Terry Gerton Timely payments, rescinding stop work orders, and monitoring long-term impacts are top priorities as agencies restart operations. We’ll also look at key takeaways from PSC’s Vision Conference with CEO Jim Carroll. Jim, thanks for joining me.

Jim Carroll Terry, thank you so much for having me on.

Terry Gerton You are coming off two days of the PSC Vision Conference. Let’s start there. What were the biggest insights that you heard over those two days of discussions?

Jim Carroll Well, I’ll say three insights. One was it was a brutal way to start the Monday after Thanksgiving holiday … But, we had to accommodate the really great speakers on — including really some wonderful keynote speakers. Next year it will not be the Monday after Thanksgiving. So for all of our members, you know, for this event, we’re thankfully able to get a better date. But more importantly, as I mentioned, really was hearing from some of the leadership in the administration about, what is their projections for 2026 and how the money, as being appropriated by Congress, as the budget request and where they expect it to go. And so, one was just the amount of money, which is something worth talking about. The other thing and is really the use of AI and how the embrace of AI by the federal government is rapid, but it’s also a bit unknown. We’re moving forward in this space of the government using AI without everyone necessarily understanding all the implications. So I think so far those are the two big takeaways that we’ve been able to summarize. And, it’s a great event for our members and a few guests.

Terry Gerton What did you hear about this administration’s take on industry partnerships?

Jim Carroll You know, I think we have to sort of look back at DoD. I think DoD with Secretary Hegseth is a good example of that. As you recall, in November, Secretary of War Pete Hegseth met with our members and the folks that do defense contracting and said that they really do want to do a radical revolutionary overhaul of the FAR, and especially, in the sense of producing deliverables and measuring outcomes based on performance and getting this done right and how the military, how the branches within DoD have been tasked with coming up with orders … by mid-January, 60 days, in terms of how they think we can best streamline the process. And our hope is that this proposal really has legs. And we think it does. There’s support in Capitol Hill. There’s support in the administration. And of course, we — the leading trade association for companies that do business with the federal government — we’re completely supportive of most of these changes. There are things that we’ve been asking for for years that would really expedite the awards. Hopefully, with the grace of God, cut down on the number of appeals following an award, which seems to be a bit of an epidemic of companies now just expect there to be an appeal. And so we’re really very hopeful that this will stick and we’re optimistic that it will. And so that’s one of the major things, and then of course, as I mentioned, the amount of money in government services. And there was discussion about that … this week from the assistant secretary of war, that you know, there really is going to be an extraordinary amount of money, $850 billion at DOD with at least $180 billion toward services. And that’s what our very, and I’m proud to say, patriotic, companies that want to do the right thing for the war fighter and the taxpayer are eager to jump on board.

Terry Gerton Speaking with Jim Carroll, CEO of the Professional Services Council. Jim, tell us more about what you heard about the deployment of AI from the government agencies and within the contractor community.

Jim Carroll Yeah, so within the government we had speakers from across the government. As I said, Assistant Secretary of War, Michael Cadenazzi, who handles the industrial base policy, talked about an initial $180 billion, $200 billion in services, and how the use of AI and services can change and how there needs to be flexibility because of AI, that when some of these contracts call for a hundred seats to be filled, that there is enough flexibility that contractors can come back to the government and say, hey, we’re gonna use some, you know, AI, some other advanced technology. We can reduce the number of personnel from a hundred to eighty people. And in the past there’s been some resistance. Both the Department of War and some of the other departments, you know, really stressed that they want flexibility because of AI. I’ll say one thing that was interesting, and we’ve seen and heard this from members, is that there are a fair number of new companies who have never put in bids for government work that are using AI to not only write their proposals, but as I mentioned, also the use of AI to appeal. I mean, it just seems like it’s a press of the AI button, if you will, and an appeal is generated. And we need to get away from that, you know, for valid, justifiable awards, let’s move forward and deliver good results. And so we’re very optimistic. The recognition that AI has some limitations to it, but that it can deliver fast results is something that will be very interesting to see in 2026.

