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.

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Interview transcript

Terry Gerton Last week maybe felt like a dog year in terms of congressional activity as Congress came back to town after the holidays. Let’s start at the beginning because the Republicans in the House started their week with a retreat. What did you hear about that and what’s shaping up to be the Republican House strategy?

Mitchell Miller Well, this was kind of a rally that President Trump, of course, threw out a lot of different ideas, whether they’ll actually become legislation really remains to be seen. But of course the big talk is about affordability and a lot of ideas have been thrown out, but are they going to actually become bills? We’ll have to see. A lot of Republicans, frankly, are already kind of getting ready for the post-Trump era, even though we’re moving into this second year of President Trump. But the big part of their strategy is definitely going to be selling the Trump tax cuts. They, of course, approved these as part of the Big Beautiful Bill, and Senate Majority Leader John Thune (R-S.D.) and other lawmakers went down to the border this past week to stress that. And you’re going to see a lot of that from Republicans as they try to get their messaging across while they’re dealing with all these other issues like health care and Venezuela, etc. That’s going to be tough though, because Democrats also found that difficult, as remember when they were trying to do everything related to the Inflation Reduction Act, selling these huge bills that have so many different things in them and actually getting them to resonate with voters before an election and in this case, before the midterms, it’s really difficult.

Terry Gerton Well, they’re complex and they cover so much ground. But in addition to that, the Republican margin has gotten really tight.

Mitchell Miller Yeah, absolutely. Unfortunately, Rep. Doug LaMalfa (R-Calif.), it really surprised everybody that he had died at the age of 65 last week, and that brought down the margin in the House to 218 to 213. So you quickly do the math, and that means House Speaker Mike Johnson (R-La.) can only afford to lose two votes on any particular piece of legislation. And then there are also a couple of special elections with Democrats likely to pick up two seats that are now vacant. So it is going to be a very, very thin margin. I know we’ve been talking about this for years, but this will be actually the thinnest margin that Speaker Johnson will have. And we saw some of that play out with the legislative action that occurred last week.

Terry Gerton Let’s dig into that because the first thing, maybe a good news piece, is that the House did pass the first of the minibus appropriation bills. Tell us more.

Mitchell Miller Right. And related to that thin margin, even that had a little bit of a mini drama on the minibus because once again, you had conservatives saying that they didn’t like some of the earmarks in part of the legislation. So they broke it up, which is kind of rare that they do that even with a minibuss. So, they basically took Commerce, Justice and science, took that as a vote separate from Interior, environment and energy, water bills. And they both passed narrowly initially. At least on the rule, and then they easily passed. So that’s a big step. As we both know, January 30 is right around the corner, and that’s the deadline for when, essentially, the federal funding will run out and we’ll be up against a potential government shutdown. But right now, I’m not hearing a lot about the possibility of a shutdown, because this week they are going to take up another minibus. That one is likely to include Homeland Security, State foreign operations and financial services. One hiccup in there could be Homeland Security, however, as we all know, a lot of controversy related to the shooting in Minneapolis last week with the ICE officer. And so that could be tripped up a little bit because a lot Democrats have concerns about how things are being moved around with Homeland Security. So we’ll see if they shift. They could actually potentially instead take up a different minibus, but the Senate meanwhile plans to take up the one that was passed last week. So. We could get to the point where we’re at least halfway through the 12 appropriations bills that need to be passed by the 30th, which in congressional terms, that’s a lot of progress.

Terry Gerton But these minibusses are sort of ordered in degree of difficulty, aren’t they? So getting the CJS and Interior bill through is one step. The next one’s a little harder. The last one is defense and some other big topics.

Mitchell Miller Yeah, that’s a great point. That literally is how it works. You know, they work through the easiest things first and leave the hardest ones for last. And definitely, Defense, Labor, Health and Human Services and Education, that is going to be the toughest one. And that’s going to the one that probably pushes us right toward that January 30th deadline, because they know that they just can’t get agreements right away on these things. But Rep. Tom Cole (R-Okla.), one of the top appropriators on the Republican side in the House. He increasingly though sounds pretty confident that they’re going to just keep cutting away at this and making sure that they get through these appropriations. By the way, just a little bit of detail on the environmental and Interior bill, the cuts that were made were actually much less than what the Trump administration wanted. For example, the EPA would be cut by $320 million. That compares to $4 billion that the administration had sought. And then the National Park Service would go down a much lower level than the almost 40% cut that the White House had sought.

