Name: Federal Funding in Focus: Key Insights from the FY 2027 Budget Release
Uploaded: 2026-04-16T19:31:09.913Z
Duration: 59 min 24 s
Description: Federal Funding in Focus: Key Insights from the FY 2027 Budget Release

Transcript for "Federal Funding in Focus: Key Insights from the FY 2027 Budget Release": Hello, everyone. Thank you for joining us for today's presentation, federal funding in focus, key insights from the f y twenty twenty seven budget release. I'm Alex Gallant, a senior marketing manager at Deltek. And before we begin, I have a few administrative items to note. For the best webinar experience, please use Google Chrome or Firefox. If you have a question, please type it in the q and a box during anytime during the presentation. We will answer as many questions as we can at the conclusion of the webinar. Please know if you are a GovWinIQ customer, you can submit a research ticket at any time. Resources are available for you to download in the docs panel on your screen. You will also receive the on demand recording of today's webinar via email within twenty four hours after the webinar ends. Now with the administrative items out of the way, let's get started. Thank you, Alex. Hello, everybody. My name is Denise Peterson. I am the VP of market analysis here at Deltek. And today I'm going to just, unpack for you the president's FY twenty seven budget request. It was released earlier this month. This is the second full budget submission from the administration and it builds directly on the policy and the spending trajectory that we saw established in 2026 including funding from the One Big Beautiful Bill act. Also it references a reconciliation bill. So that's kind of still casting a little bit of a shadow over this year's request and setting the stage for additional or second reconciliation bill, for FY '27. So here's our roadmap for today. We're we'll start, with the big picture discretionary overview. Those are the top line numbers and kind of the overall budget philosophy. Then I'm gonna drill down into department level details for both defense and civilian agencies. Then I'm gonna switch, to the contractor addressable portion of the budget. That's the money that actually flows to the the private sector. So I have a little bit of information, on that and then we'll cover what we know about the IT budget including things like cyber and AI specific spending and then wrap up with conclusion recommendations and I'll do my best to leave some time for q and a. A few notes before we jump in. When I said I'd cover what we know about IT, it's because, once again the administration did not release the program level IT budget. It's called the IT portfolio. So what we actually got was kinda top line totals for the I believe about 24 or so, CFO act agencies. And so we were able to also pluck out some IT plans from agency specific budget documents. So I'll share some highlights there as well. And then lastly as a reminder this analysis is based on the request so it's a proposal, congress has the final say, and as I'll discuss when we wrap up you know we have to consider, the the landscape for the appropriations process. But the budget does tell us where the administration wants to go and that really matters for planning purposes. Alright. So let's start with the discretionary budget overview and talk about what the administration asked for at a at a high level. So here's the headline. The administration is requesting $1,900,000,000,000 in total base discretionary budget authority for FY '27 and that's almost a 3% increase over what was enacted for FY '26. But the top line masks kinda two different stories. On the defense side we're looking at about 1,100,000,000,000 in base discretionary authority. That's a 9.2% increase. And that builds on the historic trillion dollar defense top line enacted for FY '26 when you factor in the the I'm gonna call it the OB three. And importantly the administration is also requesting another $350,000,000,000 in mandatory spending for the Department of Defense through a proposed second reconciliation bill. And a quick side note on terminology, I tend to use the title Department of Defense because that is the statutory name of the department. Department of War is symbolic until congress passes legislation. And I've been doing this a very long time and I'm just used to it. So no disrespect there. It's kind of what all the documentation comes through as. If that reconciliation bill goes through it would bring total defense resources to about 1 and a half trillion and that would be about a 44% increase from FY '26. And obviously on the civilian side the picture is very different. That request comes in at a little over $785,000,000,000 which represents a 5.6% cut. Now the six priority pillars that you see here, national security, immigration, law enforcement, energy, tech, and veteran care are kind of the lens through which this entire budget is constructed. Every dollar in this request is either flowing towards one of these priorities or being cut because it doesn't align with those priorities. Okay. Let's get into the meat of it. So now let's take a look at how this breaks down by department. This chart gives you, a a pretty visual picture of winners and losers in this request. The clear winners are concentrated in national security and the law enforcement space, Department of Defense at 1,100,000,000,000 as the dominant storage course