Interview transcript:

 

Stephanie Kostro It is the end of the calendar year, beginning of the government fiscal year. And this is the time of year when a lot of companies take a step back and evaluate their business strategy and their planning for the next few years. We see a lot folks having off-sites in December or in January to do some of this strategic planning and I’ll be frank with you, I think a lot people will be happy to see 2025 end. And they will celebrate the new year in all sorts of ways, just because of what they’ve been through this year. If your listeners can harken back to earlier this year, the efficiency initiatives really did a number on a lot of the business plans that had been developed among government contracting companies. Some of them had massive de-scoping of their contracts. Some of them had contract terminations. Some, particularly those who worked for agencies like U.S. Agency for International Development, and the Department of Education, some at Health and Human Services really saw a diminution of their planned objectives for throughout the year. And so as we go into the December and January planning cycle for these companies, what they’re really looking for are signs from the government that there is work coming as they start to think through what calendar ’26 looks like. And they start to do their resource planning for personnel and for bid teams to put together proposals. That’s really what they are looking for. And I will have to say, Terry, earlier this year. PSC, the Professional Services Council, we represent services and solutions providers. And typically every year we put together something called our business forecast, which looks at our scorecard, which looks at all of the web-based procurement forecasts put out by agencies. And we would look at tens of agencies and their forecasts and we would rate them based on 15 key attributes, which we developed in industry, about what is useful for those forecasts. This year in 2025, we made the decision that instead of putting out our seventh annual forecast, we skipped this year. The forecasts just weren’t there, and they’re still not there.

Terry Gerton So how is it that agencies put those forecasts out, and what do they base it on? And I guess the third part of that question is, why aren’t they there?

Stephanie Kostro This was a mandate from, among others, from the Office of Federal Procurement Policy, which is a White House office that said, hey, agencies, to the extent that you can, put out forecasts on your websites. And it was really to help drive new companies to join the federal marketplace and to keep those companies that are part of the GovCon community interested. If you could look at a website and say, okay, there is an opportunity coming up in Q1, Q2, Q3, and let’s build towards that opportunity. What happened earlier this year is a lot of those websites went dark. I think it was because as part of the efficiency initiative, it was no longer a useful tool because things were moving very, very quickly. What I find interesting though, is that those websites are still dark. They’re still not there. And so I’m not entirely sure how our government contracting community can put together a reliable business strategy for 2026 and beyond in the absence of that information.

Terry Gerton Well, some estimates are that the contracting workforce itself has been reduced by over 25%. Are we just missing the people who used to do this?

Stephanie Kostro I think that’s part of it, Terry. We’re missing some of the folks who took that deferred resignation or the “fork in the road” option. Some of them did the voluntary early retirement programs. I would also say in many agencies, and I’ll use the phrase “OSDBU”, but I’ll actually speak out the acronym here, the Office of Small and Disadvantaged Business Utilization. Those were usually the offices that had the lead on publishing these websites, and those offices have sort of been dismantled in some agencies. They are certainly de-emphasized in a lot of the agencies. And so it might be … they’re missing the people, that is true, but it’s also they’re also missing the offices that have the lead on putting together these forecasts. And it really is a shame because, you know, the business community uses these forecasts in so many different ways. It helps them do, I mentioned the business planning, but helps them figure out who they want to partner with, who’s going to be their subcontractors or their suppliers, their vendors, etc. This is a real gap in understanding of what the federal marketplace can offer companies. And I do think it will have effects on whether commercial companies want to get involved in government work. They just don’t know what the opportunities are.

Terry Gerton I’m speaking with Stephanie Kostro, president of the Professional Services Council. Stephanie, one more question on this. I mean, GSA has gone through a lot of work to centralize procurement and forecasting. Would you expect that GSA will take this over perhaps and share their forecast?

Stephanie Kostro I love that you asked this question, Terry, because as I mentioned the last time we put out our forecast, it was in 2024 and we had actually at PSC highlighted GSA as a model for putting out these forecasts. We mentioned that GSA has something called their Acquisition Gateway, which sets a high bar for government business forecasting and it encourages the migration to the GSA tool for other departments. So Department of Labor, Department of Justice, they were using the GSA Acquisitions Gateway. So I think this is a fantastic opportunity to go back to that gateway and have GSA take the lead.

Terry Gerton Speaking of forecasts, PSC’s got a big session coming up starting on December 1st. Your vision federal market forecast. Tell us about that.