Terry Gerton I’m speaking with Mitchell Miller. He’s the Capitol Hill correspondent for WTOP. All right, Mitchell, we’re gonna take the good news there and run with it and we’ll tackle a different topic because the House also made some surprising progress on the ACA subsidies vote.

Mitchell Miller Right. This was something that a lot of people were really skeptical about at the end of the last year, as you know, whether or not they would actually get this vote. But the discharge petition went ahead. You had four Republicans joining Democrats to get that to the floor, much to the chagrin of House Speaker Mike Johnson. And it did pass. And in fact, it passed easier than expected with 17 Republicans joining Democrats to Get this three-year extension passed. That shows that there is some nervousness among the GOP. About health care costs as we talk about moving toward the midterm elections. Now this bill will not pass in the senate, however, it does show that there is momentum for some type of health care legislation and what the talk is right now and there’s been some very encouraging developments on the senate side is that they, on a bipartisan basis, could potentially get an extension of the ACA, perhaps maybe two years And then they’re also talking about extending open enrollment to March 1. And then there will be a variety of reforms, potentially, that Republicans have been pushing for, a new income eligibility cap, a minimum monthly premium, and then potentially stiffer fines for insurance companies that sign people up without their consent, essentially going after fraud. So I think we are going to continue to see progress on this front. So another piece of good news.

Terry Gerton Maybe a little silver lining to the shutdown. The other big topic this past week was operations in Venezuela and the interest that that generated around war powers resolutions.

Mitchell Miller Yeah, this has been a pet project of Virginia Democratic Sen. Tim Kaine for a long time. And he really kind of outdid himself this time around. Last time, this came up to limit any kind of military action that the president could take against Venezuela without the consent of Congress, it did not move forward. It only got two Republicans. This time, it got the Republicans it needed to move forward, it get five Republicans. President Trump made it very clear he did not like that. He singled out all of those republicans saying they should not be reelected. But what this did was moved forward this legislation so it will likely be discussed again this week before a final vote, we’re not sure exactly when that’ll take place, but they’ll do a vote-a-rama where lawmakers will have a chance to add a lot of amendments to this. But this is pretty significant given all the support that the president has had initially at least related to Venezuela on the Republican side, the fact that congress is starting to assert itself a little bit more in connection with the War Powers Act so we’ll have to see where that goes

Terry Gerton We also heard that Ruben Gallego may be teeing up a War Powers Act [resolution] on Greenland.

Mitchell Miller That was really interesting because amid all the discussion related to Venezuela last week, Greenland was just popping up all over, and who would have thought that would be on your bingo card a few years ago? But clearly there is concern among Congress, members of Congress, about what is going to happen with Greenland and Sen. Ruben Gallego (D-Ariz.), as you mentioned, his War Powers Act would essentially say that the president could not take any military action to take Greenland, if he so desired. Now, the administration has had kind of a set of conflicting pieces of information related to Greenland, the president wanting to keep pumping up the potential threat, a lot of other members of the administration and some Republicans in Congress saying, wait a second, no, there’s no way that there’s ever going to be military action. But there is serious talk about some kind of negotiations or purchase. And by the way, if Greenland were somehow to be bought by the United States, that funding would have to come from Congress. Or, If there were some kind of deal that was cut with Denmark which of course controls Greenland then there would have to be a two-thirds majority of the Senate to approve a new treaty and those usually take quite a while so I think this may actually be something percolating obviously in connection with what happened in Venezuela. We’ll just have to see where that that goes

Terry Gerton You’re absolutely right, I did not have Greenland on my bingo card. One other thing, and this is a topic you and I have talked about and I know you’re watching, is retirements from Congress and this week Steny Hoyer (D-MD) announced that he’s going to retire. What does that mean for the leadership positions in the House?