and I'll get into some specifics in a minute. But high level, we see a familiar pattern of boost for air force and navy. That's offset by either smaller increases or small cuts to defense agencies, also known as the fourth estate, and army. With the ongoing conflict right now on the heels of all the support for Ukraine, the national stockpile needs replenishing and so we're seeing kind of budgets and the reconciliation proposal being directed somewhat at that but then also increasing to fund the administration's call it the golden vision. Right? It's the golden, dome. It's the golden fleet. So all of those things and I'll speak a little bit more on that as well. DOJ is getting a 13% increase so almost 41,000,000,000. That's a pretty historic level based on the administration's emphasis on combating violent crime and drug cartels. FBI alone would get about 12 and a half billion. And there's also money in there for some construction things like rebuilding Alcatraz, for example, as a federal prison. VA comes in at about 145,000,000,000, a 9% increase. Most of you know, big chunk is medical medical care, so they get kind of that discretionary piece but also there's a lot of, mandatory funding that gets added into that for things like there's a huge toxic exposure funding, a fund, excuse me, for example. And so, you know, with all of that, VA is the second largest department by discretionary budget. And in VA, the administration is prioritizing, electronic health record modernization at 4,200,000,000. They've got a few major construction projects. There's one in for a National Center for Warrior Independence in West Los Angeles, new facilities in in New Hampshire, new facility in Indianapolis. So, they're they're directing quite a bit of funding towards new medical facilities and benefits for veterans. Department of Energy is also up to about 54,000,000,000, a nearly 10% increase, And that's almost entirely driven by over $30,000,000,000 going to the National Nuclear Security Administration for nuclear weapons modernization. And what they're doing there is cutting in the non NNSA type side of the budget to boost the NNSA. So it's about a 12% increase for NNSA offset by about 11% cut across all the other parts of, Department of Energy. Transportation gets about a 6% increase. A lot of that is driven by they have this maritime action plan. So there's there's a new initiative where, I believe it's, well it's billions of dollars going to that to kind of upgrade ports and, maritime infrastructure and things like that. Also some hiring of FAA controllers and some infrastructure investments in, in and around DC. Now on the other side of the ledger, the proposed cuts are are are fairly deep and widespread across most civilian agencies. So HHS takes the largest dollar amount cut down 15,800,000,000. The administration is kind of reorganizing HHS around the administration for a healthy America initiative which, consolidates and eliminates some programs across HRSA, SAMHSA, CDC, and the office of the assistant secretary of health and NIH as well. NIH alone faces about a $5,000,000,000 reduction. Education is down about 3%. It's still the administration is still trying to put education on the path to elimination by transferring programs to, like, labor and other agencies. But the amount that they're requesting is it it supports the ongoing operations of, education. So when you look at the f y twenty six budget and '27, it looks more of like a a streamlining of education and kind of refocusing of mission and then moving pieces out that could be done by other agencies out. So we'll kind of see how this plays out. Last on the slide stating in international programs. There's about a 30% cut they're planning for that and this is after kind of getting rid of USAID. Our foreign assistance is being fundamentally restructured through this new America First Opportunity Fund. And there's some steep reductions to things like, humanitarian assistance, global health programs, and international organizations. And they're also trying to claw back about $2,300,000,000 in funding, which is that process is called rescissions. So let's look at some some of the smaller, departments. Same story, rest of the smaller civilian agencies similar to 20 FY '26, the administration wants to EPA for example wants to cut EPA by more than half to about 4,200,000,000 and a lot of that would be through elimination of what are called state revolving fund contributions and category grants. So a lot of that is looking at what's going to, the state and local level. And and so I won't belabor it, but you can kinda see the winners and losers there. I'll also call out GSA there. I mean, given their role in terms of, you know, especially IT contracts, kind of consolidation and and their role there, the administration is proposing a pretty big increase to that. And also keep in mind that most of GSA's funding is not through regular appropriations. It's through kind of fees and other collect it's called offsetting receipts and collections. For like doing work for other agencies. So but it's still money that they can spend, and that's a very, very healthy increase. And one last thing I'll talk about when we're looking at agency budgets, also keeping in mind the workforce data that tells a parallel story here. So the total executive branch civilian employment is is roughly flat, but, throughout last year, they ended up, with