Five Themes in Government Contracting From Deltek’s 2025 Clarity Survey

Kevin Plexico photo/PR Newswire

By Kevin Plexico, senior vice president of information solutions at Deltek

A more unstable federal government contracting environment, and an increased need for cost management and adapting strategy to new priorities, are just a few of the challenges that businesses involved in public sector sales are facing. These challenges — and the initiatives these firms are deploying to meet them — were revealed in the recently-released 16th Annual Deltek Clarity Contracting Industry Study, Deltek’s report, informed by a survey of over 900 government contractors, that takes the pulse of the current market. 

That’s not to say that there aren’t still plenty of opportunities for enterprising public sector sellers. State, local and education spending has remained steady over the last year and has seen an increase to $2 trillion, resulting in a positive outlook for 2025 and a potential safe haven for struggling federal contractors. Many small- and medium-sized businesses are also planning to invest more in their business development efforts to stay competitive and pursue work in new agencies.

Here are the top five themes that emerged from the Clarity Government Contracting Industry Study. If you want an in-depth breakdown of the findings from the study, be sure to register and attend Deltek and GovCon Wire’s upcoming webinar, “The State of Government Contracting in 2025,” happening virtually this Thursday, June 26.

Staying Agile

Government contractors value staying nimble in an uncertain environment. With policy shifts and new priorities under the current administration, being able to pivot quickly is becoming essential to staying competitive and compliant. This involves adapting business practices, messaging and strategies to match the priorities of the new Trump Administration.

Small businesses, in particular, can benefit from their agility in the marketplace and have several opportunities to strengthen their position. It can be easier for smaller contractors to adapt their offerings to match the shifting market dynamics. They can also get an extra boost by investing in emerging technologies like artificial intelligence and cybersecurity.

Technology Investment

Similar to what we found in 2024, AI and cybersecurity investments are top of mind in 2025 for businesses of all sizes. Contractors are looking to these tools not just for innovation, but to strengthen and create operational discipline and stay ahead of evolving threats. While the administration is pursuing deregulation in the Federal Acquisition Regulation, cybersecurity and Cybersecurity Maturity Model Certification requirements will be notable exceptions to deregulation efforts. The Department of Defense chief information officer is committed to CMMC implementation. With respect to AI, the new administration is clearly taking a more aggressive posture in adoption, giving contractors a widening aperture to bring solutions to market.

Our Clarity study found that AI and machine learning remain among the top technology priorities for digital strategy investments among government contractors. Two-fifths of survey respondents ranked AI among their top three priorities. This growth is likely driven by the rapid advancement of AI technology. As AI adoption continues to rise, it’s no surprise that cybersecurity and data management tools are also being prioritized for investment to support AI.

CMMC Compliance

More companies expect to fall under CMMC requirements since they were finalized in late 2024. Our survey, which was completed by government contractors across all industry segments, found that over half of respondents (55 percent) expect CMMC to apply to their company, while about a quarter of respondents (24 percent) indicated that they did not know.

In general, contractors are preparing for tighter cybersecurity standards and making sure their systems are ready for audits and certification. As mission-critical work bolsters DOD budgets, contractors who want to stay relevant will follow this work, and will need to have their cloud service providers be FedRAMP compliant and secure the appropriate CMMC compliance audits.

Subcontracting Opportunities

Teaming is always a smart growth strategy for new market entrants, but even more so when the number of prime opportunities in many industries may be diminishing, and contractors are looking to diversify their footprint to new agencies. Contractors large and small report that they are actively seeking more subcontracting roles to expand their reach and gain more work in a competitive market.

While not all survey respondents expected their revenues to grow in 2025, those that were expecting higher revenue from the government market attributed their optimism to growth in both prime and subcontracting contracts.

Finance Focus

Finance teams are laser-focused on protecting profits and keeping cash flow steady. Many are also exploring how AI can help speed up operations, maintain compliance and cut costs without sacrificing performance or control.

Going into 2025, finance teams were leading the charge in cost-cutting and process optimization, and more of that may be needed with new tariffs and ‘buy American’ priorities. If accessing U.S. suppliers isn’t an option for contractors, broader cost-cutting measures could be needed in other areas. Clarity respondents indicated that they are expanding their use of technology to assist in these efforts and to keep closer tabs on financial metrics and trends in order to recommend pivots when necessary.

Top Takeaways for GovCons

Although there is no question that government contractors are facing very real challenges in a time of substantial uncertainty, we know the federal government will always be remarkably stable compared to other industries. Based on the feedback from survey respondents, the overall outlook for the market is one of cautious optimism. The survey found that many businesses in the industry expect their overall government sales to stay constant or to decrease slightly, but most have strategies to adapt to the current market conditions. And to counteract a more competitive marketplace, many businesses are planning to expand into new federal, state, local and education markets, often aided by market intelligence tools to help them understand new requirements and contracting programs as well as identify relevant opportunities earlier.

The full research findings are available in Deltek’s 16th Annual Clarity Contracting Industry report, and they contain even more detailed insights into the current state of the market. Vendors seeking more information on the market, and looking for guidance from their government contracting peers, can find it in the Clarity report, produced by a team of in-house experts. Readers will discover how much revenue firms are receiving from their government business activities, expectations for the next year in government sales and the changes in win rates for large, medium and small businesses. They will also find that, although there are very real challenges in the 2025 market, there are reasons for optimism about growth for those contractors that can move with agility and adapt quickly.