement for quite a while. What are you hearing at this point?

Stephanie Kostro So Terry, this “Arsenal of Freedom” is a month-long tour, and it really is Secretary Hegseth going around to various places. He started out in Newport News, here in Virginia, talking with shipbuilders about what it means to be part of the team, right? Being part of the arsenal of freedom and in making things faster, more efficiently, etc. He then went out to California and spoke with folks, and then most recently, just last week in Texas, visiting Lockheed Martin as you mentioned, but also SpaceX. And so talking to folks about, what does it mean to be part of the arsenal of freedom? This is building on his November 7th Arsenal of Freedom speech that he gave here at Fort McNair in the D.C. area. And it is really about reviving this team mentality of, “we are in this together.” Against that backdrop, of course, we have recent activity in acquisition transformation, but also an executive order that came out earlier this month about limiting executive compensation for defense contractors, limiting dividends and also share repurchases or stock buybacks. And so this is a very interesting time to be in the defense industry.

Terry Gerton Stephanie, with all of the changes in the FAR and the DFAR and now the Defense Appropriation Act that’s in law, do you think that DoD has the policy tools it needs and wants to accomplish its transformation?

Stephanie Kostro There are two elements of the answer here. One is, with the fiscal year 2026 National Defense Authorization Act, which was just signed into law last month, they received a lot of new authorities, a lot of a sense from Congress about the ways in which this should be tackled. There is language there about technical data rights and intellectual property. There were things in there about how to define a nontraditional defense company, etc. But I don’t think that was sufficient; we still have work to do. And so does the department have all of the authorities and resources it needs to move forward? I think we’re going to see a lot of legislative proposals come out of the department for this next round of the NDAA, the fiscal year ’27 NDAA. And I think we’ll see things about acquisition workforce. We’re going to see things about working outside of the Federal Acquisition Regulation way of doing contracts. That is code for things like Other Transaction Authority or commercial solutions openings, etc. I don’t think they have everything they need. Part of the Arsenal of Freedom tour and the rollout of this acquisition transformation is to look at how the department can buy things more effectively and more efficiently. That’s time, not having cost overruns, etc. And so all of this is sort of coming together, in a way, to ultimately really transform the way the department buys. And I’m very excited to be part of this.

Terry Gerton Having the rules and authorities is only one piece. What’s your sense of whether the acquisition culture and workforce are aligned to actually accomplish the goals?

Stephanie Kostro Culture is the hardest element of any kind of transformation, right? I do think they’re trying to empower contracting officers and other key members of the acquisition workforce, program managers, contracting officer representatives, etc. This is a longer-term issue, and I think they are trying to tackle it through training programs, etc., letting folks know tools are at their disposal and giving them the authority to go ahead and use those tools. Now, folks don’t get into acquisition within the civil service because they’re risk-loving. A lot of times they get into it because they want to do things very smartly, very efficiently and oftentimes they look back on precedent to see how things were done before. Layer over that, Terry, the fact that we lost a lot of contracting personnel through deferred resignation programs, voluntary early retirement programs and reductions in force. So we are trying to rebuild the workforce in numbers as well as in training. I don’t think they’re there yet; I do think there’s a path to get them there. I’m eager for industry to work with the Department of War and others about how to train effectively and to let industry folks sit in the same training as the government folks, so everyone’s hearing the same thing.

Terry Gerton Stephanie, before we leave this topic, you touched on the executive order about defense contractors and compensation and buybacks. There’s a lot of unknowns still in how that will play out, but what are you hearing from your members?

Stephanie Kostro Our members were very eager to hear how the Professional Services Council would summarize that EO. So we did put out — based on the fact sheet from the White House, based from some interactions we’ve had with administration officials — our interpretation of it. That said, we’ve also asked our member companies, and we have 400 member companies and the majority of them do business with the Department of War and the intelligence community, “hey, what questions for clarification would you like us to ask?” And that list is growing. It is very long. It’s things like, is this really just for publicly traded companies? What about privately owned, or S corps and LLCs? The reason I mentioned that, Terry, is S corps and LLCs will often pay out a dividend to an executive at the company so that executive can pay taxes. They pay out of dividend, so it’s not only a dividend payment, it’s executive compensation, but it’s really just to go ahead and pay federal taxes. What do people do in that regard? How do they explain this? If they have a parent company that is overseas in Europe or elsewhere, how do they explain this executive order to those folks? And that executive compensation, there’s a limit if the company is underperforming, and all of this is predicated on the company’s underperforming — either cost overruns or schedule overruns. How do they explain this to folks? And is it really just about government contracts, or what if you’re a commercial and a government company and your executive compensation is based usually on both elements, commercial and government? So how do you go ahead and limit compensation there? This is a fascinating area to be engaged with the government on. We are all learning this together.

Terry Gerton As Secretary Hegseth tries to walk this tightrope between encouraging defense contractors to be on the team and work with us, and at the same time kind of tightening the screws on enforcement and compensation, the president has said he wants to spend $1.5 trillion on defense next year. That’s a lot of money. How is that going to get spent, do you think?

Stephanie Kostro Oh, it is an eye-catching number, right? $1.5 trillion when we are roughly $1 trillion now are just under, and it is a huge increase. Now, we’ve had large increases in the defense budget in other times in U.S. history. In the early 1950s with the Korean War, the Reagan buildup that some of us remember from the ’80s. Some of us who are listening may not remember it. They may not have been born yet, and that’s okay too. You know, there is some precedent for huge increases in the defense spend. The question here becomes, if the department and the military services are going for commercial-first mentality to prioritize speed of award and innovation, etc., they certainly can spend that money throughout the defense ecosystem. The question that we have is really, what is the organizing construct for this? What would we be spending the money on? Would it be shipbuilding, combat aircraft, the logistics piece, which always tends to be an issue? We also know operations and maintenance accounts are sometimes used and reprogrammed away if they’re not spent by a certain time, because it’s one-year money at the department, it gets reprogramed away. It’s going to be an interesting mathematical problem to tackle. In addition, I would mention, we had the reconciliation bill, the One Big, Beautiful Bill Act that passed and was signed into law last July. That infused a bunch of cash into both the Department of Defense and the Department of Homeland Security. I understand some of that money hasn’t been apportioned and provided to the departments yet, but we are now at this point in January of 2026 talking about, what would a reconciliation bill look like for 2026? Congress can pass one per fiscal year. The one that was passed last July was the one for fiscal ’25. What happens this year? There are a lot of different mechanisms to get that money through Congress and over to the government to apportion to the department.

Terry Gerton Well, speaking of 2026 appropriations, it looks like Homeland Security and Defense will be two of the last bills out, hopefully before the end of this month. What are you hearing from folks on the Hill?

Stephanie Kostro I’m hearing that they’re trying really, really hard to avert a shutdown. And I think we’re going to get there. I’m not a betting person, Terry, you know, I’ve talked about that in the past. And I’m not in this case, either. The chance for a shutdown is never zero. That said, the experience that we all had back in October and November last year would indicate that there really is no appetite for a shutdown this year. The National Defense Appropriations Act and the DHS [bill] I think are probably the last because they want to get everything done before they tackle those. Those are the two departments that received the lion’s share of the money from the reconciliation bill, One Big Beautiful Bill Act last year, and they are looking to get more money in a reconciliation bill this year. So I’m not surprised to hear that those are last, but I actually don’t think that indicates that they’re very far apart on the numbers.

Terry Gerton And on those two departments, PSC is sponsoring a trip in January to the border to do some on-site research. Tell us about that plan.

Stephanie Kostro I am so excited about this. PSC has not typically done this. I do know other entities have done this, I used to be at a think tank where we would do things like this. We are bringing almost 30 different companies out to California next week, Jan. 28 and 29, to do a behind-the-scenes access with the Customs and Border Protection folks who are out there. And the ports of LA and Long Beach, the ports at entry, the land ones over at San Ysidro and Otay Mesa, really talking with folks on the ground there about what their requirements are. This is really focused on technology. How do we use technology and the art of the possible to protect our borders? Now, I would hasten to add, Terry, border security is not a partisan issue in many, many ways. The Biden administration, the Obama administration, the previous Trump administration all focused on border issues in different ways. Our companies really want to mention to folks on the ground, here is technology that you may not have experience with that is up-and-coming. How can we leverage it to better secure our borders? Talking about cargo screening, etc. I think this is a really good opportunity for companies to sit down with folks who are in the field and hear about what they need.

The post Can key visits to cities anchoring U.S. national security spur a new American “arsenal”? first appeared on Federal News Network.

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Ed Forst never served in the Navy, but the metaphor he uses to describe the role the General Services Administration would make any admiral proud.

Forst, who has been at the helm of GSA since late December, believes agencies, like ships, have two distinct compartments. One is to focus on the mission. The other is the engine room that makes the mission run.

“I think in every business, every enterprise, every agency, every department, and what I think makes great sense, and I believe the President does too, is, let’s advance mission and let’s have the engine room, what’s behind the curtain, consolidate and get even better. That’s where I see GSA in the federal government. We’re the engine room,” Forst said at the Coalition for Common Sense in Government Procurement winter conference on Jan. 14. “Now, interestingly, GSA is its own agency, so we happen to have both. We’ve got mission and the engine room as well. So I think because of that, we really do appreciate the mission piece of that and serving our stakeholders and our constituents.”

For GSA, being that engine room in part means making acquisition less burdensome, cheaper and more agile so agency customers can meet their mission needs more quickly.

GSA has been pursuing several initiatives over the last year to fine tune the acquisition piece of the engine room.

Laura Stanton, the deputy commissioner of GSA’s Federal Acquisition Service, said between the Office of Centralized Acquisition Services (OCAS), the OneGov initiative and the implementation of changes from the Federal Acquisition Regulation rewrite, GSA is delivering speed to acquisition like never before.

For example, OCAS now centrally buys for three agencies: the Office of Personnel Management, the Small Business Administration and the Department of Housing and Urban Development. Stanton said GSA brought on OPM and SBA in about a month.

Stanton said OCAS is using an opt-in approach to help agencies and trying to relieve some of the burden on GSA’s Assisted Acquisition Service.

“We’re having conversations with a number of agencies about what are their needs. One of the things that we set up OCAS to be able to support is the buying of common goods and services,” Stanton said. “We also recognize that there are mission critical items that and there’s common things that are mission critical that can be used for governmentwide contracts, and then things where there are specialized contracts. So we’re having those types of conversations with a number of agencies at this point.”

Under the OneGov program, GSA has signed 18 agreements to reduce the price of commonly used software across government. Additionally, 45 agencies have taken advantage specifically of the enterprisewide agreements for artificial intelligence tools.

