Research compiled by FPS | Last updated: June 2026
Government contracting is a major source of revenue and economic growth across various industries. As one of the world's largest buyers, the U.S. government has a wealth of available funds to allocate for goods and services in industries ranging from defense, to IT, to healthcare, and even to facilities and construction projects. How these federal contracts are dispersed among contractors and small businesses has a huge impact on the economy.
The guide below examines data regarding trends in government contracting during the 2026 fiscal year, including federal spending trends, spending by contract category, adoption trends, and the amount of small business contracts awarded. Data was compiled in June 2026 from publicly-available federal and fiscal sources.
Federal Contract Spending
Based on data from 2022 to 2026, federal contracts account for nearly $800 billion in yearly spending by the U.S. government. Since 2024, year-over-year trends show consistent growth in the amount of spending by the U.S. government on federal contracts. Multiple government agencies award contracts, with some of the most active being the U.S. Army, Navy, and Air Force.
Total Federal Contract Spending, 2024 to 2026, With Growth Rate
| Fiscal Year | Total Contracts (USD) | YoY Change (USD) | YoY Growth (USD) |
|---|
| FY2022 | $726 billion | Base | Base |
| FY2023 | $759 billion | +$33 billion | +4.5% |
| FY2024 | $755 billion | -$4 billion | -0.5% |
| FY2025 | $793 billion | +$38 billion | +5.0% |
| FY2026 (through May) | ~$755+ billion | - | - |
Sources: U.S. GAO (June 2025); GovSpend (November 2025)
Spending by Top Agency
| Agency | Agency Type | 2024 Spending | 2025 Spending | Change |
|---|
| Department of the Navy | Defense | $126 billion | $167 billion | +$41 billion (+33%) |
| Department of the Army | Defense | $133 billion | $148 billion | +$15 billion (+11%) |
| Department of the Air Force | Defense | $99 billion | $103 billion | +$4 billion (+4%) |
| Department of Energy | Civilian | $46 billion | $48 billion | +$2 billion (+4%) |
| Department of Veterans Affairs | Civilian | $41 billion | $43 billion | +$2 billion (+5%) |
| Department of Health & Human Services | Civilian | $43 billion | $38 billion | -$5 billion (-12%) |
| General Services Administration | Civilian | $26 billion | $25 billion | -$1 billion (-4%) |
| Department of Homeland Security | Civilian | $19 billion | $21 billion | +$2 billion (+11%) |
Sources: FEDweek (May 2026); GovSpend (January 2026); Fed-Spend (February 2026)
Spending by Category
Government contract spending is often divided by contract category. Federal contracts may be awarded in industries such as defense, IT and cybersecurity, professional services, healthcare, facilities and construction, and more. Defense is currently the industry with the highest federal spending, but categories such as AI and machine learning are experiencing explosive growth.
Contract Spending by Sector
| Sector | Spending (2026) | Percentage of Total | 5-Year CAGR (2020-2025) |
|---|
| Defense Systems | ~$300 billion | ~36% | +8% |
| IT & Cybersecurity | ~$130 billion | ~16% | +12% |
| Professional Services | ~$120 billion | ~14% | +7% |
| Healthcare & Pharma | ~$115 billion | ~14% | +9% |
| Facilities & Construction | ~$90 billion | ~11% | +1% |
| Other/Logistics | ~$79 billion | ~9% | -1% |
Sources: Fed-Spend (April 2026); Nextgov.com (September 2025); Fed-Spend (February 2026); FEDweek (May 2026); Deltek (May 2026)
Fastest-Growing Categories
| Category | Sector | Spending | Growth Rate |
|---|
| AI & Machine Learning | Civilian/Tech | $7.2 billion | ~+40% |
| Shipbuilding & Maritime | Defense | ~$55 billion | +33% |
| Hypersonics & Missiles | Defense | ~$29 billion | +18% |
| Cybersecurity | Civilian/Tech | ~$32 billion | +15% |
| IT Modernization | Civilian/Tech | ~$89 billion | +12% |
| Space Systems | Defense | ~$23 billion | +12% |
| Managed Healthcare | Policy-Driven | ~$75 billion | +9% |
Sources: AI CERTs (May 2026); Executive Gov (December 2025); Fed-Spend (February 2026); Cybercrime Magazine (November 2024); U.S. Congress (February 2026); GovCon Wire (January 2026); FEDweek (May 2026)
Top Trends Shaping 2026
The 2026 landscape in government contracting is being shaped by several trends. Overall, AI and machine learning is experiencing rapid growth, with an over 40% CAGR across the last three years. Other IT-related industries are experiencing similar growth, reflecting recent advancements in technology and cybersecurity.