Stephanie Kostro I love that our entire segment here is devoted to forecasting, because the procurement dork in me is celebrating here. So PSC has this conference and it’s actually run by our foundation, which is our 501c3 nonprofit affiliate dedicated to education. And so it is a year-long process where we have so many teams come together. There are 21 different study teams, they focus on things like Health and Human Services, or Customs and Border Protection as part of the Homeland Security team. And this year of agency discussions, they speak to think tank folks, they speak procurement officials within the government, and it culminates in this conference and it’s happening in person on December 1st. It’s a virtual day for December 2nd and 3rd. It is where these 21 different study teams present their findings. So it’s not just tied to a web-based procurement forecast, but rather these discussions that they’re having with officials. We had over 400 volunteers as part of this process, and I’m just very excited. It is a great opportunity to really hear what’s going on in the procurement world, not just for opportunities, but what the dynamics look like, what impact inflation is having, etc. And to be honest, what impact these efficiency initiatives have had on the federal marketplace. So I highly recommend this conference. Again, it’s December 1st through the 3rd, and December 1 is the only in-person day here in Arlington.

Terry Gerton It sounds like in the absence of the agency forecast that we were talking about at the beginning of our conversation, this may be a great opportunity for contractors, those who are considering government work, to find out from inside sources what’s going on.

Stephanie Kostro It’s a perfect opportunity to get some business intelligence. It’s also a great networking opportunity because we do have government folks come to this conference as well to hear about what other agencies are doing. And so I highly commend it to folks who are listening, but I’m certainly going to be there and soaking up all of the knowledge that I can. I’m particularly looking forward to the Defense Services presentation in light of the Secretary of War Hegseth and his arsenal of freedom speech that he gave about transforming the processes for requirements and acquisition. I’m really looking forward to that. And I always look forward sort of to the top-line and the IT modernization teams as well. So if I were going to recommend three sessions, those are the top three. But they’re all very, very interesting and I’m looking forward to it.

Terry Gerton So how do people who want to attend find out about it and register?

Stephanie Kostro They can go to PSCouncil.org, and you can also search for Vision Federal Market Forecast and the sessions will pop up. There is a fee, obviously, for this, but it is open to the public. It is a widely attended gathering which allows government folks to attend. That is how they can connect with this conference.

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Interview transcript:

 

Travis Mack Over the years, you know, growing a small business is kind of an iterative process. You learn a lot of things along the way. And we had done very well in the small business vertical, but when we got to that point where we were trying to make that inflection, that turn to trying to be a large business, there were a couple things that we were considering. Were we going to remain a small business or were we just going to blow right through it? And we decided to kind of blow right through the small business threshold. And with that, we had to do a few things differently. We certainly had to upgrade our talent, which was really important, right? We had to also look at trying to drive additional revenue streams, trying to create additional value for the federal government. And so we decided on, not only were we going to grow organically, we were going to grow inorganically as well, which kind of led to our strategy of mergers and acquisitions and incorporating that into our organic growth.

Terry Gerton Well as you say, growing past that small business to large business zone can be really, really challenging. But you’ve kept Saalex as an employee-owned company. How did that decision factor in to your growth strategy?

Travis Mack It factored in because as we were making the transition, we had to figure out how we were going to attract the best and the brightest. And it was actually one of our core strategic decisions on us trying to go and become a large business. It has been the kind of the pillar of us trying to grow. So us becoming and transitioning into an employee-owned organization was really something that I thought of and I said to myself, “if you were going to be asked to work 80, 90 hours a week, what would you want, Travis?” I said I’d probably want equity. And hence, you know, the employee-owned building blocks that we utilize today in order to attract the best and the brightest for Saalex.

Terry Gerton Is that a strategy that you think is sustainable as you continue to grow the company?

Travis Mack Absolutely. We’ve seen it demonstrated before. We think it’s an excellent strategy for us to continue to scale and for those who are willing to put in that work, put in that extra effort. We think it’s something that … because it’s not only the top of the spectrum that’s gaining, it’s the entire organization, because everyone at Saalex has equity and we want that community.

Terry Gerton So you mentioned a little bit about your growth through acquisition strategy. You’re clearly not trying to blend in, you really want to set yourself apart. How do you set yourself apart from the other big primes in the defense and federal space?

Travis Mack We think it’s part of certainly, you know, being an ESOP, having that equity component. We also think it’s from us being unique. We’ve really embraced automation, we’ve really embraced AI, we’ve really embraced security in order to give ourselves a differentiating feel to the organization. And so we think, at our size, being agile than maybe some of the larger primes, being more efficient than maybe some of the larger primes, and really just trying to understand what the core problem is and then solving for that, we think that is a differentiating vertical for us, and we’ve leaned into that. So, you know, we’re an AI-first organization building in automation and AI through every single business system, every single component, and then that efficiency, that effectiveness really translates very seamlessly to the federal customer.