“This is a radical shift in how we think about it, and how we think about how we come to market, and also how we want you to treat us as a customer,” Stanton said at the conference. “This requires changes, not only on the government side, but it’s also going to require changes on the industry side to make that happen. We want to be better aligned when it comes to terms pricing and performance, when it comes to all aspects of that.”

Forst said he was especially focused on the performance aspects of the equation for GSA.

Measuring performance against peer groups

He said measuring performance, and holding organizations and people accountable are among his key focuses areas.

“We’re putting out some priorities for having deliverables. I’m committing every quarter and I’m going to report on ourselves on that,” he said. “I think we’re all better if we find a way to talk about measurement or metrics, whatever you want to call it. There’s a common language and vocabulary about that, so I am a big proponent.”

Forst said he will be looking at both the performance of FAS in terms of “revenue,” as well as their performance relative to peer organizations.

“If you had a record year, you’d probably beat plan. All that should be good. That’s absolute measurement. That’s you versus you. And I think that’s important. I think it’s also really important to accompany that with who’s in your peer group and how did they do? I think the relative performance matters a ton as well,” he said. “You could be down 7% and on an absolute basis, angst to death over down seven if your peer group’s down 15, that’s a home run. So I think it’s important. But if you had a record year and you’re up 6% and your peer group’s up 12%, I’d say good record, but you underdelivered versus the other side. I think we have to be honest with ourselves and look at both us versus us over the time series, and look at us versus a peer group. That seems to make sense.”

Forst said GSA plans to bring in a peer group analysis to raise their awareness and their overall performance.

The third piece of moving bringing speed to capability is the FAR rewrite. GSA will begin implementing the FAR changes within its own acquisition regulations in the coming weeks. It already issued deviations to the current FAR to begin the process.

Jeff Koses, GSA’s senior procurement executive, said in a post on LinkedIn that they have “limited the issuance of mandatory acquisition policies to my office, the Office of Acquisition Policy. Legacy mandatory policy will have to be reissued at the agency level, converted to discretionary guidance, or cancelled.”

Koses said GSA will begin culling down 500 pages of its acquisition manual, 300 pages of office policy, 500 pages of FAS policy and another 500 pages of Public Buildings Service policy and then 1,000 pages of real property leasing policy.

Reviewing the GSA schedule catalog of items

Larry Allen, the associate administrator in the Office of Governmentwide Policy, said at the CGP conference that GSA, in helping out the FAR Council, is working closely with OFPP to get all of the rulemaking completed by the end of the fiscal year.

“It may be delayed a little bit because we had a little shutdown in the fall, but that tells you exactly what type of timetable we are on. It’s aggressive, and you will see change, and we want you to be part of that change,” Allen said.

Stanton added that GSA understands the FAR rewrite has moved quickly and is addressing complex acquisition issues that will take time for government and industry to wrap their arms around.

“When we think about this year, it’s going to be a year of both adopting and adaptation, and acceleration all at the same time, and that becomes really challenging to do,” she said.

Stanton said another key initiative kicking into gear this year is GSA’s review of its multiple award schedule catalog. She said the driving theory is how can the agency operate it more efficiently and deliver more value to agency customers.

“I look at the at the catalog that we run for the multiple award schedule and it has over 100 million items in it. Only 1% or fewer of those items sell, and so this is putting burden on all of you, making sure that you’re meeting all of our terms and conditions, that those items are Trade Agreements Act (TAA) compliant, that they meet the government standards, and that the pricing is fair and reasonable,” she said. “We have contracting officers who have to evaluate those items, and what is the value that either you or the government is getting for that work? I think that this is a big opportunity for us to truly assess where is the government’s demand. As we’re also moving into making transactional data reporting mandatory, how do we effectively have a catalog that delivers on what the government needs? How do we meet those needs effectively? How do we move quickly if we have something that’s not in the catalog? It’s a lot easier to move quickly if we’re not burdened by putting things in there that are not actually being used.”

The post Forst: GSA is the ‘engine room’ that runs government first appeared on Federal News Network.

© AP Photo/Jacquelyn Martin, File

A freshly belligerent China is flexing its muscles in ways not seen since the USSR during the Cold War, forging a new illiberal alliance with Russia and North Korea. But the latent battlefield is farther reaching and more dangerous in the information age.

As we now know, over “a years long, coordinated assault,” China has stolen personal data from nearly every single American. This data lets them read our text messages, listen to our phone calls, and track our movements anywhere in the United States and around the world — allowing China to build a nearly perfect intelligence picture of the American population, including our armed forces and elected officials.

This state of affairs leaves corporate leaders, democracy advocates and other private citizens vulnerable to blackmail, cyber attacks and other harassment. Even our national leaders are not immune.

Last year, China targeted the phones of President Donald Trump and Vice President JD Vance in the course of the presidential campaign, reminding us that vulnerabilities in the network can affect even those at the highest levels of government. The dangers were drawn into stark relief earlier this year when Secretary of Defense Pete Hegseth used his personal phone to pass sensitive war plans to his colleagues, along with a high-profile journalist. That incident underscored what we’ve seen in Russia’s invasion of Ukraine, Ukraine’s Operation Spiderweb drone attacks on Russia, and on front lines the world over: Modern wars are run on commercial cellular networks, despite their vulnerabilities.

Many Americans would be surprised to learn that there is no impenetrable, classified military cellular network guiding the top-flight soldiers and weapons we trust to keep us safe. The cellular networks that Lindsay Lohan and Billy Bob Thornton sell us during NFL games are the same networks our troops and national security professionals use to do their jobs. These carriers have a long, shockingly consistent history of losing our personal data via breaches and hacks — as well as selling it outright, including to foreign governments. So it’s no wonder that, when the Pentagon asked carriers to share their security audits, every single one of them refused.

This isn’t a new revelation. Twenty years ago, I served as a Special Forces communications sergeant in Iraq. There, U.S. soldiers regularly used commercial BlackBerries — not because the network was secure, but because they knew their calls would connect. It’s surreal that two decades later, our troops are still relying on commercial phones, even though the security posture has not meaningfully improved.

A big part of the reason why this challenge persists stems from an all-too-familiar issue in our government: a wall of red tape that keeps innovative answers from reaching public-sector problems.

In this case, a solution to the Pentagon’s cell network challenge already exists. The Army requested it, and our soldiers need it. But when they tried to acquire this technology, they were immediately thwarted. Not by China or Russia — but by the United States government’s own bureaucracy.

It turns out that the Defense Department is required to purchase cellular service on a blanket, ten-year contract called Spiral 4. The contract was last renewed in early 2024 to AT&T, Verizon, T-Mobile and a few others, about a year before a solution existed. Yet despite this, rigid procurement rules dictate that the Pentagon will have to wait … presumably another eight years until the contract re-opens for competition.

The FCC recently eliminated regulations calling on telecoms to meet minimum cybersecurity standards, noting that the focus should instead be collaboration with the private sector. I agree. But to harness the full ingenuity of our private sector, our government should not be locking out startups. From Palantir to Starlink to Oura, startups have proven that they can deliver critical national security technologies, out-innovating entrenched incumbents and offering people services they need.

The Pentagon has made real, top-level policy changes to encourage innovation. But it must do more to ensure that our soldiers are equipped with the very best of what they need and deserve, and find and root out these pockets of stalled bureaucratic inertia. Because America’s enemies are real enough – our own red tape should not be one of them.

John Doyle is the founder and CEO of Cape. He previously worked at Palantir and as a Staff Sergeant in the Special Forces.

The post China hacked our mobile carriers. So why is the Pentagon still buying from them? first appeared on Federal News Network.

© (Courtesy of Military OneSource)

Interview transcript

Terry Gerton You know, our timing on this topic is pretty lucky since the president’s management agenda just dropped. One of its three goals is to deliver results and buy American. It specifically has an objective to rebuild American industry through prioritizing and enhancing “made in America” execution. But right there, we see a conflict. One is buy American, and the other is made in American. And you’re an expert in this space, talk to us about the difference between those two concepts and what makes it so confusing.

Julia Ensor Yeah, that’s a great question and one that I’ve heard many times. So when we’re talking about Buy American, we’re generally talking about federal procurement. We’re talking about if government is the buyer and you’re supplying goods to the government in accordance with a contract, there are very, very specific requirements that you have to fulfill in order to be Buy American compliant. When we talk about “made in America” or “made in the U.S.A.,” in general, we are talking about an advertising claim. We’re talking about how you position your product, how you market your product to consumers. So the standard for making a “made in the U.S.A.” or “made in America” claim, it’s very different. It’s tagged to how reasonable consumers understand your claim, and it’s aimed at preventing consumers from being misled, completely different from the very formulaic requirements of responding to a government contract for Buy American purposes.

Terry Gerton Could you give us an example of a product that might meet one requirement, for example, Buy America, but not “made in the U.S.A.” or vice versa?

Julia Ensor Yeah, so when we talk about “made in U.S.A.” as a marketing claim, in general, the Federal Trade Commission is going to expect products to be all, or virtually all, made in the U.S.A., all the way back to raw materials. So that means to advertise a product to consumers without misleading them, your product needs to have no more than de minimis foreign content in it. That’s very from a product that could be supplied to the government in response to a contract that is covered by  Buy American, where you can have a fairly significant proportion of the products attributable to foreign costs. So under Buy American you only need about 65% of a manufactured product’s cost to be attributable to U.S. Costs. So it’s different from the “all or virtually all” standard.

Terry Gerton That 65% threshold under the Buy American Act, that content threshold is going up to 75% in 2029. Does that change compliance strategies for contractors?

Julia Ensor It’ll mean that everybody needs to continue to review their supply chains. So you need to be in continuous contact with your suppliers. You need to understanding where all of your components are coming from and monitoring to make sure that you are ready to meet that 75% when it snaps into place, if you’re supplying products to the federal government.

Terry Gerton Supply chains have been under such pressure since the pandemic and continue to be shifted and realigned. Do you think that suppliers and supply chains are ready for that shift?

Julia Ensor That’s a great question. I think that supply, because supply chains are so constantly in flux, certainly when I was at the Federal Trade Commission, we saw problems arising from this all the time. I think it’s incredibly difficult for marketers, for suppliers to stay on top of what’s going on. That’s why it’s so important to have open lines of communication, to have procedures in place for routine audits, for routine certifications that you’re seeking from your suppliers to really understand where every part of your supply chain is and what’s going on.

Terry Gerton I’m speaking with Julia Ensor. She’s counsel at Reed Smith and former “Made in the U.S.A.” program manager for the Federal Trade Commission. We talked about Buy American, and we talked about “Made in the U.S.A.” In the Defense Department, there’s the Berry Amendment that plays a role in these kinds of considerations as well. Talk to us about how that fits into this picture.