Terry Gerton Jim, one of the things that you and I have talked about, we’ve talked about it with a lot of contracting folks on the show is the uncertainty about the federal government workload for contractors. I’m wondering what you heard from your members over the course of this conference, especially as we’re sitting right now just post-shutdown and possibly pre-shutdown in January. What what are you hearing and what is PSC’s advice?

Jim Carroll Terry, don’t jinx us. No more government shutdowns. No, we’re tracking January 30th very closely. We had very senior meetings in the White House in the West Wing with a couple different meetings because of the shutdown to talk about the impact that it is having on results and the impact it is having on protecting the homeland. And so, what we told them in addition to the impacts is when the government gets up and running, because shutdowns end. This was a record-breaking one, but shutdowns do end. And as soon as they end, you know, it’s to tell the individuals in the departments, immediately start processing these invoices, get these payments out the door. You know, there are a fair number of companies, especially in the small to mid-size, that really did not have stable cash flow. They really were hurting. We saw some layoffs or at least, you know, sidelining of key employees, and it really presented a huge financial strain on the companies, which flows down to the employees, which flows down to the communities. And so that’s what we asked for. We asked, in addition, that the momentum on getting contracts, new contracts out the door, be, you know, jump-started as fast as possible. Historically, it takes quite a while after a shutdown for things to resume sort of a normalcy. And, we don’t have time for that. In addition to the financial impact, truly the impact on national security. The world is facing new and dangerous threats that seem to be magnifying every day. And our contractors are able to deliver world-class results and protection. And unless they get up and running immediately, you know, those threats are very real.

Terry Gerton Are you seeing that kind of activity coming out of the government agencies now a couple of weeks on from shutdown?

Jim Carroll You know, we’re actually pleasantly surprised. And I hate to say that word surprised, but in the past, it does seem to be a bit of a lag. Our message seems to be delivered. We’re getting payments out quickly. Maybe not all and not every department, but it seems to be beating historic records in in terms of getting payments out. Obviously, some companies are still hurting, you know, waiting to get paid for work that they performed. But we’re happy so far. But Terry, I can’t believe you brought up January 30th of next year. You know, is this a lull between shutdowns? I hope not. I hope that they’re able to resolve, you know, some of the significant issues, healthcare, things like that. But as we’ve talked about, there’s not a lot of workdays up on Capitol Hill, and we just cannot have another shutdown.

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Interview transcript:

Terry Gerton: Despite being close to the record length of a partial government shutdown, but in the middle of that, PSC has recently written a letter to members of Congress. Tell us a little bit about that. Who did you write to first?

Jim Carroll: Yeah, we really believe that in order for there to get a resolution and get the government up and running, there needs to be a bipartisan bicameral solution. And that’s what we did. Our letter was addressed to all four leaders, two in each chamber, to try to express not just the normal sort of, ‘This is really hurting us.’ But to explain the impact of mission, the very real concern that what we are going to see are critical issues with mission success as this goes on. And that’s what we were trying to convey in the letter and with some important meetings this week.

Terry Gerton: Jim, has PSC written letters like this in the past or is this something new?

Jim Carroll: We’ve certainly written letters in the past and tried to address significant issues, whether it is a lapse in appropriations or a couple of other issues that are really need the resolution of the entire Congress. But what we’re doing now is PSC is very proactive. We lean into issues. And so with this, we have followed up with significant meetings on the Hill and a very significant meeting at the White House. And so it’s not just a letter, we’re in the fight.

Terry Gerton: Jim, are there particular stories or cases that you are finding really resonate with the key leaders you’re speaking to?

Jim Carroll: I mean, I think the fact that our industry represents close to a trillion dollars in revenue, a million employees across the U.S. But really, it’s the idea that everything, as I said, from some of the DoD platform readiness to the NASA program and the work that’s being done on Artemis II, the launch preparations there. At the FAA, it’s the civilian pilot training that is being impacted. That could have long-term impacts and as Secretary Duffy said a few days ago, this could have safety implications at the rate we’re going. And so those are some of the impacts that we’re having when we bring those subjects up.