Adoption and Spending on Key Trends
| Trend | FY2023 Spending | FY2025 Spending | 5-Year CAGR |
|---|
| AI & Machine Learning | ~$1.5 billion | $7.2 billion | ~+40% |
| RPA/Automation | ~$0.9 billion | ~$1.6 billion | ~+20% |
| Cybersecurity | ~$26 billion | ~$32 billion | +15% |
| Cloud Computing | $6.1 billion | $8.3 billion | +15% |
| Small Business Set-Asides (Overall) | $163 billion | $194 billion | +5% |
| Small Business Set-Asides (Small, Disadvantaged Businesses/8a) | ~$100 billion | ~$80 billion | Stable |
| Small, Disadvantaged, Veteran-Owned Businesses (SDVOSB) | ~$31 billion | ~$38 billion | +5% |
| HUBZone | ~$20 billion | ~$22 billion | +2-3% |
Sources: AI CERTs (May 2026); Ogletree (December 2025); Washington Technology (October 2024); DCD (June 2026); TechFlow (February 2026); Squared Compass (November 2025); The American Small Business Chamber of Commerce (September 2025)
Trend Share of Total Contract Value
| Trend | FY2025 Share of Total |
|---|
| AI & Machine Learning | <1% |
| RPA/Automation | <0.5% |
| Cybersecurity | ~4% |
| Cloud Computing | ~1-1.5% |
| SB Set-Asides (Overall) | 23-29% |
| SB Set-Asides (SDB/8a) | ~10-12% |
| SDVOSB | ~5% |
| HUBZone | ~3-3.5% |
Sources: AI CERTs (May 2026); Ogletree (December 2025); Washington Technology (October 2024); DCD (June 2026); TechFlow (February 2026); Squared Compass (November 2025); The American Small Business Chamber of Commerce (September 2025)
Small Business and Competition
Small businesses are frequent recipients of government contracts, with the U.S. government making special effort to award contracts to various disadvantaged small businesses or businesses owned by women, veterans, and other underprivileged groups. Overall, small businesses make up about 28% of the federal contract landscape, with disadvantaged businesses occupying smaller, but growing niches in the market.
Share of Contracts Awarded to Small Businesses, 2024 to 2026
| Category | Dollar Amount of Contracts Awarded | Share of Contracts Awarded |
|---|
| Small Disadvantaged Businesses (SDB) | $75.3 billion | 11.6% |
| SDVOSB | $32.5 billion | 5.01% |
| Women-Owned Small Businesses (WOSB) | ~$29 billion | ~4.5% |
| 8(a) Program | $24.3 billion | 3.7% |
| HUBZone | ~$22 billion | ~3.4% |
| Small Businesses Overall (Prime) | $179 billion | 28% |
Sources: USAspending.gov (2026); GovSpend (January 2026); GovSpend (November 2025)
Set-Aside Spending by Category
| Category | FY 2022 Spending | FY 2023 Spending | FY 2024 Spending | FY 2025 Spending |
|---|
| 8(a) | $22 billion | $24 billion | $25.8 billion | $24.3 billion |
| SDVOSB | $28.1 billion | $31.9 billion | $32.8 billion | $32.5 billion |
| WOSB | $28.1 billion | $30.9 billion | $31.7 billion | $29 billion |
| HUBZone | $14 billion | $17.5 billion | $17.6 billion | $17.5 billion |
Sources: USAspending.gov (2026); GovSpend (January 2026); GovSpend (November 2025); Fed-Spend (February 2026); Visual Capitalist (June 2026)
References
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- Mehan, A. (2025, November 4). Inside FY25 Federal spending: What the numbers reveal so far. GovSpend. https://govspend.com/blog/inside-fy25-federal-spending-what-the-numbers-reveal-so-far/
- Contract Spending Increased Some $18 Billion to $793 Billion in 2025, GAO Says. (2026, May 7). FEDweek. https://www.fedweek.com/federal-managers-daily-report/contract-spending-increased-some-18-billion-to-793-billion-in-2025-gao-says/
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