Top GovCon Industry Predictions of 2025

There's a new government stepping into place in 2025. With changes in technology, administration, global issues, and economic considerations, these are the top 10 industry trends we are likely to see in 2025. If you scroll down, you’ll see our list trends likely to impact small business government contractors.

General Industry Trends of 2025

1. Increased Defense Spending: Despite broader budget cuts, defense budgets are expected to rise, focusing on modernizing military capabilities and addressing global security challenges.

2. Emphasis on Cybersecurity: With escalating cyber threats, federal agencies will prioritize strengthening cybersecurity measures, leading to more contracts for IT firms specializing in security solutions. Many of these topics will be a continuation of 2024 policies, such as learning to adapt to quantum computing threats, adopting zero trust architecture, responding to AI-driven attacks, using AI to manage networks. Emerging concerns include biosecurity and keeping up with regulatory changes.

3. Adoption of Artificial Intelligence: This was definitely a hot topic in 2024, and the trend will continue into the coming year. In 2025 we will see the Department of Defense integrate AI into operations, creating many opportunities for contractors proficient in AI technologies.

4. Border Security Enhancements: The new administration aims to bolster border security, increasing demand for surveillance technologies, IT infrastructure, and related services. These enhancements will include mass deportations, construction of detention facilities, deployment of advanced surveillance technologies, increased border patrol staffing, reinstatement of the border wall construction, and increased need to collaborate with state and local law enforcement agencies. These trends will trickle down into the govcon industry to solve these issues and meet demand.

5. Supply Chain Resilience Initiatives: Efforts to strengthen defense supply chains will lead to contracts focused on logistics, manufacturing, and technology solutions. Potential new tariffs will affect supplies and pricing, and we will see tabletop exercises to tackle supply chain issues. We will also see the DOD push for automation efforts.

6. Government Efficiency Programs: Plans to streamline government operations may result in reduced federal employment and restructured agencies, impacting contractors supporting affected departments.

7. Environmental Regulation Changes: Potential relaxation of regulations by agencies like the EPA could decrease demand for environmental compliance services, affecting contractors in this sector.

8. Focus on Emerging Technologies: Investments in technologies such as quantum computing and 5G are expected to grow, offering new opportunities for innovative contractors.

9. Increased Competition for Contracts: As procurement processes evolve, contractors may face heightened competition, necessitating strategic positioning and innovation.

10. Workforce Development Challenges: The industry will need to address talent shortages, particularly in specialized IT and engineering roles, to meet contract demands.

Staying informed about policy shifts and aligning capabilities with federal priorities will be crucial for contractors navigating the evolving landscape in 2025.

Small Business Contracting Trends for 2025

The landscape of federal contracting for small businesses—including those owned by minorities, women, veterans, and participants in the 8(a) Business Development Program—is influenced by evolving policies and legal decisions. Recent developments suggest both opportunities and challenges for these enterprises.

Opportunities:

1. Extension of 8(a) Program Flexibilities: The Small Business Administration (SBA) has extended the moratorium on the Bona Fide Place of Business requirement for the 8(a) Program through September 30, 2025. This extension allows small disadvantaged businesses to compete for 8(a) construction contracts without needing a physical presence in specific locations, thereby broadening their contracting opportunities.

2. Initiatives to Increase SDB Contracting: The Biden-Harris Administration has set ambitious goals to increase federal contracting with small disadvantaged businesses (SDBs) to 15% by Fiscal Year 2025, aiming to infuse an additional $100 billion into these businesses over five years. This initiative reflects a commitment to expanding opportunities for underserved entrepreneurs.

3. Support for Minority-Owned Businesses: Efforts are underway to enhance the participation of minority-owned businesses in federal procurement. For instance, the SBA and the General Services Administration (GSA) have launched initiatives to streamline processes and increase access to federal contracts for these businesses.

Challenges:

1. Legal Scrutiny of Affirmative Action in Contracting: A recent federal court ruling declared the U.S. Department of Transportation's use of race and gender considerations in awarding federal highway and transit project funding as unconstitutional. This decision may prompt reevaluation of similar affirmative action policies across federal contracting programs, potentially affecting the criteria for awarding contracts to minority- and women-owned businesses.

2. Potential Policy Shifts with Administration Changes: The transition to a new presidential administration often brings shifts in policy priorities. If the incoming administration emphasizes government downsizing and budget cuts, small businesses reliant on federal contracts may face increased competition and reduced opportunities. Conversely, areas prioritized by the new administration, such as border security, could present new contracting opportunities.

While initiatives exist to enhance federal contracting opportunities for small and disadvantaged businesses, legal challenges and potential policy changes underscore the importance of vigilance and adaptability for contractors in this sector.