Mitchell Miller Well, this is really interesting because Steny Hoyer is just one of those lawmakers who has seemingly been around forever. And he has been in Congress now for 45 years, longest serving member from Maryland ever. And this really signifies the changing of the guard in the U.S. House of Representatives, at least on the Democratic side, because for 20 years, Steny Hoyer was part of the Democratic leadership. He was the number two under House Speaker Nancy Pelosi when she was the speaker, much to his chagrin because he wanted to be speaker at one point. But at any rate, he was the House majority leader twice during his tenure, but now they are moving on the Democratic side to a much more younger Leadership in the waiting, if you will, if they are able to retake the House. Democrats still remain pretty bullish on the fact that they might be able to do that because of gerrymandering and all the things related to redistricting, there’s not really probably going to be another wave type election for either side moving forward. But Democrats, if they picked up the seats, then you’re looking at somebody like Hakeem Jeffries (D-N.Y.), who’s been the House minority leader now for a while. He has the backing of Steny Hoyer and some of the old guard, if you will, of the Democratic Party. But you have more than 40 members of the House who are leaving to either run for other office or to retire. In this case, Steny Hoyer is not leaving because, obviously, he wants to go to another job, he’s 86 years old, or necessarily because he’s so bitter about the way things are in the House. He just feels that he has had an incredible legislative career, which is no question about it. This is a person who is respected on both sides of the aisle. In fact, former House Speaker Kevin McCarthy actually issued a nice statement related to Steny Hoyer. So, it was good to see a little bit of bipartisanship. I’ll leave you with this little anecdote, you know, with all the acrimony here on the Hill, but when he gave his final floor speech, the current House speaker, Steve Scalise (R-La.) and the whip, Tom Emmer (R-Minn.) on the Republican side, were both there on the floor and personally congratulated him. So it’s nice to see little bit of bipartisanship here and there on The House floor.

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Interview transcript:

 

Mike Meese When you think about it, [2025] had as many changes for the federal workforce and for military service members as we have had almost in the last 60 years that was not during wartime. You know, if you think about it we had massive changes after 9/11, an external crisis. We had massive changes after the 2008-2009 Great Recession; another economic crisis and obviously massive changes after COVID. But here we had the election of President Trump, and in a lot of ways that he came in was adjusting for the expansions of government that took place during the last three crises, where he peeled back a lot of that. People may agree with it, people may disagree with it, but it certainly had a huge impact on people in the military, people that were veterans that were serving in the civilian workforce and many other aspects of government.

Terry Gerton Give us a couple of examples of things you saw there at Armed Forces Mutual.

Mike Meese A lot of our members, a lot of our folks were former military, they end up now working for the federal government and were given the option of the early retirement. Consequently, many of them had to go through very rapidly and assess, what is my financial situation? How much longer can I work? If I take this fork in the road, so to speak, is my family going to be secure? Again, without knowing the unknown of what happens if you leave federal service, are there going to be jobs that are going to be out there within the economy? At the same time, you had other pretty radical changes. It wasn’t an economy that you knew that you were jumping out into. There was the liberation day, so to speak, on the first of April when the tariffs were put in place, and there was substantial economic uncertainty. So it was, there’s one government train that you were on that you might want to step off of, and if you recall back earlier in this year, many economists felt that we were going to go into a recession. Fortunately, we managed to avoid that. The market continues to do well. The economy actually seems to continue to be doing well in spite of some of the mastications of a lot of economists.

Terry Gerton Were there any changes you saw in the past year that you’d want to make sure continue?

Mike Meese Well, I think being able to be respectful of government workers and giving them the options wherever you did. The people in the Department of Veterans Affairs talked very rapidly about that they were going to try to take down 80,000 workers. Most of those have tended to be by voluntary separations or not hiring new people, and it’s had an impact on the workforce. But as much as possible, respecting the wishes of government workers and being able to do that has been a positive thing. Also, it will be very interesting because, as sort of a studier of this from a public policy perspective, the president has really stretched the bounds of executive power, and now courts and increasingly the Congress are peeling that back. One example was when the president adjusted the collective bargaining rights of many federal workers, Congress has recently started to peel that back. And so the question is, are many of these changes that were done unilaterally by the executive going to stand the test of time as a powerful president doing things? Whether you agree or disagree with them, unless they become institutionalized, we will tend to revert back to where we were before.

Terry Gerton That’s helpful insight. Certainly one of the things that marked the calendar year 2025, the beginning of fiscal year 2026, was the government shutdown, the longest lapse in appropriations ever. I think so many folks don’t understand the tenuousness of many service members and veterans’ financial status. And whether they missed a SNAP payment or they missed up a paycheck, many were really significantly impacted. Talk us through that and what you saw at Armed Forces Mutual.