Julia Ensor Yeah, so if you are supplying to the Department of Defense, the standard that you have to meet is even higher when it comes to certain products like food, clothing, fabric, specialty metals. In the case of those products, if you’re supplying to Defense, your products must contain exclusively U.S. Content. So that means that a product that could be compliant with Buy American that could very potentially not be sufficient under the Berry amendment.

Terry Gerton So contracting officers have a lot to watch out for here, as do suppliers. You’ve warned that sourcing changes can trigger compliance problems. And so what should companies be proactively disclosing? What should contracting officers be sure they’re asking to make sure that everybody is on the right side of these laws?

Julia Ensor So you need to be going back and talking to every person in that supply chain. Make sure that your suppliers are providing reliable certifications and that they have all appropriate documentation of where components are coming from, that they understand early inputs to the manufacturing process, which is where problems can occur. And then have a process in place to communicate routine supply chain changes. Don’t just restrict this to annual review. Make it a term of your contract with your suppliers. Require them to notify you as soon as possible if something changes so you in turn know whether you need to talk to your contracting officer, whether you to make supply chain changes to bring your products into conformance.

Terry Gerton Sometimes in spite of everybody’s best efforts, there are mistakes. Are there any safe harbors, little loopholes for places where they report 70%, but it’s 65% or something like that?

Julia Ensor I don’t know about loopholes per se, but open lines of communication are always the best policy. Make sure that you are reporting issues. Don’t wait for an insider to report an issue to the government. Significant penalties can be on the line if you make mistakes in this area. So have open lines and communication. Be just talking when changes happen so that you can remediate issues as they occur.

Terry Gerton You mentioned significant penalties. What actually could happen if a company is in violation of any of these laws or restrictions?

Julia Ensor Right, so the government can sue you directly. You can be liable for significant penalties under the False Claims Act. And then the False claims Act also allows whistleblowers to file confidential lawsuits on the government’s behalf and receive a percentage of any resulting recovery. So that means that if there’s an insider who sees your issue, those insiders are incentivized to let the government know if compliance falls through the cracks. So, potentially significant penalties on the line.

Terry Gerton How common are those whistleblower cases?

Julia Ensor Fairly common and increasingly common.

Terry Gerton And what kind of incentive are we talking about here?

Julia Ensor So it’s a percentage of the recovery and recovery could be in the millions.

Terry Gerton Wow, so everybody really does need to pay pretty close attention. Certainly given your experience here, if you could rewrite the rules, are there things that would make compliance clearer or maybe disentangle some of the rules that seem to conflicting?

Julia Ensor So certainly consistency across the board would make it a lot easier for everyone. I mean, right now you have a system where marketers and contractors are having to comply with so many different standards, so many different laws, and it makes it really, really challenging. And marketers that think that they’re doing their best, that know that they are, for example, compliant with Buy American, and wanna go out and tell that story about their US manufacturing to consumers, can find themselves in trouble with the FTC, can find themself the subject of a consumer protection action. And that’s a real challenge. So if there were an opportunity to harmonize the rules and the regs, it certainly would make things better for marketers. On the other hand, that could lead to additional consumer confusion or deception, so it’s a really hard place to be. And to some extent, that tangled regulatory web is somewhat necessary to harmonize the joint goals. You have the government and the administration on the one hand wanting to prioritize buying American goods, wanting to incentivize marketers to reshore manufacturing. And on the other hand, you have a push and pull with consumer protection authorities whose job is to make sure that consumers are not being deceived or misled by claims. So while it would be great if there were some harmony across the board, while it would be very helpful to marketers and to businesses, there’s also some tension here in the competing goals that the different laws and regulations are on the books to serve.

Terry Gerton Do you see any interest or momentum in Congress or amongst the regulatory community to actually move towards that kind of streamlining or simplification?

Julia Ensor So over the years, I’ve seen movement in all directions. And then the problem is that there are really strong arguments for harmonization. You know, it’s helpful to business, may result in reshoring of more jobs and encouraging more US manufacturing. But on the other hand, when you look at consumers, when consumers see claims that products are “made in U.S.A.,” they have really high expectations for what that means. They expect that the thing that they pick up is all or virtually all, is no more than de minimis foreign content. And so on the one hand, while there is a great argument toward streamlining and fostering the development of U.S. Manufacturing, it’s so important to make sure that consumers are getting the product that they bargained for. So for now, the best balance that I think that we’ve been able to strike is, on the one hand, having those technical requirements in place on the procurement level to help businesses and manufacturing on the margin where we can there, but at the same time recognizing that when you’re marketing to consumers, we have to protect consumers and impose that higher standard. So that’s really tricky for marketers, for businesses, but, at the moment, it may be the best we can do.

The post The President’s PMA push to “Deliver Results and Buy American” meets a thicket of rules first appeared on Federal News Network.

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Interview transcript

Terry Gerton Let’s start with talking about Hive. You’ve positioned yourself really as a disrupter in the federal contracting space. Are there specific technology or process innovations that have helped you most transform your organization?

Will Fortier Well, I think that that’s something that every organization is going through at this moment and time. I think some of the enablers that we’ve certainly benefited from would be the cloud service providers. That has completely revolutionized how we interact with our solutions. When I entered the GovCon space, we were still on print and file servers and version control was a huge issue and Just moving towards collaborative tools like Google suites and Microsoft Teams has allowed us to actually collaborate on the artifacts that we’re building for our clients and communicate. Could you imagine going through a pandemic without those cloud service providers? That has been a big game changer for us in how we affect our clients’ missions. But what we’ve been focusing on are things like improving decision support systems across our clients’ platforms, enabling them to just — getting the right information into the decision-makers hands and enabling that decision-making process much faster and much more efficient. Trying to take out errors, trying to increase automation and reliability of that data.

Terry Gerton Do you find that your innovations are driven more by your client demands or by Hive anticipating what they will want?

Will Fortier Yeah, I think it’s always a mixture of both. I think that just in our name itself, Hive Group, we’ve got a lot — our people are in the field, our labs are in field, we’re responding to client demand. But we also have this collection of subject matter expertise in house. All of our leadership are practitioners in the industry, meaning they’ve delivered solutions to clients themselves. And so when we’re brought into discussion, with our teams on the delivery side, what we end up doing is synthesizing what they’re doing and then using our experience to then pull that information in-house and try to build something on top of that that might be useful to the clients, might give some benefit. And not only that, but sharing from what we’re doing on one client engagement on other client engagements as well. So we’ve developed things like Hexacore, which is a delivery excellence framework that we employ in all our delivery teams. And then HiveIQ, as well, as something else that we’ve instituted, which is really information sharing and getting best practices from what one team is doing into another team’s skillset.

Terry Gerton You started to talk about some of your specific products there. It’s a crowded federal contracting space. How do you use those kinds of products and other techniques or strategies to differentiate Hive?

Will Fortier Yeah, that’s interesting. So there’s been a lot of innovation in this space, and certainly there’s been a lot a top-down pressure, which is really making it — a lot of people taking stabs at trying to innovate. Whether we’re building the tools themselves, or we’re developing partnerships with those that actually have really good tools as well, it’s a mixture between both of those sides of the coin. A lot of what we do is focused around the reinvestment of what were doing. I mean, we’ve had a quick and fast growth trajectory since the start of the company. And so what we’re doing is taking that money and it’s allowing us to reinvest into what we’re able to offer as far as our solutions to our clients. That allows us to also get deeper and specialize in some of those areas that we’re focusing on.

Terry Gerton You talked about that rapid scaling and growth. Are there any particular critical decisions that have enabled you to scale without losing your quality control?

Will Fortier Yes, scaling. That is something that, as a practitioner in the field, I think a lot of us don’t really get faced with those kinds of questions until you’re either in the C-suite or in the ownership seat, yourself. And so what we do, I think it’s kind of two-part. One is internal, it’s making sure that the right people are in the right seats on the bus. Because what got you to 50 people isn’t necessarily the same configuration that’s gonna work when you’re scaling up to 200. And so you gotta keep that in mind. And that’s something that you learn when you are actually sitting in that seat. And then the next is externally. I think that looking at your support providers is a real game changer and getting the right support providers can be a real force multiplier. And making those mistakes can also cost you a lot of effort and time down the road. And there’s certainly some examples of that, one would be getting good advice. Not surprising to anybody, but having good legal advice is a really obvious thing to have, but one that kind of caught me by surprise was banking relationships. And so, when you start out a company, whoever will give you a line of credit and some treasury is usually who you end up starting with. But as you start to scale up, your needs do change. And so I remember our CFO, Ryan Fuller, came to me and said, hey, I think it’s time that we kind of look at some other options, got into that, got into the why. We ended up going with JP Morgan Chase. Once we did that, I really started realizing how important banking relationships are. Bringing people, hearing from the SMEs on what direction the market is going, getting to meet with other business owners and sort of collaborating with them on what they’re going through — all those kinds of, those offerings that the right support provider can provide is just, it certainly has affected who we are as a business and how we operate.

Terry Gerton That is such important insight, and it sounds like a lesson learned maybe the hard way through experience.

Will Fortier Yeah, you can start your QuickBooks as a great tool, probably not going to get you to, it’s probably not something you want to scale on. But yeah, I mean the tools that you start out with are great and they certainly have a place, but the partnerships, they need to evolve along with how you scale.

Terry Gerton You also mentioned the importance of having the right people in the right seats on the bus, everybody’s favorite leadership analogy. But what are your tricks of the trade in terms of making sure that you have the right people in those right seats, especially in cleared positions, and how do you maintain culture as you’re growing your organization?

Will Fortier The culture question is, we could spend an hour on that alone and that has certainly faced some challenges with COVID and the separation of a lot of folks going remote. But when it comes to talent retention, I think it’s one of the most important things that we’ve focused on. It’s important not to just drop your team member off at a client’s site and say good luck. When our employees look around, what we focus on is putting an emphasis around lifting our people. This is actually one of our core pillars as an organization. And in doing that, we try to focus and work with our client sets on finding opportunities for people to have a growth path. And when we do that, it’s more than just a sales pitch. I mean, the employees that are coming in can take a quick look around and see some folks who might have joined our organization at an entry level and are now a part of the leadership team. Finding those kinds of candidates is certainly what we strive for, and that’s the kind of culture that we want to build and support. Then really a part the secret sauce is how you hire, which is very different depending on the organizations that you go to. I think that what we try to focus on is more the total picture. I mean, some bigger mistakes that we see both on the government side as well as the industry side is making a hiring decision just because the person has done the work, similar work before, instead of focusing on the culture fit: is this person professionally curious? Are they gonna emulate the qualities and the core values that you’re trying to establish throughout the organization? And look, nobody bats a thousand in doing that, but it is something that we consciously try to keep in mind when we’re building out our team.