Terry Gerton So that strategy through mergers and acquisitions can really shake up company culture as you’re bringing in different organizations. How have you managed to build an organic Saalex culture and hold on to that through that growth cycle?

Travis Mack It’s a process. And you know, it takes time. It really does, especially now with all the new changes, with how you implement artificial intelligence efficiently, bringing in different organizations within one culture. We’ve launched an initiative called One Saalex, really just trying to focus everyone on — it’s one infrastructure, which is backed by an AI-first mindset, and bringing everybody in and just trying to demonstrate the efficiencies of the platform and how we are supporting our end customers. So we take it day by day. We try to talk about what the benefits are; and it’s a lot of training, Terry. It is truly a lot of training and a lot of — I kid, every single day, half of my battle is changing hearts and minds. And I’ve got to show up every day changing hearts and minds and showing the innovation and showing how, at the end of the day, it’s actually better.

Terry Gerton And you’re bringing in folks with some really amazing technical talent, clearance capability, high-tech roles. How are you finding the job market, and then how do you find the integration once you get them on board?

Travis Mack The job market right now is something that we focus a lot on, right? I mean, the lifeblood of what we do is with individuals, with people. And true enough, we’re trying to scale that with AI and things of that nature. But really it’s about us being out there in in the community. It’s about us being active. It’s about us defining and identifying roles that, you know, we can fit individuals into very, very seamlessly. I think we’ve been certainly very forward-leaning with the mechanisms by which we hire. Traditional ways of hiring isn’t necessarily something that is at the top of the mind these days. So we try to be flexible, we try to be nimble, we try to be innovative, we try to do all those things that we think will entice individuals to come and work with Saalex.

Terry Gerton And one of those things, as you already mentioned, is being an AI-first company. So how do you deploy that kind of fast-moving technology, both in Saalex and then for your customers to keep them on the cutting edge?

Travis Mack Well, we’re not going out building large language models for the federal government. That’s not what we’re doing. We’re going to let them handle that. You know, ours had to be from a services perspective, right? And so we had to figure out, how do we engage and utilize AI from a services perspective? First we thought about, hey, okay, what does that look like? Our journey with AI actually started about two years ago and we really started to focus on AI functionality within all of our business systems. We took that and then we put in the digital connectors with RPA, with robotic process automation, you’ve got to have that digital connection, and then at the end of the day, trying to deploy that from a federal perspective and integrating that with the customers and the uses and creating digital workforce agents and the whole nine yards. And so we’ve tried to be innovative. We think that utilizing AI gives us an agile advantage, you know, than some of the larger competitors that we have. We’re able to move a little bit quicker as a mid-market federal contractor, and so we’re excited about, what are those new use cases, what are those new concepts that we’re delivering? We’re thinking about the work differently, Terry, every single day, and that requires a total mind shift.

Terry Gerton Well speaking about thinking about the work differently, we’ve talked about your growth strategy, we’ve talked about your workforce culture and training, we’ve talked about your tech approach. But the world of federal contracting and defense contracting is changing very, very rapidly. So as you look forward, say five years, what do you see for Saalex, and how are you positioning them to take advantage of the opportunities you see?

Travis Mack I’m going to try to pull out my magic ball here, put my Nostradamus hat on. Difficult question because of how fast things are changing. And what we’re trying to do is just be iterative. What we don’t want to be, Terry, is late. That is the thing. And we know we’re going to have some false starts. We know we’re going to not get it right as we implement automation and AI and efficiency throughout the organization. Government agencies right now want speed, they want agility, they want efficiency, they want security, the whole nine yards, as they are trying to change how they do the work as well. Five years out, we really think that it is about the iterative process, it is about changing how we do the work, it’s about identifying where we can drive efficiencies, and it’s about how we can, in my thoughts, do more with less, honestly. Because that’s where we’re headed to. So we’re excited about building an infrastructure, building a capability that the federal government and government agencies can utilize with some of our technical services, right? We’re supplying software development, we’re doing test range management, a whole bunch of technical stuff with the Department of War. So we’re excited about, how do we deliver those services differently? And what does that look like? Because I think that’s what everyone is struggling with. What does that look like? We’re trying to help get some visibility and we know it’s iterative. We know it’s going to innovate, we know it’s going to continue to expand, but we just didn’t want to be late.

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