with those and the fork in the road and all that, down about 300,000 federal employees. And so we're starting to see some shifts there. The full budget, documentation does provide and our our full report on the budget provides a look at the planned workforce actions. So for example, agriculture, they're looking to drop another 19,000 FTEs, NASA's 3,000. But just this, they wanna add almost 7,000, and interior, about 4,500. So, you can see that they are still working through those workforce, reorganization plans that were initiated, last year. So for contractors, the key question is whether your agency is on the growth side or the cut side. But even if your agencies are on the cut side, it's really now about hunting down the money. Because it's still billions and billions of dollars. It's just shifting, which means, you know, you you're gonna have to look at diversification. Right? If if you have all your eggs in one agency and their budgets are declining, you know, you're gonna have to look at where is that money actually going. Okay. So I'm gonna spend quite a bit of time on on this slide because there's a lot going on. So I will say that the DOD controller luckily gave us, a few datasets to work with. But the full DOD budget documents, by military department, they're saying those won't be available until April 21. Until then, we can still kinda see the direction, of defense programs. So I'm gonna walk through. I was able to kinda look at the programs and group them in these big priority buckets. So starting with shipbuilding, obviously, Navy. The two biggest investments here are getting a few extra billion. There's a Columbia class submarine, that deal d wants to throw another $5,000,000,000 at to 19,800,000,000, Virginia class submarine up from 14,100,000,000 to 16,700,000,000. There's also some plan increases for some of the aircraft carriers, from 2,400,000,000 to 4,500,000,000, for example. D a DOD is also requesting 2,000,000,000 for, a new program. It's called the BBGX program. This will be a new program to build a new class of navy guided missile battleships, and the administration envisions maybe about 15 to 25 of them and that will be part of like the golden fleet program that I mentioned earlier, with plans for procurement to start in the early 2030s. So there's funding in there for that. Shifting over a little bit into missile defense, sorry I'm jumping around here on the slide. Missile defense, there's some pretty healthy increases for the lower tier air and missile defense program up from about $530,000,000 in FY26 to 2,000,000,000 in FY27. Almost tripling the long range standoff weapon budget from $551,000,000 to 1,400,000,000. And then there's a couple of new missiles, new programs that are being proposed. There's the Terminal High Altitude Area Defense or VAD program. There's about $9.00 7,000,000 in their procurement budget and another 1,100,000,000 in their RDT and E or the Research Development testing and evaluation budget, their R and D budget. So they're you know combined about $2,000,000,000 for that and that is the program that uses interceptor missiles. It covers a larger area than the Patriot Air and Missile Defense System. It complements that system but you know this is again part of that larger missile defense strategy and part of the reason why the administration continues to ask for more and more money for Department of Defense. Another new one, the conventional prompt strike. There's about 750,000,000 in procurement for in the procurement budget for that and then another 1,300,000,000 in in the RDTNE. And this program pairs hypersonic missiles with submarines and surface ships and offers kind of a non nuclear way to hit high value assets quickly. Another couple callouts here, increase for the Tomahawk from 257,000,000 to 1,000,000,000, and then Tomahawk modifications from 480,000,000 to about 800,000,000. And then there's also planned increases in in RDT and E for their resilient missile warning, missile tracking, low earth orbit, that's a mouthful, program from 1,700,000,000 to 3,600,000,000. So, lots of money going there to missile defense. Makes sense considering kind of the whole, you know, Golden Dome shield on prioritization. Let's look at aircraft. So obviously with Air Force, planned major increases for, there's a program called the P-8A Poseidon and the budget there would increase from 13,600,000 to 4,200,000,000. So major increase to get that up and running. Also proposing increases for a few other aircraft like there's a KC-46A program 2,800,000,000 to 3,600,000,000. There's an advanced Hawkeye program from 1,100,000,000 to 3,200,000,000. And then there's a new program called the collaborative combat aircraft and that, has a $1,300,000,000 request. Now moving on to space, in space force, there's also, more than a $5,000,000,000 boost for space procurement, and that includes, two about 2,000,000,000 for the national security space launch program, dollars 2,000,000,000 and this is up from $712,000,000 for special space activities and then a nearly $800,000,000 boost getting it to $1,000,000,000 for the ground moving target indicator. And so this is another area where, you know, some of the the proposed budget increases would be directed to somewhat offset by some spending in army and things like that. Taking a look at r and d across the board, mostly this is mostly in the defense agencies part of the budget. So that's