Terry Gerton So we’ve talked a little bit about what makes Hive different, your scaling strategy or your workforce strategy, but there’s a lot that’s changing in the GovCon space right now. So if you’re looking forward five years, how do you think Hive will change to continue to be competitive in the market?

Will Fortier Yeah, so to say that things are changing right now doesn’t feel like a strong enough phrase. But one of the things that we want to focus on, and we could go on about all the different kinds of capabilities that we’re trying to implement for clients, but one that’s near and dear to my heart is certainly the acquisition process. You’re seeing a lot in that discussion nowadays, and certainly with the revolutionary FAR overhaul, you’re seeing lot of recommended change for how the government goes about procuring things. So I think that there’s a lot of discussion that needs to happen, and there’s certainly a lot of innovation that we can work towards. In that realm, one of the things that we’ve started at Hive Group is the Industry Partner Council, and that is a collection of really the big 20, and altogether there’s 200 businesses all throughout the GovCon space that are in varying degrees participating, and what we’re aimed to do is really just strengthening that conversation between contracting activities and industry, and trying to find ways to educate each other, you know, break down those barriers, get us talking more, and there’s certainly, with as much change that is going on right now, we’ve got to also keep those avenues to talk and discuss what’s working and what’s not working. So that’s one avenue that we’re hoping continues to stick and certainly getting more contracting activities on board with it.

The post In a crowded federal contracting space, Hive Group bets on innovation first appeared on Federal News Network.

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President Donald Trump took aim at defense contractors Wednesday, announcing new restrictions on executive pay and stock buybacks as part of the administration’s push to speed procurement and revitalize the defense industrial base. 

In an executive order issued late Wednesday, Trump said companies “are not permitted in any way, shape, or form to pay dividends or buy back stock, until they are able to produce a superior product, on time and on budget.”

The order directs Defense Secretary Pete Hegseth to identify defense contractors providing critical weapons, supplies and equipment that are “underperforming, not investing their own capital into necessary production capacity, not sufficiently prioritizing U.S. government contracts, or whose production speed is insufficient as determined by the Secretary,” while simultaneously engaging in stock buybacks or corporate profit distributions. 

Contractors identified under the review must be notified and given an opportunity to submit a remediation plan within 15 days to address performance issues. 

If disputes over underperformance issues cannot be resolved within 15 days or the remediation plan is deemed inadequate, the defense secretary “may initiate immediate actions to secure remedies for the secretary that will expedite production, prioritize the U.S. military and return the contractor to sufficient performance, investment, prioritization and production, to the maximum extent permitted by law.”

The executive order also directs the Defense Department to ensure that future contracts with new or existing defense contractors include provisions prohibiting stock buybacks and corporate profit distributions during periods of underperformance, contract noncompliance, insufficient investment, or “insufficient production speed as determined by the secretary.”

The government already has a whole set of tools in its toolbox to incentivize, reward or penalize companies based on their performance, and the executive order relies in part on mechanisms the Defense Department already uses. What is different, however, are the remedies the administration is focusing on — and the main challenge in implementing this executive order will be defining the key parameters contractors are going to be held accountable for, Protorae Law member Alan Chvotkin said.

“The remedies of no stock buybacks and caps on executive compensation — that’s not a remedy that the government already has available to it,” Chvotkin told Federal News Network. “It’s not so binary to say it’s 100% of contractor’s problem or zero of the contractor’s problem, and that’s where the hard work is going to come on each of these major programs — defining the specific parameters that the department is expecting.”

Stan Soloway, president and CEO of Celero Strategies and federal acquisition expert, said the executive order seems to presume that any cost overrun is the fault of the contractor without recognizing that “not all cost overruns are created equal.”

“The [executive order] is full of vagaries and ambiguity. It is going to be very interesting to determine how they measure whether a company is performing … There’s no mention about the responsibility the Defense Department has for cost overruns and program delays. While companies are far from perfect, all too often, the delays are driven by changing requirements, by requirement rigidity, lack of flexibility in the requirements and by budget uncertainties,” Soloway told Federal News Network. 

Back in 2007, the Defense Science Board, for instance, examined three troubled programs — the Littoral Combat Ship, the presidential helicopter and the Army’s Comanche helicopter — and found that constantly changing government requirements were a major driver of cost overruns and schedule delays. The Packard Commission reached the same conclusion two decades before the Defense Science Board issued its report.

“Accountability is key here, but there is a shared responsibility between the government and contractors. There are many tools to hold contractors accountable, but way fewer tools to hold the government accountable. This EO doesn’t do anything to make the government more accountable,” David Berteau, former president and CEO of the Professional Services Council and now president of David Berteau & Associates, told Federal News Network.

“The disconnect of this EO is if the desired outcome is better contract performance, how can implementing this EO produce better results? That isn’t clear to me. Someone will have to write implementation guidance that does that. I spent a lot of my career writing implementation guidance, and I have a hard time seeing implementing this in such a way that it produces better performance quickly,” he added.

If the goal of the executive order is to push companies to invest in production capacity and capability rather than shareholder returns, that approach only works if there are returns on that investment, Berteau said.

Lockheed Martin’s recent deal with the Pentagon to increase Patriot missile interceptor production to about 2,000 missiles a year is a significant step toward that approach, Berteau said. Lockheed agreed to fund an expansion of its Patriot missile factory in exchange for a seven-year commitment from the Pentagon.

“We have to wait to see the implementation guidance to get a sense of what the real goal is, better contract performance leading to faster deliveries or what,” Berteau said.

“It is critical that the relationship between the government and contractors be one of shared responsibility and partnership, particularly around defining and deciding what the contract will give you and the structure of the contract to make sure the government will get what it needs. There is a lot about this EO that doesn’t seem to be about strengthening that partnership. It seems to be more about punishing one side of the equation,” he added.

The Defense Department did not respond to questions about whether contractors should expect formal guidance in the coming weeks or how many underperforming contractors it has already identified.

“After numerous years of failing to meet contractual obligations, under President Trump’s order, defense contractors will no longer be allowed to leave our warfighters behind while giving themselves massive payouts from stock buybacks. This will give Department of War the ability to meet national security objectives and ensure efficiency and accountability. Our obligation is to our warfighters; not Wall Street,” Chief Pentagon Spokesman Sean Parnell told Federal News Network in a statement. 

Executive pay

In one of his Truth Social posts, Trump said no executive should be allowed to make more than $5 million, but the figure did not make it into the executive order.

Instead, the president directed the defense secretary to ensure future contracts require executive compensation to be tied to performance — such as on-time delivery, increased production and “all necessary facilitation of investments required to rapidly expand the United States stockpiles and capabilities” — rather than short-term financial metrics like cash flow or earnings per share driven by stock buybacks.

If a contractor has “engaged in underperformance, non-compliance, insufficient prioritization of the contract, insufficient investment, or insufficient production speed,” the department could cap executive base salaries at current levels.

Executive compensation was a contentious issue in 2013, when President Barack Obama called on Congress to cap executive pay at $400,000.

A cap on executive compensation already exists in some form — contractors can pay their executives whatever they choose, but the government only reimburses costs up to a certain limit.

The executive order, however, goes a step further — it’s shifting from how much the government will reimburse the contractor to limiting how much the company can pay its executives.

“Pretty significant difference, but maybe they’ll fall back on the same mechanisms. I don’t know that yet. Nobody in the department is talking yet about how they’re going to implement this. I’m sure they’re still trying to work that out,” Chvotkin said.

“I think there’s a fair question, broadly speaking, in commerce, generally, not just in the government market, about executives having the right incentives to drive long-term performance and excellence. But I don’t know what the standards are going to be, what the metrics are going to be.  There’s a ton of ambiguity in here,” Soloway said.

Who does the EO apply to?

While the executive order targets contractors that provide “critical weapons, supplies and equipment,” it doesn’t clearly define the term “critical.” 

Chvotkin said new contracts could easily specify which vendors qualify as critical suppliers or require all new contracts to include the provisions laid out in the executive order.

And while the executive order is broadly aimed at “all contractors,” Chvotkin said its likely target is traditional defense contractors rather than the commercial firms the Pentagon has been trying to attract. 

“I think it’s all contractors, but fixed-price contractors — less likely, they’re going to have binary decision. Commercial contractors, where the effort is to bring more of them in, but probably not as many of them have the triggers, the buyback, the sort of where the government is reimbursing for executive compensation as they do for many of the traditional defense contractors,” Chvotkin said. 

What’s next?

Chvotkin said the Defense Department is likely to issue general guidance to programs on how to carry out the secretary’s review.

“I think they’ve already done quite a bit of that, but I would expect [the undersecretary for acquisition sustainment office] to lead a fair amount of that responsibility to describe what those contracting provisions are relating to critical weapon systems and supplies and equipment. They’ve got to identify those first, then catch up with everybody else on a rolling basis,” Chvotkin said. 

“From the contracting folks, I would expect a broad set of contract provisions, both modifications to existing contracts, as well as provisions to go into new solicitations and new contracts to be awarded. That includes the identification of the key performance parameters for each solicitation and new award, the requirement for the company if notified by the Department of Defense or the contracting officer of the failure to adequately meet the performance objectives, the requirement for the remediation plan and then the additional remedies that the department might ask for as part of either the failure of the contractor to meet the original contract performance of projections or the remediation plan,” he added.

Jason Miller contributed to this report.

If you would like to contact this reporter about recent changes in the federal government, please email anastasia.obis@federalnewsnetwork.com or reach out on Signal at (301) 830-2747.

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Comprehensive acquisition reform proposed by the Trump administration has broad and bipartisan backing. Designed to strengthen both the military itself and its supporting defense industrial base (DIB), the initiative as outlined in Defense Department documents issued in November has been long in gestation.

Among those championing the reforms: Mac Thornberry, the former chairman of the House Armed Services Committee and advisor to Amazon Leo for Government. The Texas Republican retired from Congress a few years ago but remains active in defense and procurement reforms – issues he pushed for during his congressional days.

Looking at the community of suppliers to the Defense Department, Thornberry said in a recent interview, reform must do more than ease a few Federal Acquisition Regulation rules. That’s because of the mass of what constitutes the DIB.

“I think that the defense industrial base is far broader than we’ve thought about before,” he said. That is, it goes wider and deeper than the large, prime contractors who make airplanes, ships and tanks.

