The Greg and Camille Baroni Center for Government Contracting at George Mason University’s Costello College of Business has released the inaugural Government Contracting Trends and Performance Index, a first-of-its-kind analysis of the 200,000 firms supplying nearly $800 billion in products, materials and services to the federal government.
The Baroni Center research team used open-source data, surveys of government contracting firms and detailed analysis to examine three areas: the structure of the federal contracting industrial base, current trends in government contracting and the financial performance of government contracting firms.
Baroni Center Executive Director Dr. Jerry McGinn, lead researcher on the index, said the inaugural release fills key gaps in understanding the private sector industrial base that supports the federal government.
“This research can help inform ongoing initiatives designed to improve government contracting processes and execution,” he added. “We look forward to engaging with industry and government for meaningful discussions to drive better contracting outcomes across government.”
Key findings include:
Measuring innovation outcomes is critical but lacking
The use of agile acquisition vehicles like Other Transaction Authorities and Small Business Innovation Research grants has surged over the past five years. But without measuring the results of these investments, benefits remain largely anecdotal. Better metrics are essential to assess the impact of innovation efforts.
Incentives drive innovation
To attract and retain cutting-edge firms, the federal government must create strong incentives for innovation, adoption and integration. Survey respondents identified profit, ease of doing business and steady partnerships as the most effective motivators.
Small businesses innovate, but most of their work isn’t innovation
While small businesses contribute to innovation through programs like SBIR, much of their work remains in areas such as civil engineering, software installation, utilities, administrative services and manufacturing. To increase small business innovation, agencies need to evolve their contracting strategies.
Reevaluating “nontraditional” defense contractors
Today’s legal definition of nontraditional firms excludes only 7.5% of companies in the Defense Department market, researchers found. To make these contractors effective drivers of innovation, the government must refine the definition and track these firms more closely over time.
Industrial base sentiment remained strong in 2024
The Baroni Center analysis found the federal market remains competitive despite a decade-long decline in the number of firms. Survey results and the financial performance index show government contracting companies of all sizes were positive about recent performance and future prospects. While sentiments may have shifted in light of DOGE, key performance indicators are likely unchanged.
The researchers call on the Trump administration to work with Congress to expand publicly available data on OTAs and SBIR/Small Business Technology Transfer programs. This would help track prototypes through production and measure development timelines, adoption rates and service longevity for capabilities created through these funding methods.
They also recommend creating contract structures that better incentivize small business investment in priority areas where their innovations are most needed.
In line with S. 5618, the FoRGED Act introduced in December 2024, Congress should redefine “non-traditional defense contractor” in legislation updating 10 U.S.C. §3014. A clearer definition would help identify and support companies driving technological innovation, such as those investing in independent R&D, backed by venture capital or private equity, or posting high annual revenue growth from commercial technology sales.
DOD should apply the updated definition to the Defense Federal Acquisition Regulation Supplement and DOD policy directives to improve identification, incentives and tracking of innovative firms and programs of record.
The index was co-authored by Dr. Jerry McGinn, Jeff Kojac, Edward Hyatt, Lloyd Everhart, Olivia Letts, and John Davis.