everything other than the military components. First off the top, more than a quarter of that budget, about 59,000,000,000 goes to classified programs, so we can't see those. But this is where the majority of Golden Dome funding is. So after the 20 something billion of funding from OB3 is expended and just side note, DOD has said that all of the funding that they got in the the reconciliation bill, they expect to spend by the end of this fiscal year. So the administration is banking on a second reconciliation bill to add another $17,000,000,000 to that. And so there's only about three ninety eight million requests under the regular base discretionary appropriations for Golden Dome. So again another sign they're really looking for another bill to be able to, and mandatory spending that would be added to that. Now outside of that, there's also a major boost for the, called the JADC two, GADC two development and experimentation activities from $578,000,000 to 2,100,000,000. And then there's a new program, worth about one and a half billion for a a program called Adonate, SAT c two. So, obviously, that's a a new program for satellite command and control. Now moving into technology and AI, their cyberspace activities and operations is about $7,000,000,000 that comes out of mostly comes out of their operations and maintenance budget. $2.2400000000 in RDT and E, cyber RDT and E. And then there's a almost 25,000,000,000 for AI and machine learning in the RDT and E budget, for things like, undersea artificial intelligence and machine learning and to support the chief digital and artificial intelligence officer activities. And then there's kind of a, there's a push for like base communication. So in their procurement budget, there's an increase for communications of all kinds from 14,600,000,000 to 22,200,000,000. And there are two kind of big increases. There's one, actually, this is there's several increases, but one of them is for this counter small unmanned aerial system program, and then a number of different, like, smaller radio systems. And then lastly, with readiness and infrastructure, there's about a 23,800,000,000 request for sustainment restoration and modernization activities. But what's interesting here is so that's in their regular appropriations or regular budget request. And then they're proposing another 27,600,000,000 to be earmarked for that future second reconciliation bill. So you can see this in the military construction budget. So in there, some of the other things, they're requesting almost 15,000,000,000 for a new multi mission dry dock and 1,800,000,000 towards, headquarters for SpaceCom. DOD is also requesting, about 4,000,000,000 for DISA's o and m operations, which is, slightly above the 3,000,000,000 that they are working with for f y twenty six. The real story here again is that for DISA O and M, they're proposing another 12,400,000,000 in mandatory spending in that second reconciliation bill. And then lastly, DealD is requesting about 16,000,000,000 for contractor logistics support. And that's an increase, for about 13,800,000,000 that, they're working with for FY '26. So that's just scratching the surface but that's quite a bit going on already. Now let's take a look on the civilian side. So like I said, even with declining civilian top line numbers, there are some investment, you know, increases. Technology and AI is a major theme. We see for example in Department of Energy, investing about 1,200,000,000 specifically in AI including, seven AI supercomputers at a couple of the national labs. VA, I mentioned, is modernizing their electronic health record system. That's been a very long standing program, so they're throwing another $4,200,000,000 at that. And then also another, 130,000,000. They're trying to implement automation and AI to improve claims processing. NASA has their $8,500,000,000 Artemis program. It targets the moon landing by the 2028. There's a lot of IT embedded in that. And there's also a 175,000,000 new investment for a lunar base camp. Now looking at infrastructure, this includes about $10,000,000,000 for this presidential capital stewardship. So this is basically a DC beautification and restoration program that is supposed to go through the National Park Service, to, like I said, modernize, restore, beautify different, you know, federal buildings around the DC area. There's also a billion dollars for a great Salt Lake restoration. And then I mentioned the maritime action plan. So 1 and a half billion at transportation for that plan covering shipbuilding, ports, and also this merchant marine academy. Energy and minerals is another bright spot. There's a $13,000,000,000 cross agency critical minerals initiative that DOE is involved, state commerce and interior. And this is tied back to an executive order from last year that was focused on American mineral production. DOE is also investing 3 and a half billion in firm base load power deployment and also about 75,000,000 for energy water security. I mentioned VA a few times. They're dominating budgets on the civilian health side. So public health funding is kind of reduced overall because it's being kind of restructured around this Make America Healthy Again initiative, that has a focus on chronic disease prevention and food safety. We all know that immigration law enforcement continues to be a top priority in the administration. The budget provides 22,200,000,000 for