What contractors are looking at in the DoD and DHS budget submissions
Interview transcript:
Terry Gerton I know one of the things that defense contractors always watch is the rollout of budget submissions in the anticipation that there’s code in there for things that might be coming up. And so you’ve been watching these as they roll out and the defense department’s budget was sort of the latest to hit. So tell us, what are the biggest moving pieces in there that you see that contractors should be paying attention to?
Stephanie Kostro As we are waiting for the rest of the departments and agencies to release their budget materials, the Department of Defense budget that came across was packed full of stuff that we were interested in. Roughly 40% of PSC member companies, and we have about 400 of them, are defense contractors, they work with the Department of Defense. So theyβre looking at things like, what was included in the reconciliation bill? What was included in these budget materials for FY26? And where can they provide their expertise and β since there were services contractors and solutions contractors. So where can we provide our solutions? And so top-most, of course, was to secure our border, because it’s not just Department of Defense, it’s Department of Homeland Security, and within the defense materials you have more than $5 billion to achieve 100% operational control over the southwest border. So, what can contractors do to support that? You know we’ve got folks with technology solutions, we’ve got folks who can provide support in terms of personnel, and we’ve got people who can provide support in terms on the immigration side on the detention centers. And just briefly on that, Terry, about 90% of the detention centers along our borders are run by contractors who take great pride in the work they do to provide food, shelter, even in some cases, family support and oftentimes education. As we are unpacking this in the Department of Defense bill, we are looking forward to seeing what the government would like the contractors to do.
Terry Gerton Well, it sounds like you’re going to have to merge a number of documents here since defense has two pieces. They have their budget and they have the reconciliation bill and then the immigration and border security piece. You also have the DHS bill. We’ll come to the DHS bill in a minute, but I want to go back to defense. How are you thinking about this with all of DoDβs talk about insourcing IT and services? And yet, you know, you’re looking for opportunities here in the budget documents.
Stephanie Kostro You asked about big moving pieces. We also obviously have the media coverage of the Golden Dome, right? The $25 billion down payment that is both within the reconciliation bill and support for it in the DoD budget material, the nuclear enterprise and how to deter China on the insourcing piece in particularβ¦we are watching that very, very closely. There was a memo that came out in May signed by the Secretary of Defense regarding IT management and advisory and assistance contracts. Our community was watching that with very rapt attention. As we go through these budget materials, what we’re looking for are indications that they’re not going to use contractors or they are going to use contractors in these areas. Two items I’d like to highlight for you: One is the budget materials include more than $15 billion for cybersecurity. That includes work that the contractors will have to do. In addition, there’s a $1.3 billion piece for industrial-based supply chain improvements. As you think through how they’re going to use contractors, these are investments that are going to be made that indicate that they are going to use contractors, that they’re are going to rely on private sector expertise, cutting-edge technologies, etc., in order to make our nation more secure.
Terry Gerton One of the other places where there are a lot of services and contractual support is in operations and maintenance, building maintenance, R&D, those sorts of things. What are you seeing there in the Defense Department’s materials?
Stephanie Kostro So as the Department of Defense looks at what it might require to support the war fighter β it’s that piece that’s going to be critical, right? The RDT&E in here, the research development testing and evaluation piece, the operations and maintenance piece, building facility management β those all fall to contractors in large part, in terms of sustainment of platforms as well as logistics pieces. As we look at the O&M budget and we see that it is flatβ¦you couldn’t get more flat in terms of the FY26 budget request vis-a-vis FY25. That said, we are looking forward to seeing how the Department of Defense applies this funding in terms of logistics and contractor support. There are a lot of moving pieces, particularly out in the Indo-Pacific area of responsibility. We have the Pacific deterrence initiative, which is really set up to deter China. That has more than $10 billion in it, as well as some money to support Taiwan, etc. What is highlighted in the DoD budget materials on the China piece is the use of innovative capabilities. And we’re going to find that in RDT&E as well as some of the operations and maintenance piece. So supply chain is going to be important out there, and we have a huge role to play as contractors in that area.
Terry Gerton I’m speaking with Stephanie Kostro. She’s the president of the Professional Services Council. Well, let’s switch then back to the DHS budget because that piece is coming together. And also, of course, there’s a big piece of that in the reconciliation bill. DHS has its separate budget. What are you seeing as the big movers and shakers in the DHS programs?
Stephanie Kostro A lot of media attention is being paid to the border security piece, as well as the immigration piece. There’s a lot money in the reconciliation bill, some $170 billion to support the border and immigration priorities of President Trump. And that includes what they’re calling the border barrier system. It’s not so much a wall anymore, but a barrier system. And from a contractor perspective that means, let’s look at the technologies. Let’s look at some of the remote capabilities where we can surveil the border or watch the border without actually having boots on the ground on the border. And so some of the technological solutions are going to come from contractors who are eager to offer their solutions to the government. In addition, as I mentioned earlier, immigration is a law enforcement duty or responsibility, but the role of contractors in that area is to really help support on the detention center side. More than 90% of those detention centers are operated by contractors. And so as they look to make sure that the folks who are detained and put into these centers receive the best treatment that they can under the circumstances and given what we are doing along the border, I think our contractor community is really eager to see what they can do to support the treatment of folks along the border.
Terry Gerton It occurs to me that as you are deducing these shifts in priorities, they’re coming at the same time as the FAR changes are going to change requirement documentation, how contractors submit their input in the front end of that. How do you put these two pieces of sort of strategy together for your stakeholders?
Stephanie Kostro Our stakeholders are obviously our 400 member companies, right? And as we look forward to seeing what happens on the FAR rewrite, or as the government calls it, the revolutionary FAR overhaul, PSC is gathering member input and providing it directly to the government in terms of provisions within the FAR that should be rescinded or revised or otherwise modified. There are a lot of moving pieces here and the FAR rewrite is moving full steam ahead. There are several parts of the FAR that are out for comments. PSC is busily trying to facilitate a submission of comments, including a revolutionary FAR overhaul action center on our website that’s available to our members where they can submit their thoughts. They are coming fast and furious in terms of ideas that the contractor community has. When you overlay all of the moving pieces to support President Trump’s priorities, whether it’s on the border, immigration, deterring China. Golden Dome, all of the things that we mentioned earlier, it really is a lot to keep in straight in your head as well as in contracts. But I have full confidence that our contractor community. They focus on compliance. They have folks dedicated to compliance. We are going to face a period where we have legacy provisions from the FAR supplements that will have to be rationalized as we move forward. Those provisions are included in current contracts, but may be phased out going forward. And we’re going to work with our contracting community to make sure that they are in compliance with what the requirements are and make sure we keep that top of mind.
Terry Gerton Well, there may be a new opportunity for your stakeholders in the services industry, for example, to provide input to the government before the RFPs go out, right? So that’s part of the new piece as well.
Stephanie Kostro I think what the government has been talking about has been making it common-sense compliance, right? Things that aren’t overly burdensome to anybody involved. That includes the civil servants and military personnel who are looking at contract requirements and enforcement of contract requirements. That said, you know, we have a vested interest in our community of contractors to make sure that we stay on the right side of regulation, the law, etc. Part of this is also, Terry, the statutory underpinnings of the regulations. Some regulations are closely tied to what is in law and what was passed through Congress and enacted by the president. Therefore, you know, we are proposing some legislative changes as well. And you’ll see things like that in the Forged Act on the Senate side, in the Senate Armed Services Committee, or on the Speed Act, which is wending its way through the House Armed Services committee.The post What contractors are looking at in the DoD and DHS budget submissions first appeared on Federal News Network.
