The Department of Government Efficiency (DOGE) has been making waves since early 2025, and its impact on government contracting is no longer theoretical. Contracts have been canceled. Agencies have been gutted. And small businesses that depend on federal work are scrambling to figure out what comes next.

This is not a political article. It is a practical guide to what has actually happened, which sectors are affected, and how you can adjust your strategy to keep winning work.

What DOGE Has Actually Done

Let us separate the noise from the facts. Here is what has materially impacted government contracting as of early 2026:

  • Mass contract cancellations — USAID saw billions in contracts terminated or suspended. EPA, Education, and HHS have all experienced significant contract pauses or cancellations.
  • Agency workforce reductions — SBA staff cuts have slowed down certification processing, including 8(a) certifications. IRS, EPA, and CFPB have seen major headcount reductions.
  • Hiring freezes across civilian agencies — Fewer federal employees means fewer contracting officers writing and awarding solicitations.
  • Consolidation of IT contracts — Push toward fewer, larger contracts and shared services, which can squeeze out small businesses.
  • Review and renegotiation of existing contracts — Some agencies have been directed to review all contracts above certain thresholds for cost savings.

The bottom line: overall federal contract spending is tightening in civilian agencies, but defense and security spending remains strong or is growing.

Impact on Small Businesses

Small businesses are feeling the DOGE effect in several concrete ways:

Slower Certifications

SBA staff reductions have created backlogs in processing 8(a), HUBZone, and WOSB certifications. If you are in the pipeline, expect delays of 2-4 months beyond normal timelines. If you have not started your 8(a) certification, factor this into your planning.

Fewer New Solicitations in Some Agencies

Agencies with reduced staff are posting fewer new opportunities. When contracting officers are let go or reassigned, the pipeline of new solicitations slows to a trickle. This is especially noticeable at EPA, Education, and parts of HHS.

Payment Delays

Some contractors have reported slower invoice processing at affected agencies. When your agency contact disappears due to a RIF (reduction in force), finding someone to approve your invoices becomes a real problem.

Contract Modifications and Terminations

Existing contracts are not necessarily safe. Some agencies have been directed to find cost savings, which can mean reducing scope, exercising termination for convenience clauses, or simply not picking up option years.

Which Sectors Are Safer

Not all government contracting is under pressure. Some sectors are actually growing:

Defense and National Security

DoD budgets have been largely protected or increased. If you can do defense work, this is the most stable sector right now. Cybersecurity, logistics, maintenance, and IT modernization are all active areas.

Cybersecurity

Across all agencies, cybersecurity spending continues to grow. CMMC compliance requirements are creating new contracting opportunities for both cyber service providers and the businesses that support them.

Veterans Affairs

VA healthcare and IT modernization remain well-funded. SDVOSB set-asides at the VA are still flowing. If you are a service-disabled veteran-owned business, the VA should be on your radar.

Intelligence Community

IC budgets are growing. The barrier to entry is higher (clearances, specialized capabilities), but for those who qualify, the opportunity is significant.

Infrastructure

Bipartisan Infrastructure Law funding is still being disbursed. Construction, engineering, and environmental remediation contracts continue at the state and federal level.

Which Sectors Are at Risk

If your business primarily serves these areas, you need a diversification plan:

  • International development (USAID) — Severely impacted. Many contracts terminated.
  • Environmental services (EPA) — Reduced budgets and staff mean fewer new contracts.
  • Education (Dept of Education) — Under threat of reorganization or elimination.
  • DEI-related consulting — Executive orders have eliminated these contracts across all agencies.
  • General management consulting at civilian agencies — Under scrutiny as a cost-cutting target.

How to Adapt Your Strategy

Here is the practical part. If DOGE cuts are affecting your pipeline, here are concrete steps to take:

1. Diversify Across Agencies

If you have been a one-agency shop, now is the time to expand. Look at your NAICS codes and identify which other agencies buy what you sell. Do not put all your eggs in one basket.

2. Pivot Toward Defense If You Can

DoD is the biggest buyer and the most protected budget. If your services can be positioned for defense work, start pursuing it. Get your CAGE code, consider facility clearances if applicable, and start attending DoD industry days.

3. Look at State and Local

Federal is not the only game. State and local governments are spending infrastructure money and generally have not been affected by DOGE. Many of the same set-aside preferences exist at the state level.

4. Strengthen Your Set-Aside Position

In a tightening market, set-asides become even more valuable. If you qualify for 8(a), HUBZone, SDVOSB, or WOSB certification and have not applied, do it now — even with the delays, having that certification gives you access to contracts that full-and-open competitors cannot touch.

5. Focus on Contract Vehicles

Being on GSA Schedule, OASIS+, or agency-specific BPAs means you are pre-qualified when agencies need to move fast. In a leaner environment, contracting officers prefer the path of least resistance — and that means buying from existing vehicles.

6. Monitor Opportunities More Aggressively

With fewer opportunities in some sectors, you cannot afford to miss the ones that do come up. Relying on manual SAM.gov searches is risky when the margin for error has shrunk. Set up automated alerts that match your exact capabilities so you see every relevant opportunity the day it drops.

The Bigger Picture

Government contracting is not going away. The federal government will always need to buy goods and services from the private sector. But the mix is shifting. Civilian discretionary spending is being squeezed while defense, security, and infrastructure remain strong.

For small businesses, this means being more strategic about where you compete. The days of casually browsing SAM.gov once a week and hoping for the best were already numbered. In the DOGE era, they are over.

The contractors who will thrive are the ones who diversify their agency exposure, maintain their certifications, and use smart tools to find opportunities before the competition does.

Stay sharp. Adapt. The opportunities are still out there — you just have to be more deliberate about finding them.