Mike Meese Yeah, it’s unfortunate, but somewhere in between a quarter and a third of service members are just one or two paychecks away that if they had a $400 extraordinary expense, that would really set them back. And so consequently, although fortunately, the shutdown was resolved and no military paychecks did not take place, there was a heck of a lot of uncertainty in that. For Armed Forces Mutual, for example, we have a lot of people that pay us their insurance payments by allotment. Normally we get those allotments four days before payday, or we get the information from the Defense Finance and Accounting Service four days before payday. We actually did not get them until about 12 hours before payday. So it literally was the federal government putting things together right before the 31st of October to be able to get things done. And that anxiety for us, and I’m sure every other military-supporting organization, all the banks and everybody else, were working right at the last minute. Service members were postponing vacations. The biggest issues that we saw was people that were literally in the middle of a permanent change of station and the funds either would not come through for that, or maybe they were supposed to go into government quarters, but it was not an essential person that was going to inspect those government quarters. So they’re living on the economy having to pay for a hotel bill while they were moving into those quarters. And so although it did not affect everybody across the board, there were selected pockets where people ended up with some very extraordinary expenses that they might not have been prepared for.

Terry Gerton Mike, there was some proposed legislation that would perhaps mitigate this in the future. What’s your sense of its possibility?

Mike Meese The good news was, and I think we talked about this when we talked in October, everything in the law says that people that were going to be furloughed were in fact going to get back pay. And when this passed, part of the law was for individuals to get back pay. That ought to be permanently part of that law so that you remove the uncertainty and the potential threats that people are not going to get paid on that. In fact, what we really ought to do is find a way for Congress and the executive to work together to get all 13 bills passed by the end of the fiscal year. And that way, you don’t run into this challenge. In fact, this shutdown is probably a good example because I don’t think, whether you’re on one side or the other, anybody hugely politically benefited from this one way or the other. People will write op-eds about it, but nobody outside of Washington cares about that. They just know that government didn’t function for almost a month and a half.

Terry Gerton I’m speaking with Mike Meese. He’s the president of Armed Forces Mutual. Mike, what lessons do you want to make sure that service members, families and veterans take from 2025?

Mike Meese Well, the first is, just following up on the shutdown, some people, especially federal civilian workers, they got lump sum pays in November, at the end of November, where they deferred going out to dinner, deferred vacation or deferred other spending in October. When you get that lump sum pay, that’s actually a good opportunity because you can’t go back out to dinner like you were going to in October. Save that money, set it aside in an emergency fund. Prepare for future potential shutdowns and put the money toward your long-term goals. So that, I think, would be a very important thing. The second thing is, be prepared yourself, always. And that’s keeping your skills up, keeping your resume handy, keeping that LinkedIn profile there. I don’t know what will happen in the future in terms of other federal government shutdowns or opportunities for a deferred retirement system, but it’s always something that people should bear in mind that, especially since we have seen that government jobs that they thought were going to be permanent may not be permanent, you’ve got to be able to have other options.

Terry Gerton Well, speaking of that smart financial planning, any advice for folks who are navigating financial stress through the holidays or perhaps just after?

Mike Meese Well, that is always a challenge. What I tell people, we sometimes have gotten a little bit of a habit; back during COVID when you couldn’t travel, you tended to get more extravagant gifts for the family that you were not visiting. Now that you’re visiting and traveling to them, recognize that just being there is part of that gift, so you don’t need to be quite as lavish on the expenditures. The other thing that I talk with military families, there was one Christmas where I had five members of our family, it turned out that visiting two sets of relatives, we actually flew on Christmas day. And if you fly on Christmas, it’s actually a very cheap fare. It’s kind of strange being in the airport on Christmas but all the flight attendants and pilots are wearing hats and singing Christmas carols. They have to work that day and it turned out to save us a lot of money for a family of five. So there are ways that you can get deals even during the holidays.

Terry Gerton And as you turn your attention to 2026, what legislation or policy changes will you be watching for as the new year begins?

Mike Meese Well, it’ll be very interesting what happens with federal government workers as well as the military. Currently in the National Defense Authorization Act, the military pay increase is going to be 3.8%. And so that is actually ahead of inflation. For me as a military retiree, my pay increase as military retiree and Social Security age is only 2.8%, so the military is doing a little bit better. Federal workers, on the other hand, are going to get a 1% increase, except if they are in federal law enforcement positions, like the FBI, Customs and Border Protection, Secret Service and any other federal border law enforcement. The proposal is for them to get a 3.8% increase, the same as the military. So when you do get that pay increase, whether it’s 1% as a civilian worker, well you’ll be a little bit behind inflation, or 3. 8% in the military or law enforcement, be sure to use that judiciously and maybe put some of that away into savings because you don’t know what will end up happening in 2026.