DOJ for law enforcement surges. So hiring and other, you know, technology, things like counter drug technology, but also some funding for detention operations and facilities and, things like that. And then, when it comes to r and d, O and B typically releases, at the end of each fiscal year looking forward to the next one, a memo kind of outlining high level what the administration's r and d priorities are. So that came out last September and it laid out about five different, budget priorities that are kind of shaping investments within agencies. So, you know, things like AI, quantum, semiconductors, microelectronics, and then, you know, advanced communication and computing technologies. Okay. So that is the top line based discretionary with some mandatory spending thrown in there. But we know that not all of that, you know, is spent on contracting. So this is kind of where the rubber meets the road for us. The not all discretionary spending flows to contractors, but that's where the majority of contract spending is. The rest is, you know, personnel calls, transfer payments, grants, all kind of other stuff. So when we wanna get closer to what will they actually spend or what is available to spend on contractors, we we look at that contractor addressable portion to kind of understand what's available for the government contracting community. And so there are some budget documents that requires agencies to classify their spending across I wanna say it's like 20 different categories but not all of them are addressable. Right? Some of them are the things I just said. It's what they wanna spend on FTEs, you know, what some of the internal contract or internal interagency spending stuff. So I pull out the categories where contractor addressable spending lives. And what's important to note here is that the shift towards defense spending and away from civilian discretionary spending naturally increases the overall contractor adjustable pool, right, because defense dollars tend to have higher kind of contractor pass through rates than many of the civilian, programs. And we can see here the defense influence, You know, given their budget, all the most of the increases you see here are really being pulled along by DOD. So for example, you know, that big increase for equipment and r and d and supplies, that is very tightly, tied to DOD needs. Another interesting thing here is that we can also see a flattening in professional services, and you'll see this referenced as, advisory and assistant services. So and this isn't completely unexpected given if you remember last year a lot of the kind of data calls and Doge activities when they were terminating contracts, there was a pretty heavy focus on professional services, primarily kind of your consulting your, you know, consulting contracts. So I'm not surprised. I think it's it's it's a good thing that it's flat, because that tells us perhaps that they are slowing down or kinda targeting, professional services. So as we can see here, you know, still a ton of money. And then you have that other services bucket that just kinda catches up everything else. Right? That's a amalgamation of a a bunch of different things. So although it's it's kind of decreasing a bit driven down by the civilian agencies, it's still quite a bit of money there. So, you know, the money is still flowing in in federal. Okay. So that is the big picture discretionary. Let's shift to the IT budget, which is usually one of the most closely components for the GovCon community. It is I wanna say it's either second or third biggest, market in government contracting, over a $100,000,000,000 a year. Actually, it's more like close to 150 because of IT that gets embedded in defense and aerospace and RDT and E budgets that are kind of, reported separately. There is a reason that we are calling out IT here because in previous going way, way back, if you've been around, we used to get program level IT budgets. If anyone remembers the exhibit 50 threes, that transitioned to into the IT portfolio that was on the Fed IT dashboard. So what I'm gonna present to you now is very limited compared to what we've been able to present in the past because, we didn't get the IT portfolio for FY '26 or FY '27. And another important note to call out about that is that in in those budgets like we see with discretionary what usually happens is you get three years of data. You get data for and I'm gonna use the current one obviously. So actual spending which is FY '25, you get the numbers for what was inactive. Sometimes it's an estimate. Sometimes it's a CR number, continued resolution for the current fiscal year. And then you get the request for the upcoming budget year. And so you we typically see that across all the budget documents. But because they've only been giving us, the top line department level IT numbers, and they've only been giving us the request year. So I say all that before I show you this slide, which is what we have to come what we have available to to, compare. So a couple things here as I mentioned. So what we have is what was requested in the in FY '25, '26, and '27. I think it's still useful. FY '25, just keep in mind that that budget was put in, that was a Biden budget. Right? The first full Trump budget was f y twenty six, so this is the second one. And I called that out because I think it's important to to look take a look at the tolls because after kind of, you