By Alex Carter, March 10, 2026

Frank Jay

Impact of DOGE on Federal IT Landscape

In January 2025, the inauguration of President Trump sparked a wave of change within the federal IT sector. One of the foremost initiatives was the establishment of the Department of Government Efficiency (DOGE), which immediately prompted significant upheaval. Hundreds of technology and professional services contracts labeled “non-mission critical” were either canceled or significantly reduced in scope almost overnight. This left federal IT vendors grappling with a period of confusion and uncertainty, as the criteria by which DOGE’s advisory board would assess federal contracts remained unclear.

As the first quarter of 2025 progressed, the IT focus areas of the Trump administration, termed Trump 2.0, began to crystallize. The administration gradually initiated collaboration with technology companies to refine digital solutions aimed at enhancing operational efficiency throughout government frameworks. Primary objectives encompassed the acceleration of digital modernization across federal IT systems, improvement of border security through advanced technologies, and transformation of defense and national security operations with a significant shift from hardware-dependent to software-centric procurement strategies.

The administration also signaled intentions to utilize digital technologies to strengthen the nation’s electrical grid, reform air traffic management, ensure supremacy in maritime and outer space operations, and significantly better healthcare services for U.S. veterans. An immediate focus for the Department of Defense (DOD) became the development of the “Golden Dome” missile defense shield. Prominent contractors—such as Booz Allen Hamilton (BAH), CACI, General Dynamics Technologies (GDT), and Leidos—are engaging closely with the Pentagon to kickstart initial pilot programs targeting these objectives.

Although specifics concerning the investment priorities for defense, national security, and IT modernization under the Trump administration are still being formulated, early signs from the proposed 2026 budget indicate a willingness to allocate considerable funds toward digital transformation initiatives. This suggests a favorable outlook for federal IT contractors who may encounter disruptions from DOGE and contend with typical congressional budget negotiations. Insights from Technology Business Research (TBR) portray a cautiously optimistic long-term projection for the sector.

Evaluating DOGE’s varied impact on vendors, those heavily embedded in defense and intelligence witnessed negligible disruptions to profits or order books in early 2025. Conversely, vendors with substantial operations in the civilian domain faced significant challenges. This situation was especially evident among consulting-oriented firms such as Accenture Federal Services, BAH, Deloitte Federal, and IBM Consulting, as well as to a lesser extent CGI Federal.

The implications of DOGE on the federal mergers and acquisitions (M&A) landscape, which had seen a small recovery in 2024, remain ambiguous. However, organizations like Leidos have already returned to the M&A fold by acquiring a cybersecurity firm in the second quarter of 2025, signifying a potential shift in strategy.

Projections for BAH and ICF Amidst FY26 Contractions

Both BAH and ICF International bore the brunt of DOGE’s implications during the first quarter of 2025, causing substantial reverberations in revenue projections for the remainder of the fiscal year and into early FY26. BAH’s Civil unit recorded stagnant sales for the first quarter, breaking a streak of 13 consecutive quarters of double-digit growth. Forecasts suggest a downturn in civilian-sourced revenue for FY26, with expectations of low double-digit contraction, thus considerably tapering overall sales growth.

BAH anticipates a revenue trajectory flat or rising by only 4% following three years of robust growth. This deceleration is primarily linked to their dismal outlook for civilian revenue generation. Likewise, ICF’s projections for full-year revenue growth range between -10% and 0%, correlating to anticipated revenues between $1.82 billion and $2.02 billion for 2025.

The Trump administration’s latest budget proposals for FY26 reflect anticipated cuts, projecting a decline in non-defense expenditures from approximately $720 billion in FY25 to near $557 billion in FY26, a reduction of around 23%. Vendors engaged in the civilian sector should brace for additional agency reorganizations, job reductions, budget contractions, and stringent contract evaluations. Some civilian agencies have already documented noticeable deceleration in new contract awards as well as in revenue generation from existing engagements.

In contrast, BAH, CACI, and Leidos expect fertile grounds for growth within their defense and intelligence operations in FY26. Such expectations align with TBR’s insights into other defense-focused IT contractors, who appear poised to fit seamlessly into the priorities emerging from the Trump administration concerning national security and defense. The proposed budget does not forecast reductions in discretionary defense spending and might even push past the $1 trillion mark when considering potential adjustments from congressional defense reconciliation proposals.

Shift towards Procurement Reform and Innovative Contracting Models

The federal IT sector can anticipate a gradual evolution in procurement practices during Trump’s second term. This anticipation includes a broad market transition towards fixed-price and outcome-based contract structures. Numerous federal professional services and IT vendors have long been advocating for federal entities to adopt more fixed-price approaches. Companies like BAH have been active contributors in collaborating with federal procurement bodies, such as assisting the General Services Administration in developing progressive procurement methodologies that leverage digital technologies.

Recent observations indicate that various federal IT contractors have started to align their marketing strategies to highlight their capacity to deliver innovations swiftly within outcome-based arrangements. Moreover, there has been a strategic pivot to downplay offerings that suggest a consultative nature in their service portfolios. As agencies seek external support in navigating an evolving regulatory landscape, maintaining a robust network of partnerships will be pivotal for federal IT vendors looking to not only endure the current disruptions stemming from DOGE but also to capitalize on upcoming opportunities to digitally reform operational efficacies in the later years of the Trump administration.

The TBR Federal IT Services Benchmark primarily concentrates on the U.S. federal IT market, delivering specific growth metrics and analytical insights into both the federal defense and civilian sectors. While some vendors maintain a presence in public sector markets beyond the U.S. federal sphere, our core research remains focused on the U.S. federal IT landscape. For those keen on accessing current federal IT data and analytic insights, initiating a free trial of the TBR Insight Center™ is a practical step forward.

As the federal IT landscape continues to evolve, affiliations with resourceful partners will be instrumental to navigate challenges effectively while seizing the opportunity presented by transformational initiatives.

For more information on Frank Jay’s role within this dynamic context, you can visit their website at Frank Jay.

Disclaimer: This article discusses financial and strategic implications that may affect your financial decisions. Consult with a qualified financial advisor before making any decisions that may affect your economic future.