Herndon, VA – May 12, 2025 – Deltek, the leading global provider of software and solutions for project-based businesses, has published the 16th annual Deltek Clarity Government Contracting Industry Study. The 2025 report, drawn from nearly 900 contractors across all business sizes and sectors, delivers a comprehensive analysis of the current market conditions, benchmarks, challenges, and forward-looking strategies shaping the government contracting landscape in the United States and Canada.
While government contractors experienced strong performance in 2024 (54% reported higher government revenue), the study identifies several strategies these organizations should consider to address challenges anticipated in 2025.
The survey responses highlight growing political and economic uncertainty in the federal marketplace, with anticipated pressure on contract performance. Although some metrics fell short of the all-time highs seen in the 2022 report, contractors’ outlooks remain positive, with 59% expecting higher revenues in 2025.
Key Findings from the 2025 Study Include:
- Contractor Confidence Drops: The Government Contractor Confidence Index fell by 3.5%, hitting its lowest point in six years, and signaling increasing caution around federal spending and growth prospects for contractors.
- Efficiency is a Focus: Labor and the rising costs of goods remain among the top concerns for contractors. Firms reported that improving internal efficiencies is their primary strategy to overcome these barriers.
- AI Adoption Surges: 45% of respondents are now using artificial intelligence to streamline their operations and enhance business development efforts—up 10 percentage points from last year.
- Small Business Struggles Intensify: Many small business contractors continue to face slower growth and limited access to federal resources. Nearly half (46%) of small business respondents indicated that they aren’t currently taking advantage of federal support programs such as 8(a), which could help ease growth barriers. These contractors also report the greatest difficulties in adopting new technologies like AI and managing rising labor and compliance costs.
- Compliance Costs Are Rising: More than half of respondents anticipate increased compliance costs due to updated CMMC requirements and related infrastructure upgrades and tools. Enterprise firms have already invested an average of $100K or more. While small businesses have typically spent far less, the DoD estimates the cost to support a CMMC Level 2 Certification for SMBs will be around $100k.
- Proactive Business Development is a Must: Finding opportunities too late was the top business development challenge. The industry’s top performers – those in the top 10% of self-reported new bid win rates – are leveraging AI, proposal automation, and early lead identification to stay ahead.
“Contractors are navigating a complex and rapidly changing environment, but they also have more opportunities than ever to innovate and grow,” said Kevin Plexico, Senior Vice President of Information Solutions at Deltek. “This year’s Clarity report highlights how top-performing firms embrace emerging technologies like AI, strengthen compliance postures, and refine business development strategies to capture new opportunities while managing risks and costs. Success today requires not just resilience, but proactive, data-driven decision-making across all areas of the business.”
The full report is now available to download.
About Deltek
Better software means better projects. Deltek is the leading global provider of enterprise software and information solutions for project-based businesses. More than 30,000 organizations and millions of users in over 80 countries around the world rely on Deltek for superior levels of project intelligence, management, and collaboration. Our industry-focused expertise powers project success by helping firms achieve performance that maximizes productivity and revenue. www.deltek.com
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