“Now it includes everything from communications and batteries and minerals to space and cyber. There are more players than there have ever been before,” Thornberry said.

More than the breadth of the DIB favors reform, though, according to Thornberry. A perhaps more important factor is the innovation coming in so many technologies from the private sector – innovation often aimed at commercial use but which also proves essential for the deterrence and lethality of U.S. forces.

“It used to be that the government would be the leader in making the best tank or the best ship or the best fighter jet,” Thornberry said. “But now it’s often private industry that is the best at artificial intelligence or quantum or a lot of things in space.” Ergo, “If private industry is the best at making a lot of the stuff we need to protect the country, relationships have to evolve between government and industry and also among allies.”

Add in the speed at which the technology front is moving, and the need for faster, more streamlined acquisition becomes more pronounced. In the Cold War era, much innovation was sparked by defense needs in the first place – things like stealth coatings, radar guidance and revolutionary energetics. Now, Thornberry points out, innovations occur whether the Defense Department takes two weeks or two decades to acquire them and turn them into capabilities for troops.

Thornberry cited still another factor in favor of acquisition reform: “How interconnected it all is. We tend to think of the separate military services, separate domains, separate theaters around the globe,” he said. “In a way, it’s all interconnected, one global theater right now, especially when you talk about space and cyber.”

The result? “We can’t just fall back on the way we’ve done things in the past,” Thornberry said. “We’ve got to change. Partnership is the key word. It must not just be a label. It’s got to be a reality for us to take advantage of everything that the best in the country can produce.”

Make room for space

Among the policy updates the administration emphasizes is greater use of the very commercial technologies driving the economy. Much commercial innovation occurs in space, specifically in the burgeoning technologies of low earth orbit (LEO) satellites. Competing vendors, including Amazon Leo, have launched hundreds of small LEO satellites that robustly fill a missing link in the worldwide communications network.

As for defense, Thornberry said, “The only way we can do a lot of what needs to be done for the country’s national security is in and from space.” The LEO capacity stands as a case in point for the need to more readily adopt commercial technologies.

“If you’re going to provide the best that the whole country can produce for the benefit of the war fighter,” Thornberry said, “you’ve got to take advantage of that commercial part of space.”

He added, “I’ve been surprised, as I have left government, at how much investment is going into space, from both the companies and the investment community.”

Two advantages of technology pursued by multiple companies are the resulting levels of competition and the resiliency of not depending on a sole supplier.

“That is true in space as well,” Thornberry said. “If you’re going to rely on commercial space providers, as we must, then you’ve got to make sure you have the resilience of multiple providers.”

In fact, he said, the Defense Department needs greater supplier diversity in all of the domains in which it operates.

“We’re not going to have one company or two or three companies that are going to solve all our national security issues,” Thornberry said. “We need to have this diverse ecosystem with partnerships of various kinds.”

He added, “And that’s especially true, I think, in space.”

Within the ecosystem of suppliers and technologies in space, Thornberry said, the government will require disparate systems to interconnect. He cited Defense Secretary Pete Hegseth’s reference to modular, open systems architecture.

That means, Thornberry said, “you can have different capabilities, but they have an interface that means you can put a plug in whatever sort of capability you need to; and that interface is something that’s available to everybody.”

The open systems approach, which he said Congress tried and ultimately failed to codify a few years back, is now needed for projects such as the Combined Joint All-Domain Command and Control (CJADC2) project and the Golden Dome missile protection program. Both Defense initiatives are essentially integrations of multiple existing systems and capabilities.

Acquisition for speed

Space has become a highly contested environment, Thornberry said.

“Anything that is valuable is threatened and gets under attack,” he said, “and we see adversaries doing that. They have demonstrated anti-satellite weapons. We’re seeing a whole variety of capabilities to deny us the advantages of space.”

Moreover, this is happening “at an incredibly fast rate,” he said. It all gets to a key goal of acquisition reform. Hegseth “talked about the importance of speed, and I do agree that that is a characteristic we have not placed at the top of the pecking order, but we have to now.”

That includes the speed at which commercial technologies get adapted and turned into capabilities. Thornberry called Ukraine and its war with Russia a masterclass in agility afforded by speed of adaptation.

“Ukraine can adjust their drones with a week’s time,” he said. “We’ve got to get better at adapting to meet the circumstances and working through commercial providers is the only way that can happen.”

Ukraine shows what’s possible and needed everywhere.

“A few years ago, it became clear that adversaries were moving at an incredible rate to improve their capability,” Thornberry said. “At the same time, technology in general was advancing at an amazing rate.” He noted that the Pentagon had programs here and there to speed technology adoption. These include the Defense Innovation Unit and the Air Force’s Kessel Run.

Thornberry said those efforts produced results, but not systemically. He said there’s evidence of resistance deep within the bureaucracy then and now. Therefore, he said, the latest effort to reform acquisition throughout the Defense Department requires comprehensive adoption to succeed.

“The tendency is to do things the way we’ve always done them. If we do that, we will not be able to defend the nation,” he said.

Besides speed, the acquisition system must produce a market attractive to companies in the first place, Thornberry said.

The old-line defense companies have learned the existing system, “and they’ve done some pretty innovative things in limited spheres,” he said. “But they’re oriented towards the rules and requirements that the current process gives them.”

By expanding use of other transactional authority (OTA) and, as Thornberry put it, letting off some of the procurement shackles, more defense-focused innovation would flow from commercial companies and startups.

Equally crucial, the Pentagon must find a way to send clear and consistent demand signals to maintain the attractiveness of the defense sector to the investment world.

“They need to have some wins. It doesn’t mean everybody wins, but these folks need to see that there is the potential for a profit in making these investments,” Thornberry said.

He added, “The purpose of all this is to get the very best that the whole country can produce into the hands of the war fighters so they can defend the country.”

As for acquisition reform, Thornberry said, “Will the investors continue to invest? Will the commercial companies be willing to work in defense? Is there a chance for startups to earn enough business to stay in business? All of that is yet to be determined.”

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Interview transcript

Terry Gerton Our listeners may not know what the International Stability Operations Association is. Why don’t you give us a quick primer? Who are you and what do you do?

Howie Lind Well, thanks, Terry. We are an industry association made up of about 200 companies, all different sizes, large, medium, and small, who support the U.S. Government and our allies overseas. We stand at the intersection of government and private industry to help both sides succeed in all of our missions and goals. We hold conferences around the world in support of our governments and our Allies. We help them in the combat and command regions of world, Europe, Africa, Middle East, Indo-Pacific, and we support our companies and we’ve been doing it since 2001, so going on 25 years. And it’s a great organization to be part of, for those out there that are not part of it.

Terry Gerton Stability operations are by their very nature unpredictable, dangerous. What are the biggest challenges in the government commercial relationships that you all help facilitate?

Howie Lind Well, we go to the kind of the not nice places of the world sometimes, our companies do, but a lot of them have prior experience, the employees of our companies, either prior military, probably diplomatic or in the development regions of the word, so they’re used to going in these sometimes not secure places. The biggest challenge though this past year really has been with the changing face of government contracting. So there’s been a lot of you know churn so to speak within our companies, but I think it’s leveling out now, and our companies are adjusting to the new climate.

Terry Gerton Well, to help them adjust, you’ve got a big conference coming up. Your global summit is your capstone event. What makes this gathering unique compared to other defense or contracting conferences?

Howie Lind Great question. We hold this every year, our annual summit in Washington D.C., and it’s really a culmination of all the different conferences around the world. And so we highlight each of those different regions within the annual summit. And for this one right now, though, we really feel will be a highly attended — we normally have about 300, but we are expecting more, maybe 350 or 400 attendees because of the government shutdown which ended a month or so ago. And coming right after the start of the new year, I think there’s a lot of pent up energy for people, for companies to want to hear what’s going on with our government contracting and we have a lot senior officials from the government to speak there so it’ll be a big interest for them.

Terry Gerton So as you look at this year’s agenda, what are the big themes? Are you talking about operational resilience, risk management, new contracting opportunities?

Howie Lind All that, exactly right, as well as the geographic areas of the world. But like I said, there’s been this new change. There’s an agency, it’s called the International Development Finance Corporation. DFC is the nickname for it. They’ve been in existence for a few years, but this year in particular, they’ve really been bolstered up to take over, so to speak, of the USAID role, but also within the administration’s priorities of where in the world, which countries our country wants to develop in. So there’s been a lot of focus within ISOA for DFC engagement. But that’ll be part of it. Other parts of this conference will be regional logistics. Our companies do logistics. That’s a big part of all of our company’s repertoire. There’ll be discussions about transportation issues, aviation issues, all different types of industries that our companies cover.

Terry Gerton You mentioned also that you’ll have a number of government officials. Has it been difficult to get face-to-face with government officials over the last year?

Howie Lind It has been, yes. And there’s restrictions on Pentagon Department of War officials, but we are still having some. We’ll have the Army Corps of Engineers, which is a big part of our company’s industries that we work with. There’ll be a keynote speaker from there, a keynote from, it’s called the Defense Security Cooperation Agency, DSCA, the leader speaking there. We’ll have two congressional representatives, Congressman Joe Wilson (R-SC) and Congressman Rich McCormick (R-Ga.) talking about their work in Congress with the House Armed Services Committee. And so we cover the spectrum of what companies want to hear about.

Terry Gerton I’m speaking with Howie Lind. He’s the president and executive director of the International Stability Operations Association. Howie, I also noticed that there’s an entire day of the conference carved out for small business. Why is that so important? And are you seeing small businesses face some unique challenges when they try to work in this space?

Howie Lind The Small Business Day for our summit is very important. We’ve done this the last few years, where we dedicate the entire day to hearing from smalls as well as the administration, government officials, about the state of small businesses. In particular, we have a speaker talking about the rewrite of the Federal Acquisition Regulation, the FAR, which is very much important to all of us, as well a recent event in Congress to re-look at all the set-asides for small businesses, which is a big deal. We view, and its true within the government, that smalls, it’s the critical aspects and experience that they have to our larges is absolutely important, a very important aspect for our community.

Terry Gerton Are there particular challenges that small businesses face when they’re operating in theater?

Howie Lind There are. And actually this year, back to the challenges of this redoing a lot of things, a lot restrictions this year, many of our companies have been stressed on what their missions are, particularly when the USAID, when that collapsed in the State Department, they had to redefine their roles and missions. But overseas, they can adapt very well. And that’s where, you know, the real true innovation sometimes, many times, occurs right within the small business community.

Terry Gerton Your organization emphasizes collaboration with agencies like state and defense. We talked about that a little bit earlier, but how does this summit help bridge communication between federal agencies and the contractors who support these operations?

