Key Insights from the 2025 Government Contracting Trends and Performance Index
The 2025 Government Contracting Trends and Performance Index, released by the Greg and Camille Baroni Center for Government Contracting at George Mason University’s Costello College of Business, presents a critical snapshot of the state of federal contracting. Authored by John G. McGinn, Jeff Kojac, Edward Hyatt, Lloyd Everhart, Olivia Letts, and John Davis, the report aims to improve public understanding of how private-sector firms support the functioning of the U.S. government, and provides one of the most comprehensive data-driven reviews of the federal industrial base to date.
At the heart of the report are three core questions: What is the structure of the federal government contracting industrial base? What are the current contracting trends? And how do government contractors assess their financial performance? Using open-source data and survey responses from over 400 firms, the Baroni Center identifies several noteworthy findings and issues a series of thoughtful policy recommendations.
One of the most striking observations is the continued decline in the number of prime contractors over the last 15 years. While the DoD experienced a 51% decrease and other federal agencies saw a 39% drop, the analysis also finds that many firms classified as having “exited” are in fact still participating as subcontractors or remain engaged in pursuit of work. New entrants to the market have also declined by over 50% since 2009. Despite the perception that consolidation has stifled competition, the Baroni Center’s research found that competition remains robust and stable in most federal markets.
The report casts a critical eye on the term “non-traditional contractor,” finding that under the current statutory definition, only 7.5% of DoD contractors qualify. This broad definition dilutes the utility of the term as a proxy for innovation. The authors recommend legislative action to redefine "non-traditional" to better align with firms that are more likely to deliver advanced technologies—those backed by venture capital, with strong R&D investment and rapid commercial growth.
On the innovation front, the use of Other Transaction Authorities (OTAs) and Small Business Innovation Research (SBIR) programs has grown significantly. OTA spending by DoD surged 220% between 2018 and 2023, now comprising roughly 10% of RDT&E outlays. SBIR and Small Business Technology Transfer (STTR) investments across agencies nearly tripled in the past decade, reaching almost $6 billion. Yet, the report highlights a major blind spot: there are no publicly available metrics to determine whether these innovation efforts yield lasting impact through sustained procurement or program integration. Without such transparency, the full value of these investments remains speculative.
Small businesses continue to play an outsized role in providing government services—especially in areas like civil engineering, administrative support, and software installation—but most of this work is not linked to innovation. If agencies want small businesses to be engines of innovation, targeted changes to small business contracting strategies will be necessary.
Financially, government contractors expressed optimism. Surveyed firms reported strong business performance in 2024 and expected continued growth. The Baroni Center’s Financial Performance Index, based on self-reported KPIs like revenue growth, proposal success rate, and gross margin, revealed a healthy average score of 146 out of 200, suggesting a largely confident industrial base. Interestingly, this sentiment held steady across company sizes, contract types, and market segments.
Despite a backdrop of rising mandatory federal expenditures that are crowding out discretionary budgets, the federal contracting community appears resilient and forward-looking. Still, the report cautions that DOGE (Department of Government Efficiency) reforms and broader acquisition changes under the Trump Administration could shift the landscape rapidly.
Ultimately, the Baroni Center’s report offers a comprehensive, data-rich overview of the federal contracting ecosystem. It underscores the need for more refined definitions, better metrics for innovation, and incentives that align industry capabilities with government priorities. As the federal government continues to modernize its acquisition practices, this index will serve as a vital annual benchmark.
Disclaimer: This blog post is a summary of the 2025 Government Contracting Trends and Performance Index published by the Baroni Center at George Mason University. While care has been taken to accurately present the report's findings, this summary does not constitute legal or financial advice. Readers are encouraged to consult the full report and the original authors for authoritative analysis.