Navigating Federal Contracting in 2025

By Danielle Jones, SBTDC Government Contracting Counselor

Adapting to Policy Shifts, Compliance Changes, and Market Competition

A change in administration brings shifts in policy priorities, regulatory compliance, and funding allocations. Contractors must be prepared to navigate these changes to remain competitive and compliant. New administrations typically redirect federal spending toward industries that align with their economic and political agenda, and staying informed of these shifts can help contractors make more informed decisions about their business. 

What is the America First Investment Policy?

The America First Investment Policy expands funding for infrastructure and domestic manufacturing, directly benefiting U.S.-based suppliers and manufacturers. While the  new policy could increase sales for some manufacturers by decreasing international competition, in some cases, increasing tariffs on other countries can inadvertently hurt companies that rely on cost efficient or rare and unique imported products. 

Additionally, investments in renewable energy could lead to new opportunities in solar, wind, and battery storage projects, though reduced funding for fossil fuel industries may decrease contract availability for oil, gas, and coal-related projects. It will be crucial for government contractors to keep track of these spending trends so they can properly forecast and pursue opportunities as they arise.

DEI Regulatory Adjustments

Regulatory adjustments such as Diversity, Equity, and Inclusion (DEI) can also significantly affect contractor operations. Recent DEI changes, particularly the Executive Order, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” are significantly impacting federal contractors, mandating a review of their DEI policies and potentially leading to legal risks and changes in contracting opportunities. The new DEI regulations may require changes in hiring practices to comply with diversity, equity, and inclusion (DEI) mandates as well as affect current contracts that were filled by or related to DEI departments.

Cybersecurity Standards 

Contractors should also stay informed of Cybersecurity standards with the Cyber Maturity Model Certification (CMMC). CMMC compliance helps organizations that work with the defense industry–or have suppliers and customers in their defense supply chain–meet contractual security requirements to protect Controlled Unclassified Information (CUI) that the DoD or primes share with their contractors and subcontractors.  

The CMMC Program final rule (32 CFR Part 170) came into effect on December 16, 2024, and is now a requirement for individuals in the DoD supply chain, including contractors who interact exclusively with the Department of Defense as well as all subcontractors. Additionally, increased oversight and compliance requirements could result in more stringent audit and reporting obligations, increasing administrative and other financial costs. Companies may need to invest in costly compliance infrastructure to meet the new standards.

Agency Funding Cuts

In addition to the aforementioned changes, contractors could face increased competition due to budgetary constraints and funding reallocations, particularly those that work in sectors facing funding cuts such as the Department of Education, U.S. Agency for International Development (USAID), and other agencies that have faced or will face budget cuts. 

Contractors will need to consider other agencies to work with and compete with contractors that are already competing and winning contracts with those agencies. Understanding the budget cuts and reallocations can help prepare contractors to develop a strategic plan to build new relationships and prepare to do business with different agencies.

Moving Forward in an Uncertain Environment

To remain competitive and compliant under a new administration, businesses must stay informed about policy changes, analyze shifting government priorities, and align their strategies accordingly. Reviewing contract portfolios, adjusting bidding approaches, and strengthening relationships with key government decision-makers will be crucial. Ensuring compliance with new regulations, investing in transparency, and optimizing financial and operational management will help contractors successfully navigate the evolving federal contracting landscape.