Howie Lind Right, and that’s a very important aspect of all of our conferences and our summits, too, where we have key speakers, the keynotes, as well as panelists from the government there. We build in, we call them networking breaks, but it’s also the receptions at all sorts of time for companies to be face-to-face with their government counterparts. In particular, every one of our conference, we also hold, we called it a business matchmaking session. Speed dating is very accurate but it works. The companies love it. They spend 10 minutes apiece as they go around this big room, they can talk face-to-face with the government officials, as well as smalls meeting with the large prime contractors who they want to work with. So it works very well.

Terry Gerton So there’s an opportunity for folks really to get their questions answered by the people who are on the ground.

Howie Lind Correct. That’s correct.

Terry Gerton If folks are interested in registering for the conference, where do you want them to go?

Howie Lind Our website is Stability-Operations.org. Please go to that website, and there’s plenty of time. The summit starts January 12 — 12, 13, 14 in Washington, DC. The Willard Hotel, it’s a great location. So please go there and sign up, and I look forward to seeing as many of you as possible.

Terry Gerton Well, beyond the summit, what trends do you see shaping stability operations in 2026?

Howie Lind Well, like I said, it’s an ongoing change in this administration. Right around the corner from the summit is our annual Middle East conference in Amman, Jordan, the first week in February, which we have focused, of course, on a lot of things happening in the Middle East with Syria and Gaza and Lebanon. The region is always ripe for things to occur with our companies. Following that, in the spring, in April every year, we have a Europe Industry Days conference in Wiesbaden, Germany. So, those are the next two big events after the summit.

Terry Gerton And will there be the same opportunity in those conferences to hear directly from government leaders in those areas of operation?

Howie Lind Absolutely. Absolutely. So again, we focus on the combatant command. So in the Middle East, it’s Central Command where we’ve been corresponding, communicating with their leadership to have many of their officials on the panels as possible, as well as keynote speakers from their leadership. European command, EUCOM, same thing in Europe, having keynotes and panelists from their command there.

Terry Gerton Well, this administration has certainly been shifting the playbook around the world. So I would imagine that your contractors, your members, have a lot of questions. What do you want them to know right now in terms of preparing for what may come down the road?

Howie Lind Well, right now we have a lot of speakers that are coming from the government to talk to them, to us, about what they see are the current changes and potential crystal ball looking forward within contracting. Let me make one point, too, though. All of our events are open for members and nonmembers, so both can participate in our events.

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President Donald Trump put defense contractors on notice today. In a post on Truth Social, Trump said his administration is capping executive compensation at $5 million and prohibiting companies from doing stock buybacks and paying out dividends to shareholders.

President Trump signed an executive order Wednesday evening putting these restrictions in place at a policy level.

“All U.S. defense contractors and the defense industry as a whole, BEWARE: While we make the best military equipment in the world (no other country is even close!), defense contractors are currently issuing massive dividends to their shareholders and massive stock buybacks, at the expense and detriment of investing in plants and equipment. This situation will no longer be allowed or tolerated!” President Trump wrote in a post this afternoon. “Also, executive pay packages in the defense industry are exorbitant and unjustifiable given how slowly these companies are delivering vital equipment to our military, and our allies. Salaries, stock options, and every other compensation are far too high for these executives.”

President Trump said going forward, until these companies build new and modern production plants for military equipment, no executive should be allowed to make in excess of $5 million.

The limiting of executive compensation isn’t a new idea. President Barack Obama called on Congress to limit executive competition to $400,000. In 2013, the White House said under current law, government-reimbursed contractor pay is tied to a formula that mimics the compensation levels of top private-sector CEOs, which has grown by more than 300% since 1995.

An hour later, President Trump sent out a second post taking specific aim at Raytheon, now known as RTX. He said Raytheon has been “the least responsive to the needs of the [DoD], the slowest in increasing their volume, and the most aggressive spending on their shareholders rather than the needs and demands of the U.S. military.”

Trump said if Raytheon wants to do further business with the government, it will not be allowed to do any further stock buybacks.

“Either Raytheon steps up, and starts investing in more upfront investments like plants and equipment, or they will no longer be doing business with [DoD],” President Trump wrote.

An email to RTX seeking comment was not immediately returned.

The defense giant said 54% of its $80.8 billion in revenue came from its defense business worldwide in 2024.

In fiscal 2025, USASpending.gov shows RTX held 1,652 contracts worth more than $7.2 billion. The Navy and Air Force are among RTX’s biggest DoD customers.

RTX is known for providing systems like Patriot, National Advanced Surface-to-Air Missile System (NASAMS) and Upgraded Early Warning Radars.

Federal procurement experts question whether the executive order would even be legal and how this would “chill” the markets.

“So much of this ignores that the speed to build/buy/repair is often the fault of the government, not the contractor,” said one industry expert, who requested anonymity.

President Trump went even further in a third post, calling on Congress to increase the DoD’s fiscal 2027 budget to $1.5 trillion.

“This will allow us to build the ‘dream military’ that we have long been entitled to and, more importantly, that will keep us safe and secure, regardless of foe,” the president wrote. “If it weren’t for the tremendous numbers being produced by tariffs from other countries, many of which, in the past, have ‘ripped off’ the United States at levels never seen before, I would stay at the $1 trillion dollar number but, because of tariffs, and the tremendous income that they bring, amounts generated that would’ve been unthinkable in the past … we are able to easily hit the $1.5 trillion number, while at the same time producing an unparalleled military force and having the ability to, at the same time, pay down debt, and likewise, pay a substantial dividend to moderate income patriots without our country!”

DoD requested $848.3 billion for fiscal 2026 which was slightly lower compared to its $849.8 billion request in 2025.

Industry associations like the Professional Services Council, the National Defense Industrial Association and Aerospace Industries Association all declined to comment or didn’t respond to a request for comment.

The post Trump calls for capping executive pay at defense contractors first appeared on Federal News Network.

© AP Photo/Alex Brandon

If you only read the contract clause, you’re missing the playbook.

As of Nov. 10, the Defense Federal Acquisition Regulation Supplement (DFARS) 252.204-7021, also known as the “Cybersecurity Maturity Model Certification [CMMC] clause,” is now in effect. With implementation officially underway, contractors are under pressure to understand not only what 7021 demands of them, but also what contracting officers (KOs) are required to do behind the scenes. Those instructions, which are buried in DFARS subpart 204.75, tell KOs when to include 7021, when they cannot award, and what they must verify before exercising options or extending a period of performance.

Contractors often treat 7021 as a black box dropped into their contracts. Now that the clause is active across new awards, KOs are following explicit procedures you never see. Understanding those procedures gives you visibility into how requirements are determined, enforced and sustained over the life of your award.

Where 7021 really comes from — and what KOs must do

The CMMC clause doesn’t appear in your contracts out of nowhere. It’s part of a stack. At the top is 32 CFR Part 170, the Defense Department’s CMMC program policy (effective Dec. 2024). DFARS 204.75 translates that policy into concrete guidance for contracting officers: policy, procedures and instructions on when to use the clause. You see it in practice as DFARS 252.204-7021, paired with 252.204-7025. DFARS 204.7500-7501 set the scope and definitions. The point is that DFARS isn’t inventing anything new; it’s carrying out CMMC program policy and telling KOs how to enforce it.

The KO instructions are unambiguous. Under DFARS 204.7502, a KO shall insert the required CMMC level when the program office or requiring activity tells them to. The KO doesn’t decide the level, as that comes from the program office based on the data and mission, but they are responsible for putting it into your contract language. Just as clearly, KOs shall not award a contract, task order or delivery order to an offeror without a current CMMC status at the required level.

Two qualifiers matter. First, “CMMC status” doesn’t mean “in progress.” It means you’ve achieved the minimum required score for the assessment, and your status is recognized (self or third-party; final or — at Levels 2 and 3 — conditional). Second, “current” matters. Status is generally valid for three years, and you must maintain it for the life of the award.

To make sense of this, it helps to decode what “status” really means at each level:

• Level 1: Only a final self-assessment counts and no plans of actions and milestones (POA&Ms) are allowed.
• Level 2: Can be self- or certified third-party assessor organization (C3PAO)- assessed, in either final or conditional status.
• Level 3: Always a government assessment — Defense Industrial Base Cybersecurity Assessment Center (DIBCAC) — which can be final or conditional.

KOs may award if your status is final or conditional at Level 2 or 3, provided it meets the required level in the solicitation and any open items are limited to those allowed by 32 CFR §170.21. But conditional status is time bound: 180 days from the status date. If you achieved conditional four months ago and bid today, you’ve only got about 60 days left to close those POA&Ms. There is no conditional path for Level 1.

The message is clear: While conditional paths exist, they are narrow and tightly limited.

The SPRS/UID reality check

Before a KO awards, extends or exercises an option, they verify your status in the Supplier Performance Risk System (SPRS) using your 10-character alphanumeric CMMC Unique Identifier (UID), which is tied to the specific system or enclave that was assessed. This binding matters. The government wants traceability from the contract to the exact enclave processing its data. If your UID points to System A, but CUI ends up in System B, you’ve created a mismatch with contractual — and potentially False Claims Act — implications. Keep your boundary, documentation and operational reality aligned to the UID you present.

This KO check isn’t one-and-done. KOs verify at initial award, again at option exercise or performance extensions, and again if you introduce a new UID mid-performance (for example, after a significant scope change requiring a new assessment). If your status isn’t current at any of those points, the instruction is simple: no award, or no option for extension.

When 7021 must be used — and when it isn’t

The rule is now active, placing us in the phased rollout period that runs through Nov.9, 2028. During this stage, DFARS 204.7504 requires KOs to insert 7021 whenever the program office identifies a CMMC level and no waiver applies. Waivers remain rare and are issued only at the contract level, not as carve-outs for individual contractors.

When the rollout ends on Nov. 10, 2028, the requirement broadens: 7021 must appear in any contract involving the processing, storage or transmission of federal contract information (FCI) or CUI, unless formally waived. Wherever 7021 is used, 7025 follows to ensure all offerors see the requirement before bidding.

What this means for the contractor

Contractors should assume that KOs are already verifying CMMC status in SPRS today, not at some future point. Here’s how the KO’s world translates into your action list:

• Don’t “strategy-bet” on KO discretion: The KO isn’t picking your level. The program office is. The KO’s job is execution and verification under “shall” language.

• Know your status category and the timeline: If you’re planning to bid with conditional Level 2, track the 180-day closeout window from your status date. Build that into proposal schedules and risk plans.

• Engineer your scope and keep it stable: Your CMMC UID binds the assessment to the specific system that will handle DoD data. Avoid unnecessary “significant change” events mid-performance that would force a new assessment/UID, unless you’ve planned for it.