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Interview transcript:

Terry Gerton I want to start by taking a look back. You took over at PSC this spring. What has been the most surprising thing you’ve encountered in your first year on the job?

Jim Carroll It’s hard not to look back on the first year and think of the disruption caused by the record-breaking shutdown as being something very, honestly, traumatic. The fallout from DOGE and the impact that has had — those two things stand out as the biggest opportunities and challenges to overcome. Certainly the shutdown and the duration of it was a surprise. I think everyone sort of expected two weeks out, or three weeks out, that it was going to happen, but the fact that it lasted so long. The wonderful surprise really has been the dedication of the companies that are members of PSC to fulfill the mission. I’ve spent my entire career in the government, with one stint in the private sector. Being able to work with these member companies, they truly feel that they are doing the best work for and on behalf of the country. The significance and seriousness with how they approach their job has been just a wonderful affirmation of the work that they’re doing.

Terry Gerton So Jim, coming off of that, one of the things that happened just before the Senate left town was the confirmation of 97 more political appointees. You’ve said this is really important to PSC and industry. Walk us through what you’re watching in terms of political confirmations.

Jim Carroll At the beginning of the administration, we did see members of the cabinet and the deputies confirmed very quickly and getting them through the process. Since then, it’s been bogged down getting these assistant secretaries and a few deputy secretaries confirmed. What that means with getting 100 more people on the job is what you would expect: They’re on the job, they are going to be the decision-makers. We’re excited because we believe that things are going to start moving a lot faster. And we sincerely appreciate the willingness of those people that were willing to serve in an acting capacity. But those people have some constraints on how they move, what decisions they can make; now getting the new political appointees in, it means that they’re really going to start moving faster. We’re hoping to be able to see more long-range and not just some of the short-term things, so we’re excited about that. We think it’s in the best interest of everyone to get these folks onboarded and get them moving. We are certainly going to take advantage of that and be coming to them to tell them exactly how these things impact the industry — and therefore impact the country.

Terry Gerton I’m speaking with Jim Carroll. He’s the CEO of the Professional Services Council. Jim, you mentioned up front the surprise around the government shutdown. Hopefully we won’t have another here at the end of January. But what, then, are the contractors in your community expecting in terms of procurement momentum? Is it going to pick up from what we’ve seen?

Jim Carroll Yes, we absolutely believe that. And I am not as worried about the shutdown of the end of January as I was back in the fall. Hopefully you feel the same way, Terry. I don’t think either side won. I think both sides lost during that shutdown. I’m hoping, and we’re certainly telling people, that that is the situation. With the these people on board, there’ll be renewed excitement. They are eager to get the job done. A lot of them have been waiting, really, a year since they were announced by the president, so they’re going to be incredibly motivated to work and to get decisions made, to get acquisitions going and really sort of set the policy for working with industry. We’ve heard from some of them already. We’re looking forward to meeting with some of them as they get settled in and find their office. We will be meeting with them and making sure that they understand the broad significance of what they’re doing and letting them know we’re a willing partner to achieve those objectives.

Terry Gerton Jim, one of the big challenges for the government contractors in 2025 was just the delay in terms of invoices, the disruption in contracts, terminations. Are you expecting that these backlogged invoices and stalled new awards and recompetes are going to pick up speed?

Jim Carroll Yes. We went in with some of our members to meet with the Chief of Staff, Susie Wiles, and the White House counsel. We told them — and this was while the shutdown was ongoing — that we needed, once it ended, to be able to move on these. We have followed up with the White house leading up to Christmas. The Chief of Staff, Susie Wiles, was very receptive to it and was, we believe, to be really on message with this. We talked about the communication and how to best achieve it through the departments and agencies. So we’re optimistic that these invoices will be paid. Because this is work that has been done, and for these companies, for the most part, they have been paying their employees. Some, sadly, had to put folks on the bench and furlough people temporarily. But a lot of them kept working, did what they needed to do, and now there’s cash flow issues for some of these companies. That’s what we’re pressing on to the White House. That is what we’re talking about with the members of the cabinet on some of the issues, is to get these invoices paid and get these companies up and running fully.