know, everything that went on last year, especially focused on IT, it felt like IT spending was kind of down. Actually, the actual spending amount is higher than this request. So we did okay. But the point is the administration in the request is trying to kind of get back to FY twenty five numbers. And that's that's a great thing for those of you in the IT space. Right? So, you know, I think there's finally this recognition that IT has always been an an enabler of mission and even more so when you're in an environment where the mission is still complex and still ongoing, but we've also had cuts to federal workforce. And so technology often can, you know, automate, you know, they're leveraging AI, things like that to kind of fill that gap a little bit. So and also note the DOD IT budget data was not available at the time that we've, published this report. So this is civilian only. DOD IT information is usually several weeks behind in a good year. But, so there it's gonna be even more than that because the discretionary budget itself is also delayed a few weeks. So we may not get to see a lot of that. I would say that, if you're waiting for that, you'll probably be able to see the top line, IT numbers by component, because they if we were, for example, to get an IT portfolio at some future date, DOD and that data, it's only about half of it's in there because they kind of pulled back several years ago, spending on national security systems. So that portfolio only gave us half of the DOD picture anyway. But at some point, hopefully, we'll be able to see the top line levels of, DOD IT. So with that being said, just a few cut up callouts here. First of all, the civilian IT budget request at 75,700,000,000 is a healthy increase over what was requested before. DHS is up, 9.2% to 11,700,000,000 kind of maintaining its position as one of the bigger civilian IT spenders. This reflects kind of ongoing border technology investments, some CISA cyber operations, the automated commercial environment system, things like that. So there's some kind of big IT, you know, mission areas that still require some healthy funding. Obviously, the standout story here is VA which jumped 62% from 7 and a half billion to 12,200,000,000. That massive increase, again, the electronic health record modernization rollout that had stalled under the previous administration a bit. But also another 6,300,000,000 for IT systems, modernization covering things like cyber, financial management, modernization, digital platforms for things like mental health, community care, and housing. Treasury is also, potentially seeing a budget increase driven by their need, at the IRS for technology modernization. And a lot of that is driven by what was in the one big beautiful bill. There's the within that bill was the working families tax cut act, and there were some provisions in there that we require, IRS to kinda change a lot of things on the back end. And so that increase is intended to kinda facilitate that. Once again, DOJ up nearly 41%. I mentioned the FBI, you know AI powered counterterrorism initiatives and expanding digital law enforcement capabilities. Unfortunately on the decline side, HHS you know dropping 9.1% to nine point five billion. A lot of this has to do with programs being either eliminated or consolidated. And then NASA, for example, dropping 24%. Some of that is due to some programs like the international space system. Some of that stuff is approaching retirement. They've terminated, you know, select science missions. And so, kinda that's where we are with the IT budget. Okay. This is just, it makes that soar even more clear. Right? So that VA increase alone accounts for the lion's share of overall IT budget growth and stability agencies. And if you think back to when I started here, the agencies seeing cuts tend to be those that are on the receiving ends, of the broader budget reductions, you know, HHS, NASA, agriculture, social security. But note that even agencies facing overall budget cuts, often have stable or growing IT budgets because administrations typically view, you know, tech modernization as the end of the road to the mission. So, so dollars will be moving around when there if these cuts are, stick in the appropriations. And I think the practical takeaway here if you're an IT contractor, I'll keep saying it, you gotta follow the money. You have to diversify. You gotta, you know, follow the money to VA, treasury, justice, DHS, within organization. You know, you may have to kind of expand your your, radar there a bit to kind of incorporate more, agencies, maybe agencies that have kind of tangential missions. Okay. So we also did get some insight into the civilian cybersecurity budget. So if you're in that space, there is a proposed increase to 12,200,000,000, or excuse me, slight in decrease, to $212,200,000,000, compared to FYI '26. And if you look at the underlying data, DHS is a dominant cybersecurity spender. But I will call this out because DHS is a top priority for the administration. But, the one thing they have called out is CISA and wanting CISA to kind of streamline its mission. And so that's why we see some, some increases and some cuts in in some areas of of CISA. You know, so not all areas of DHS are seeing increases. But DOJ, you know, jumps from 956,000,000 to nearly 1,300,000,000. And, again, that's tied to the FBI and digital investigations and things like