- Deltek’s 2026 GovCon Clarity Report found contractors accelerating operations and AI adoption while struggling to maintain profitability and control.
- Kevin Plexico said GovCons face growing pressure to move faster as compressed acquisition timelines, automation and compliance demands reshape the market.
- GovCon executives seeking insight into evolving defense priorities can connect with government and industry leaders at Potomac Officers Club’s upcoming Army, Air and Space, and Navy summits.
Government contractors are under mounting pressure to move faster while maintaining tighter operational discipline, according to Deltek’s newly released 2026 GovCon Clarity Report, which found firms navigating a rapidly shifting market shaped by AI adoption, compressed acquisition timelines and heightened compliance scrutiny.
The 17th annual report, based on responses from 917 government contractors collected in January and made public on Tuesday, framed “speed vs. control” as the defining operating tension of 2026. Deltek said firms are accelerating proposal development, pricing analysis, automation and project execution while simultaneously facing increased scrutiny around cybersecurity, pricing defensibility and audit readiness.
“The biggest challenge that we see in the market is profitability,” Kevin Plexico, senior vice president of information solutions at Deltek, told GovCon Wire in an interview. “While companies have been growing, their profit margins fell from 20 percent to 17 percent, and nine out of 10 firms saw at least one financial metric decline.” Plexico is a seven-time winner of Executive Mosaic’s Wash100 Award and one of GovCon Wire’s trusted GovCon Experts.
As contractors navigate changing acquisition priorities and increased competition, Potomac Officers Club’s upcoming Military Service Series events are expected to serve as key forums for executives looking to better understand agency direction and evolving procurement trends. The 2026 Army Summit on June 18, 2026 Air and Space Summit on July 30 and 2026 Navy Summit on Aug. 27 will bring together government and industry leaders to discuss modernization priorities, operational efficiency and emerging technologies shaping the defense landscape.
What Is the GovCon Clarity Report?
The GovCon Clarity Report is Deltek’s annual benchmarking study focused specifically on the government contracting sector and is part of the company’s broader Clarity research series covering multiple industries.
Now in its 17th year, the GovCon edition examines financial performance, operational trends, business development practices, compliance pressures and emerging technologies affecting contractors across the federal market.
This year’s edition found contractors averaged roughly 15 percent revenue growth in 2025 and expect 16 percent growth in 2026, even as operational pressures intensified.
According to the report, firms remain cautiously optimistic despite growing uncertainty around procurement reform, compliance obligations and operational execution.
Plexico said some companies have weathered the turbulence more effectively than others depending on their agency exposure and operational positioning.
“It’s about eight or nine months after the administration kicked in and on the heels of DOGE cuts, significant changes to agency funding around USAID, HHS and Education, while at the same time we saw significant growth in aerospace and defense segments,” he said.
What Is Driving the ‘Speed vs. Control’ Challenge?
Deltek’s report repeatedly emphasized that speed has become a competitive requirement across GovCon.
The study found contractors are increasing speed in business development, pricing, automation and project execution while also struggling to maintain governance, auditability and operational visibility.
Plexico said contractors are increasingly being forced to compress traditionally lengthy acquisition and proposal timelines.
“The traditional business development process becomes a highly compressed process,” he said. “You need to formulate your winning strategies, teams and proposal approaches very quickly.”
The report found 83 percent of contractors missed opportunities in 2025 because they discovered them too late.
According to Deltek, proposal development remains highly resource intensive, with contractors reporting an average of 84 hours spent developing a single proposal.
Plexico also said agencies’ increasing use of task orders, other transaction agreements and fixed-price contracting mechanisms is reshaping how contractors pursue and execute work.
“We want capability delivered quicker, even if it’s an 80 percent or 90 percent solution versus a fully developed solution,” he said.
Why Is AI Becoming Central to GovCon Operations?
Artificial intelligence emerged as one of the report’s dominant themes.
According to the study, 90 percent of government contractors now use AI in some capacity, up from 45 percent in last year’s report, while 92 percent reported using generative AI tools.
Yet Deltek also found AI maturity remains limited. Only 5 percent of respondents described their AI capabilities as “fully developed,” while just one-quarter reported mature governance structures.
“Clearly companies are really leaning into AI as a source of productivity and automation to drive efficiency,” Plexico said. “But the adoption is running well ahead of organizational readiness.”
The report described AI governance as a growing competitive differentiator rather than simply a technology issue, particularly as contractors increasingly deploy AI in pricing, proposal development, cybersecurity and compliance workflows.
Deltek found 37 percent of contractors cited data privacy and security risks as their top AI concern, while 34 percent worried about inaccurate AI-generated forecasts and recommendations.
Cybersecurity, AI governance and operational resilience are also expected to be key discussion topics at Potomac Officers Club’s Cyber Summit next week, where federal and industry leaders will examine evolving cyber requirements and emerging technologies impacting the defense industrial base.
Why Are Contractors Struggling to Maintain Profitability?
While firms continue to project revenue growth, Deltek’s findings suggest profitability remains under pressure.
“They’re getting bigger, but not necessarily more profitably,” Plexico said. “That’s a problem companies are not going to be able to outgrow.”
The report found 96 percent of contractors expect compliance costs to either remain elevated or increase in the coming year.
Contractors also identified labor costs, supply chain pressures and compliance requirements among the industry’s most significant operational challenges.
According to Deltek, many firms are responding by prioritizing operational efficiency improvements, automation investments and process modernization initiatives.
Plexico said firms are increasingly realizing they cannot simply “outgrow” mounting operational complexity without improving efficiency and governance.
“I think one of the key challenges companies face is how to find efficiency and productivity amidst the growth they’re trying to get after,” he said.