Terry Gerton Well, speaking of paying one of the few agencies that has a significant appropriation is Department of Defense. You’ve got a lot of your constituents, your member organizations, in the defense sector. What’s driving the agenda for defense in 2026?

Jim Carroll Certainly the meeting that the president announced with the top defense contractors, who are members of PSC, is that they do want to contain costs. What we’re doing now is explaining that they are containing costs and it’s just like anything. Change orders — if you’re building a home and submit a bunch of change orders while the contractor is building your house, that costs extra money. So we’re explaining the same thing is happening with government contracts. That the procurement process can be streamlined, there can be a focus more on deliverables as opposed to some of the issues of the contract that have no impact. We’re seeing some of those smaller things, companies were going to certain sections within the Department of War and saying, hey, we have a new way to do things, we can do this in a more efficient way and deliver results faster. We’re going to use, maybe it’s AI which obviously is going to be a continuing a big issue in ’26, and we can reduce the number of people that we have in seats by 20% or 30%. And the department would say, no, we contracted for 90 or 100 people and we want 90 and 100 people sitting in seats — without really focusing that we can deliver better, faster, cheaper results if we amend the contract. So it’s some of that we think we’re going to be able to overcome because Secretary Hegseth and the White House have been so focused on getting the results, that if we can work together with these new folks that have been confirmed, these new 97 people  — not all of them in the [DoW], some are in the [DoW], some are in other key departments where we work — we really are optimistic that things are going to move much faster in ’26.

Terry Gerton Well, it sounds like with all of the new appointees, and perhaps some stability in terms of funding, that you’re hoping that 2026 is a more predictable year for government contractors. What exactly is PSC going to be focused on as you look into the new year?

Jim Carroll What we’re doing is focusing on meeting with not only the people that are just confirmed, as I said, a lot of these assistant secretaries. But now that things are a little more predictable, we’re going in, and we bring our members with us. It is important that our CEOs, our significant C-suite executives are with us when we’re going in to meet with members of the cabinet. And truly, we’re setting up meetings with secretaries and other key decision-makers so they can hear from us — and when I say “us,” I’m talking about the industry — about how to achieve the results that they want in 2026. That’s one of the things that we’re doing, now that there are more people in place, now that they want direction and want results, we are going in with our members and we are absolutely going to be leaning into explaining to them the best ways we can help drive the objectives that they want.

The post Will 2026 be the year GovCon shifts from disruption to execution? first appeared on Federal News Network.

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President Donald Trump signed a spending measure Nov. 12, funding federal operations through January and ending the longest government shutdown in US history after 43 days. The Senate had approved the measure the previous day, with seven Democrats crossing party lines to reach the needed 60-vote majority. They were won over by a Republican pledge to revisit the question of subsidies for Obamacare in December.

However, a sideshow to the fight over the Affordable Care Act is causing outrage in the hemp industry—and among farmers in hemp-producing states like Kentucky. A last-minute provision added to the spending bill will effectively ban all hemp-derived THC products.  

The Dreaded ‘Loophole’

This concerns what has been derided as a “loophole” in the 2018 Farm Bill that legalized the production of industrial hemp in the United States. The Farm Bill kept the federal ban on cannabis and cannabis products with more than 0.3% Delta-9 THC—and on Delta-9 THC itself, whether derived from hemp or “marijuana.” However, in a measure intended to legalize the CBD market, it allowed extraction and sale of cannabinoids other than Delta-9 THC, if derived from hemp. 

This had an unanticipated effect. In the wake of the 2018 law, an industry suddenly boomed around hemp-derived cannabinoid products—and not just CBD but psychoactive THC. Particularly at issue was Delta-8 THC, an isomer of Delta-9, which behaves much the same way in the human organism. Products containing Delta-8 were suddenly available in convenience stores, gas stations and truck stops coast to coast.  

A backlash also quickly emerged. Critics argued that because the industry was essentially using a subterfuge to skirt the law, these new products were basically unregulated. 

The new law contains a provision added to Agriculture Department funding that restricts hemp and hemp-derived products to those containing low concentrations of all THC—not just Delta-9 THC. It is to take effect on Nov. 12, 2026, one year from the date of signing. 

The new provision “prevents the unregulated sale of intoxicating hemp-based or hemp-derived products, including Delta-8, from being sold online, in gas stations, and corner stores, while preserving non-intoxicating CBD and industrial hemp products,” reads a Senate Appropriations Committee summary.  