• Keep status current through the entire period of performance (PoP): Treat the three-year validity like a maintenance interval. If your status expires during performance, you’ve put option exercises and extensions at risk.

• Map data flows to the assessed system: Ensure your CUI boundary and your assessed enclave are the same in reality, not just on paper. Align your system security plan (SSP), network diagrams, asset inventory and boundary controls to the UID’s scope.

• Bid packages should include UID clarity: Make it easy for the KO to verify SPRS entries. Label the UID, level, status (final or conditional), status date and expiration in your cover letter or compliance matrix.

• Have a POA&M closure plan you can execute: If conditional, your plan should show who/what/when, procurement lead times and validation steps. Assume the government will ask for evidence of progress.

• Prepare for options early: Six months before option exercise, review your status currency, any scope drift, and whether new UIDs have appeared. Give your KO a smooth verification path.

The KO’s lens

Now that 7021 is in effect and being applied to new awards, KOs are already following the same mandatory procedures across solicitations, evaluations and option exercises. From the KO’s perspective, 7021 is not subjective. It’s a procedure backed by “shall” language: Include the required level, verify status in SPRS by UID, and do not award or extend if the status isn’t current at the required level. Conditional Level 2/3 can win you work, but only within the 180-day window and only with allowable POA&M items per policy.

By understanding the KO’s checklist, contractors can predict how requirements will appear in your contracts, anticipate when status checks will occur, and avoid surprises that might otherwise cost you awards or option years.

Jacob Horne is the chief cybersecurity evangelist at Summit 7.

The post CMMC DFARS clause explained: The KO’s checklist contractors never see first appeared on Federal News Network.

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Interview transcript:

Terry Gerton We are in our first full week of January, and we’ve started it with big news over the weekend, the capture of Nicolas Maduro in Venezuela. What impact does that have on the government contracting community? Tell us what you’re hearing.

Stephanie Kostro We have started 2026 with a bit of a surprise for some of us, right? And in terms of contractors, you know, contractors have long been involved in U.S. engagements around the world. This is no different. And so as we move forward, whether it’s military operations or if it’s critical infrastructure protection for oil and gas lines in Venezuela, etc., depending on where the White House wants to go with this plan they have, contractors will be certainly a part of that. We’ve heard in the news media about the president talking to oil and gas companies. I would also say government contractors have a role to play in what’s coming up, and I hope that we can collaborate and cooperate with the White House, with the agencies involved, to make sure that contractors’ voices are being heard and that we’re being used effectively.

Terry Gerton We’re certainly going to hear more about that over the next few days as the operation unfolds, but let’s change topics a little bit; still looking forward to what you’re hearing in 2026. The Revolutionary FAR Overhaul was a big topic in 2025 and now it’s playing out in practice. What are you seeing in the Department of Defense’s class deviations?

Stephanie Kostro Well, we were seeing a lot of activity, Terry, over the holidays. To go back a little bit into the Revolutionary FAR Overhaul, which is this massive rewrite of the Federal Acquisition Regulations, we saw lots of class deviations released from the FAR Council last year, and there was direction from the president as part of this overhaul to undertake a rewrite of all the supplements of the FAR. And every agency has its own supplemental documentation regarding the acquisition regulations. The Department of Defense/Department of War, they have one of the largest supplements, if not the largest supplement, so undertaking a rewrite of that documentation is a massive effort as well. In mid-December, on December 19th, we saw coming out of the department 31 separate class deviations that would take effect on February 1st, which is not too far away, and they’ll guide contract writing until the formal rulemaking process can catch up. This was a large tranche of Phase 1 class deviations. We were unpacking the 31 pieces of language as we speak. In addition to the actual changes to the DFARS language are changes to non-statutory policies and procedures that are found in what’s called at the department procedures, guidance, and information, or PGI. This is the supplemental body of work to the supplement itself. As we go through all of these documents, it’s really important for contractors to look at them carefully, figure out how they’ll impact their work, their business, and the mission of the agency that they’re supporting, and to give feedback to the Department of Defense/Department of War regarding how these are going to play out.

Terry Gerton What are you seeing in the first 31? What stands out to you, at least in the initial look?

Stephanie Kostro There are several that do stand out to me. We’ve had this conversation before about this push in the government to go towards commercial products and commercial services. When you think about the Department of Defense, you think a lot of the very bespoke, military-focused products and services or solutions. But they do actually acquire lots and lots of commercial services and commercial products. And we heard this in the November 7th Arsenal of Freedom speech from Secretary Hegseth, about this need to incorporate more commercial components to what the department is acquiring. When I looked at the class deviations, I saw some of the subparts on applicability of certain laws for commercial products, commercial services and commercially available off-the-shelf items. I also saw a lot of activity there on simplified acquisition procedure, so they’ve retained rapid contracting for combatant commanders, authority within the DFARS, and some other special contracting methods. So this is really reflective of what we’ve seen in the FAR Overhaul, but more specific to the service members and the warfighters.

Terry Gerton I’m speaking with Stephanie Kostro. She’s president of the Professional Services Council. Stephanie, there are contractors who work across agencies. How are they keeping track of all these deviations if every agency has their own new rule book?

Stephanie Kostro It is such a challenge to think through. You’ve got the FAR, which is what governs so much of acquisition within the federal space, but every single agency does have its own supplement. They’re trying to make sure that they’re aligned, or at least not misaligned. That said, it is a challenge for your run-of-the-mill contractor, particularly for small businesses who don’t necessarily have the resources or the knowledge base to go, hey, this is tweaked in this way, but that other agency is tweaking it in a different way, and that’s what it means for my business. I understand that there will be training opportunities that the government’s putting together, not just for government employees and the contracting officer and the acquisition corps, but also for contractors. And I’m encouraged that it will be coursework that both the contracting officers in the government and the contacting folks outside the government can take together and understand what is going on. But you’ve put your finger on one of the major complications that we’re facing, which is, okay, the FAR is being changed, but all of the agencies are going to interpret changes differently for their own purposes, and what does that mean for industry?

Terry Gerton And you mentioned that the new DFARs deviations go into effect 1 February. Do contractors have an opportunity right now to provide feedback or is this a done deal?

Stephanie Kostro So the class deviations are out. We do have a line of communication open to folks at the department to say, hey, you know, this could be an unintended consequence of this particular phraseology or language, etc. They will take effect February 1st. I believe that they’re open to modifying them before the actual rulemaking process starts. And we’re hoping that as a trade association — PSC, we have 400 member companies — we’ll go out to them and say, hey, what is a burr under the saddle or what is real sticking point for you here? And we’ll convey that, or they can convey it themselves. There seems to be an openness to receiving that feedback, but again, not sure what they’ll do with it, particularly as different supplements from different agencies may be misaligned. And so again, it’s very complicated. I think we’ll be playing this out through all of 2026.

Terry Gerton Well, speaking of complications and burrs under the saddle, also over the holidays there was a leak of a draft executive order that might limit buybacks, dividends, and executive compensation for military and defense contractors. What are you hearing about that?

Stephanie Kostro So it’s been fairly quiet on that since last you and I talked Terry. There was an executive order, as you mentioned, in draft form that was being discussed in the media. We still haven’t seen the language, we haven’t heard much more about meeting with decision-makers about that. We are very hopeful that when language does come out or is shared, or if these conversations happen, that the White House and others will be open to contractor feedback regarding how this impacts industry. I would mention, PSC, we often highlight, as I did earlier in this discussion, we have 400 member companies. Collectively, our companies, between commercial and government contracts, contribute $1 trillion to the U.S. economy. And that’s just our 400 member companies. So we are a big player in the national economy between commercial and government contracts. So as we have these discussions, I hope that concerns will be taken under advisement.

Terry Gerton Even the leak of this executive order had immediate impact in the stock market. What are you hearing from your member companies about the potentially negative effects of these requirements?

Stephanie Kostro These new requirements, as I understand — again, haven’t seen the language — but as I understand they’ve been drafted, would have impacts on shareholders, would have impacts on the broader economy. Already the rumor of it had an impact on some share prices. I really hope that as we work together — we’ve had a long history of public private partnership and of collaboration with the government — and again, we are here to help with federal missions and making sure the taxpayers in America get what they’re paying for in terms of mission success, whether it’s Internal Revenue Service or Department of Defense/Department of War or Homeland Security, border security, etc. But these companies need to remain viable. They need to be able to pay their workers, able to do the work themselves. That is the conversation that we want to have about the longer-term impacts of some of these potential actions. And I hope, again, that the government will take that under advisement.

The post No slow rolling for defense contractors as 2026 gets started first appeared on Federal News Network.

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The Defense Information Systems Agency isn’t just talking about meeting Secretary Pete Hegseth’s goal of “speed to capability.” It’s holding contracting officers and program managers accountable.

By March, at least 40% of all task or delivery orders let through the General Services Administration’s schedules program or an agency blanket purchase agreement must use at least one “acquisition accelerator.” By September, 80% of all task and delivery orders issued through GSA or their own BPA must use these tools to speed up the acquisition process.

“It’s oral proposals or presentations. It is confidence ratings. It’s about reaching consensus as soon as a presentation is provided instead of waiting a couple [of weeks]. It’s saying, ‘No, you’re doing it now and you have an hour,’” said Doug Packard, DISA’s procurement services executive, at the recent Forecast to Industry day. “It’s best suited where you have 20 firms submit an offer and you get the two that are best suited to meet that requirement. You have a couple of things to talk to them about that aren’t minor. You can pick the firm and talk with just them, not the other 19, and that saves us months in trying to get us to who is the awardee.”

While Packard didn’t have any specific metrics, he estimates that DISA is shaving weeks off acquisitions timelines, specifically during the source selection phase.

DoD issues 31 FAR deviations

DISA is receiving some additional policy support to expand the use of these accelerators. The Defense Department’s Office of Pricing, Contracting and Acquisition Policy issued the first set of deviations to the Federal Acquisition Regulation to begin implementing the Office of Federal Procurement Policy and the FAR Council’s overhaul of the 40-year-old regulations.

On Dec. 18, John Tenaglia, the principal director of DPCAP, signed 31 class deviations that will be effective on Feb. 1.

“[T]hese class deviations retain DoD-specific statutory direction and direction determined necessary for sound procurement within the new, streamlined RFO structure,” Tenaglia wrote in the Dec. 19 memo. “The [revolutionary FAR overhaul] Phase 1 changes represent actions we can take unilaterally, in advance of formal rulemaking, to reduce regulatory and procedural burden on both our workforce and on industry. Issuing this first tranche of class deviations now provides a preview of the kinds of changes you can expect to see next month once we release the remaining class deviations.”