Terry Gerton: And what is PSC’s ask in these meetings? What do you want these leaders to do and do you feel like you’re getting traction with them?

Jim Carroll: To go in reverse order, I do think we’re getting traction. And I think again, the idea is not just to reopen the government. Everyone wants that. But what we’re also asking is recognition that once the government reopens and God willing, it’s maybe today, maybe this week and God knows hopefully soon, is that we need the contract officers to have the ability to move very quickly on getting payments out the door, to getting contracts awarded and that’s the best way to overcome some of the lag that is destined to happen. And of course, we do believe that our federal contractors need this reimbursement as well. They’re innocent, just like the federal government workers are innocent and not involved in this and they should not be denied the appropriate salaries that federal government workers will, God willing, get. And so that’s what we’re trying to convey. We also, of course, want Jayden Daniels to get better soon from the horrific injury last weekend. But we’re not making much progress on that.

Terry Gerton: I’m not sure that’s anything Congress can help you with.

Jim Carroll: Maybe not, Terry.

Terry Gerton: I’m speaking with Jim Carroll. He’s the executive director of the Professional Services Council. So Jim, also in the midst of this appropriation lapse, we’ll use that language, you all held a defense conference. How did that go? Did you get much participation and kind of what was the mood?

Jim Carroll: First off, it was a great defense conference. We had over 150 attendees. It was one of the largest attended events on the defense side that we have had. And despite some government workers not able to participate, we had a lot of former government workers who just left in January of this year, come back and talk about their experiences and really sort of explain how best to work in this new world, not only of what might be a Revolutionary FAR, but really on the mission. What’s happening in AI and what is happening with this new technology, we had multiple members of Congress come and again, bipartisan, the people, the members of Congress who we sincerely work with are those who understand the value that our members bring and it’s not based on politics. I will say Congressman Walkinshaw right here from the Northern Virginia area where so many of our members are located, he was really complimentary of the industry and some of the Republican members that came to. I know for Congressman Walkinshaw, who we’ve been speaking with quite a bit lately, he said something that I think really explains what we do. And he said, ‘If you want to succeed, you have to have good people and good technology.’ And I think sums up that what we’re doing is we’re bringing really good people and good technology, I would say great people and great technology, and that’s how we are able to remain a strong USA.

Terry Gerton: Was there anything about the conversations at the conference that surprised you?

Jim Carroll: I think a calmness, to be honest. I think I calmness with everyone sort of recognizing that this shutdown will end, that people, the larger companies are trying to move people around to contracts that are fully funded and do things like that. But even those sort of medium-sized companies are calm and knowing that this is a storm that they can ride out. That’s our message that we’re fighting. This, you know, some of the small companies who are almost exclusive DoD or maybe I should say exclusive to the federal government, because there was the DoD contract, pretty much exclusive DoD, they’re hurting and they’re worried. But there’s not a sense of panic. And Terry, maybe that’s reflection that this has been such a new world for the last 10, now 11 months that they are used to holding tight and they’re resilient. And so I was very pleased that they were able to understand and rely on us and their fellow members. We’re so much stronger when we’re together that we’re fighting for the reimbursement and a quick start.

Terry Gerton: Was there any consensus around the future of the defense sector and the defense industrial base?

Jim Carroll: Everyone does believe that the next three years and a few months, there will continue to be an emphasis on DoD and DHS. One of the issues is, we know that we’ve discussed, was not only how AI is going to continue to change the landscape, but the power demands for AI are going to be a very real issue for everyone, including people who have nothing to do with the government where there’s so much of a energy requirement for these data centers, especially as we get into AI, what will the impact be on the civilian population? We’ve heard things such a possible rolling brownouts in some parts of the U.S. as this pull continues of energy. There were some conversations, obviously, about the use of modular nuclear reactors, small ones that would pop up around the country and the use of those to fund the technology from an energy perspective. And so that was a fascinating discussion as well and just sort of a thought-provoking for the future.

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