Media reports warn of an “extinction-level event” for the hemp industry when the provision kicks in. 

Bluegrass Senators at Odds

Kentucky’s Republican Sen. Rand Paul pushed an amendment to strip the provision from the bill, but this failed in a 76-24 vote. And his principal opponent was fellow Bluegrass State GOP senator, Mitch McConnell—who had championed the 2018 Farm Bill as then-majority leader of the Senate. 

The Louisville Courier-Journal quoted Kentucky farmers fearing that the new law could be a “death sentence.” 

The move is also meeting with pushback in Texas, where the GOP-dominated political establishment is divided over an effort to ban Delta-8 at the state level. Officials with the Texas chapter of the Veterans of Foreign Wars told Waco’s KWTX that many vets use hemp-derived THC products to treat PTSD and other ailments related to their service. 

“What in the world just happened last night?” Thus responded Mitch Fuller, legislative chair for Texas VFW, after the Congressional logjam broke. Fuller had successfully lobbied Gov. Greg Abbott to veto the Delta-8 ban in the statehouse earlier this year.  

Abbott’s big rival on the question in his own administration was Lt. Gov. Dan Patrick, who had pushed for the state ban and enthused in a tweet about the federal one after it passed: “As part of the resolution, consumable, highly intoxicating hemp-derived THC is essentially banned in America. Farmers are protected to produce industrial products. CBD and CBG are still legal. However, Delta-8, Delta-10, and candies, snacks, and gummies with high dosages of intoxicating THC are all banned. Hemp-derived Delta-9 will only be allowed to be sold in very low, non-intoxicating dosages.” (This is a reference to the 0.3% cap, well below the threshold for any psychoactive effect.)

Mitch Fuller retorted: “Of course, safety is important, of course children not having access to this is important. But let’s not use a chain-saw approach to this, let’s use a scalpel approach to it, and regulate it.”

The VFW chapter said they will use the year before the ban takes effect to organize pressure to have it reversed.

Industry Voices Sound Alarm 

The hemp and cannabis industries are, predictably, distressed over the new measure. Adam Stettner, CEO of financial lender FundCanna, said in a statement: “Banning intoxicating hemp through a government funding bill isn’t policymaking; it’s panic disguised as progress. You can’t erase a $28 billion market or the millions of consumers who already exist. You can only decide whether those dollars flow through legal, regulated channels or into the shadows. You’re kidding yourself if you think consumers will stop buying hemp beverages, gummies or wellness products because Congress flipped a switch.” 

Stettner raised the specter of backsliding toward prohibition: “Dismantling compliant supply chains won’t make these products disappear; it will make them untraceable, untaxed and unsafe. What we need isn’t a ban, it’s balance and logic. If lawmakers want safer products and clearer rules, they need to regulate, not eradicate. The responsible path forward is to regulate hemp like we do alcohol or caffeine at the federal level, with age limits, testing and labeling. Inserting a blanket prohibition by sneaking it into a budget deal won’t work; prohibition never works.”

Thomas Winstanley, executive vice president of infused products purveyor Edibles.com, emphasized the ironic role of the former Senate majority leader, who has announced that he will retire next year.

“Mitch McConnell has once again proven himself the architect of the law of unintended consequences,” Winstanley said. “When he introduced the 2018 Farm Bill, it was celebrated as a lifeline for America’s farmers—a rare bipartisan achievement that gave rural communities a new cash crop and built a thriving, homegrown industry. What no one expected was that it would also ignite a $28 billion consumer market, create over 300,000 American jobs, and form a domestic supply chain rooted in U.S. agriculture and innovation. That was the first unintended consequence, a positive one. Today, history repeats itself, but this time, the fallout will be devastating. By attaching a sweeping hemp restriction to the government spending bill, McConnell has chosen to end his career by crippling the very industry he created.”

He too pledged to use the one-year grace period to organize resistance: “Farmers, brands, and consumers, once fragmented, are now mobilizing together to defend what they’ve built and to finally push for the federal framework the hemp industry has long demanded.”

The post New Legislation Bans Hemp-Derived THC appeared first on Cannabis Now.

U.S. Sen. Rand Paul suggested he'd keep the government closed to avoid a federal hemp THC ban.

GOP senator would keep government shut to save hemp THC is a post from: MJBizDaily: Financial, Legal & Cannabusiness news for cannabis entrepreneurs