Among the 31 deviations DoD initially issued are updates to FAR Part 6, competitive procedures, Part 10 for market research and Part 12 for commercial products and services.

“Each class deviation reflected below consists of the revised DFARS part with its associated solicitation provisions and contract clauses, followed by the revised procedures, guidance and information (PGI),” DoD wrote on its FAR deviation website. “The line out documents reflect the current DFARS and PGI with markings to identify high level changes to the official versions at 48 CFR chapter 2 and published on the DPCAP DARS website. The portions of the regulation and PGI that are proposed for removal are struck through. Regulatory text and guidance that have been revised are retained in their original form.”

DoD plans to issue a second tranche of deviations later this month and throughout 2026.

In the coming months, the Pentagon will issue the deviations for FAR Parts 8 and 16. DISA is applying its acquisition accelerators to contracts under these sections.

So far, 23 civilian agencies have issued FAR Part 8 deviations and 18 have issued Part 16 updates.

OFPP seeking feedback through Jan. 12

OFPP and the FAR Council also have issued FAR Companion guides and practitioner albums to help the training and education of the acquisition workforce on the new rules.

Additionally, OFPP Administrator Kevin Rhodes held a series of roundtables with contractors, industry associations and others to gain their perspectives of the FAR overhaul. OFPP says these contractors and associations “shared feedback on five priority goals: increasing competition, reducing costs, accelerating the acquisition system, changing cultural norms and deploying best practices.”

Rhodes said in a statement that “the feedback we received will help inform our efforts for the next phase of the RFO.”

OFPP is accepting more feedback through Jan. 12 through its IdeaScale on ways to continue to improve the FAR across the five priorities.

“Please share a specific buying practice that should start, stop, continue, adjust, or scale in the new era of federal acquisition. Your idea does not need to be new, it only needs to address a real issue or practice that matters to you or your organization that can improve federal buying today,” OFPP wrote in asking for feedback.

As of Jan. 6, public and private sector stakeholders have submitted 86 ideas, ranging from ensuring the “rule of two” remains in place to expanding oral presentations and streamlined source selection beyond IT acquisitions to limiting the flow down requirements to small business subcontractors.

The use of streamlined source selection and oral presentations are examples of what DISA is requiring of its contracting officers in 2026.

Packard said DISA tested out these about 11 different accelerator tools over the last 18 months and determined they worked for both the agency and industry.

Carlen Capenos, the director of the Office of Small Business Programs at DISA, said at the DISA event that the accelerators don’t just benefit the agency, but contractors too.

“We hear often from small and large business that if they’re not going to win, they want to know that fast, the idea of failing fast. So we see step things where you have to provide X, Y and Z, and if you don’t have that, well, then we don’t need you to put together a full-blown proposal because you don’t have the ability to ever win. Or if there’s somebody that’s so much better that has a better solution that we’re talking about, instead of all the check marks, we can eliminate the rest of it and go fast,” she said. “There’s a lot of those things that are really great for small business when they just want to get in front of folks to say, ‘I have the solution. Let me articulate it for you.’ So there are those that really like that point. Our office has done a couple trainings with the contracting folks that have set these up, and they run through it once a year, twice a year, where they provide it to anybody who wants to sign up for it.”

Packard said now that DISA has tested out these accelerator concepts, even winning a protest, it’s time to apply them to increase the “speed to delivery” and attract more commercial companies into DoD.

The post DISA’s push for acquisition accelerators buoyed by FAR update first appeared on Federal News Network.

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Interview transcript

Terry Gerton So this is a really interesting case. You started as a language services firm, and now you’re a mid-tier government contractor with a pretty broad portfolio. Tell us how you evolved the company from its origins to where it is now.

Julian Setian So my mother, who was a professor of applied linguistics, she founded the company originally to provide skilled expertise for a lot of the low-density languages … for the federal law enforcement agencies. We were kind of this sleepy little company that nobody was paying attention to for several years until 9/11 happened, and that was kind of a big turning point for us. When suddenly it became starkly obvious that the government just didn’t have enough foreign language expertise organically to meet the demands in the post-9/11 era. So we started out essentially becoming the largest supplier, among the largest suppliers of foreign language expertise to the federal government. That just put us into a lot of really unique spaces that we then use as a platform to grow and diversify the business from there. So fast forward to today, we’ve got essentially four core business units, then two subsidiaries. We have a technology and engineering business. We have an overseas logistics and supply chain business. We have a professional technical services business supporting the intelligence community, so we’ve become quite diverse since then over the course of the last 25 years.

Terry Gerton Was there any particular turning point on any of those additions that you made that helped you scale SOSi in a particular intentional way?

Julian Setian So we became acquisitive in the 2016 time frame, and that was thanks to, in no small measure, to the banks that finance us. I mean, to this day, J.P. Morgan has been an extraordinary partner for us, helping us to grow and diversify our business. But that was really kind of the big turning point. I had made a commitment in 2016 to make a major acquisition each year from that point onward. We’ve come close to holding that commitment since then, but really, in this industry, this is the ultimate roll-up industry. If you don’t factor M&A into your growth strategy, it’s really hard to scale and become a $1 billion+ business.

Terry Gerton So you really grew SOSi without small business set-asides or outside equity. You grew that internally. What holds all of those lines of businesses together for you?

Julian Setian At the end of the day, it really doesn’t matter if the government’s buying F-16s or services. There’s a certain methodology to doing business with the government. Once you master that methodology, you can not just grow, but you can diversify very, very quickly. And so at our core, we’re a national security contractor. We follow the budgets very closely, but we make sure that our capabilities and the solutions we offer are very closely aligned to whatever the national security imperatives are of the nation. And so, what really kind of binds it all together is that we’ve got this sort of mission-oriented focus that permeates just about everything we do. And, you know, we’re national security contractors first, everything else second.

Terry Gerton As you think about the space that you’re in, it’s very competitive. There are major primes, lots of folks trying to get in on the small business side. You sort of sit in the middle. How would you say SOSi differentiates itself? Is it agility? Is it depth? Is it special technical knowledge? What sets you apart?

Julian Setian You know, I tell our people all the time, it’s not what we do that sets us apart, it’s who we are. You know, we are the largest privately held company in the space that has no outside institutional capital in the business. What that basically means is that our planning horizons tend to be a lot longer. We take the long view on almost everything that we do. You know, there just aren’t that many companies like us out there and we’ve been in business for 30 plus years with essentially the same ownership. I’ve run the business for the last 25+ years personally myself. So it’s really kind of the personal touch and just sort of this family-oriented atmosphere. So yes, we’re a family-owned business. We really try to push that culture down to the very last person within the organization.

Terry Gerton Let’s explore that culture for a minute because you’ve described a very unique ownership structure in this environment, family owned, family operated, and yet in the national security space, you’ve got to work with folks who are highly technical, highly cleared. How do you keep current in the job market and at the same time hold to that family culture?

Julian Setian Again, I think, you know, we’ve never had a hard time selling ourselves, as it were, to the talent pool. People are generally attracted to us if they have an entrepreneurial mindset. If they want to be close to the customers, we tend to have, you now, our intimacy with customers and their missions tends to be a lot greater than I think the ownership structures of some of our largest competitors in the space. And so we’ve never really had a hard — we attract a certain type of talent and we’ve ever had a time finding the right types of people to work for us. They’ve gotta be mission oriented, they’ve gotta entrepreneurial, really wanna break new ground and actually make a difference and at the same time be held accountable for results.

Terry Gerton I would imagine your workforce is fairly distributed as your clients would be, so how do you keep that culture streamlined and focused when folks are out in all different kinds of places?

Julian Setian So we’re in 16 countries today. We’ve operated in close to 40 around the world over the course of the last 25 years. You know, keeping, maintaining a common culture across distributed work locations is an age old challenge in this business because so many of our employees work in customer spaces. You know, I make myself very accessible. I spend a lot of time on the road. We hold regular town halls with employees, you know, really genuinely. And then of course, you know, over the course of the last 10 years technology has become such that it’s become a lot easier to communicate key messages and themes with a distributed workforce. And so really it’s just about staying engaged, staying plugged in, keeping a very flat organizational decision-making structure and really spending time out in the field in the trenches with your employees.

Terry Gerton You mentioned that one of your lines of business is tech integration. How do you keep SOSi on the front edge of technology adoption and then how do you bring that technology through to your client?

Julian Setian So I think the industry is at an inflection point right now where innovation really does matter. It’s not just empty talk. What’s really made a difference for us is in the last handful of years in particular, establishing partnerships with non-traditional technology companies that are outside of the government contracting space and really becoming a facilitator or channel into the government space. Forming strategic partnerships with pure tech firms that are not government contractors first, or tech firms first, government contractors second, particularly those with tried and proven commercial industry capabilities. You know, that’s really an important part of the growth process. And I think what’s really set us apart in the last couple of years, we’ve — a lot of the changes that are taking place right now in the federal acquisition world so far, FAR 2.0, which a lot people have made a lot, you know, a lot a lot those changes really play to our strengths as an innovative entrepreneurial business.

Terry Gerton You mentioned the FAR. There’s certainly a lot of change happening in how the federal government is acquiring everything from products to services, and especially in the national security space. If you were to look ahead five years or so, what would you say are the biggest challenges and opportunities out there in the acquisition space? And how are you positioning SOSI to take advantage of those?

Julian Setian Wow, that’s a big question. I mean, a lot of companies are grappling with that right now. I think you’re going to see a lot less FAR Part 15 acquisitions. The way the FAR is evolving, there’s going to be a preference placed on companies that offer commercial solutions. So in other words, technologies and approaches that have already been tried and tested in the commercial space. And the use of OTAs has become extremely prevalent. I think it’s close to $30 billion of awards been made on OTAs this year to date alone, which is greater than it was in the prior year. Undoubtedly that number will start to increase. You know, again, this is when innovation really matters. And so, you know, I think you’re going to see an increase in FAR Part 12 acquisitions, you know, unique capabilities that are brought to the forefront that have already been tried and proven in the commercial sector, and then scaled through best-in-class vehicles through FAR Part 8. The way we are adapting to the new marketplaces. We’re looking for opportunities to productize things that we do. So we have a collection of products, a real, no-kidding IP that we own, that we’ve developed in-house, or that we have acquired through acquisitions, that we’re really kind of leading with technology at this point, leading with those products. And also looking for opportunities to identify clusters of services that really genuinely are differentiating. So, things that we do that other competitors don’t do that we can then productize, build some brand awareness around and then lead with those as we approach the marketplace.

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