that. Another call out though, state department going from 635,000,000 to 809,000,000, and then transportation, increased about $50,000,000 or so. Interesting thing here is that VA VA cybersecurity spending actually reported, you know, decreases slightly from 1,200,000,000 to 1.1. Although the overall VA IT increase suggests that cybersecurity is often funded through broader IT modernization accounts. And that's always been the case where, you know some agencies have cybersecurity that's called out specifically in a separate lie item and others it's embedded in other things. So the bottom line here for cybersecurity contractors, you know the overall market there's flat, but there's some pretty significant rebalancing happening. So some of the opportunity is shifting from DHS Centric programs to Justice State, and other agencies that are kind of very tied into the administration's priority list. Okay. We can't have a webinar without talking about AI. It's clearly a technology priority of the administration. And, you know, we're starting to see some dedicated budget line items emerge across agencies. I will say that this is not they have not standardized, calling out AI specific programs. You kinda have to dig for it. You have to mine for it. And so that's what we did here and and just plucked out some of the bigger programs that we're able to identify. And also somewhere we know that they have programs. They mentioned them in the budget request. We've seen their use case inventories, but they don't attach a dollar amount to it, which suggests that they are kind of like when cloud emerged many, many moons ago, that they are kind of plucking dollars where they can and redirecting them into these programs so they may not have a dedicated line item. So for example here, I mentioned DOE earlier, 1,200,000,000 for its AI and quantum program. And it is part of a a larger commitment, where, you know, they're saying AI is going to kind of under be an underlay for virtually all of their efforts. So really trying to get AI infrastructure, in place and embedded. NSF's $655,000,000 future of intelligence initiative is notable. It's one of the largest AI specific line items in the civilian budget, and it aligns obviously with the r and d priorities that OMB memo emphasized on kind of fundamental AI research including, you know, infrastructure, you know, data efficiency and AI for scientific discovery. I won't belabor the point but I'll mention it again, Justice and FBI, you know, funding there for AI powered terrorism, intelligence support, and tactical response. So that's part of kind of the law enforcement dimension of the administration's AI push. What's not captured though is the broader AI ecosystem like I mentioned where AI is funded within other technology and infrastructure programs. We can see from their inventories that's happening. And there's a lot of work with existing budgets to kind of make sure they have the infrastructure for that. But it it is probably slower going going than the administration wants just because of, you know, you can't cut a ton of money out of civilian than expect them to kind of keep pace where AI needs to go. So here for contractors, Mitch is pretty clear. AI capability is kind of becoming table stakes across virtually every agency. I suspect we're gonna see some pretty big numbers for AI when we get the DOD IT budget as well. Okay. So last slide here, before I get to conclusions or recommendations is contractor reliance. This slide answers the critical question of when budgets change, how much of that change actually impacts contractors? So to help answer this, I look at the percent of discretionary budgets that go to total contract spend and then the percent of IT budgets that are used for contracting. So we call that contractor reliance. The average contractor reliance for IT spending is about 61% which is significantly higher than the 40% average for total discretionary. So that tells you that IT remains one of the most contractor dependent functions in government. And I know with some of the reorganization, you know, some IT shops were shut shuttered or moved or whatever. And I suspect that with some agencies where we're seeing some potential workforce increases, they may be trying to hire some more IT folks there. But given where they're trying to go, I think there's still that high demand for contractor support. Just suspect a lot of scrutiny in those contracts, on pricing and, you know, compliance and all those things. The the variation across agencies is fairly dramatic. You know, some agencies spend upwards of like 70 to 80% of their IT budgets on contracts, while others, typically those with large internal IT workforces, you know, may keep more in house. So the practical insight here I think is that changes to IT budgets are most impactful in agencies that spend at least half of their IT budgets on contracting. And I would say that the same is true for most markets that if at least half of their budget they are preserving for contracting of some sort for various, types of, products and services, you know, there's more sensitivity there to, you know when the discretionary budget or the IT budget changes and they have to figure out how to reconfigure that to maintain, at least maintain the bucket of money that they intended for for contracts. So if you cross reference this data with the IT budget changes I mentioned before, you you kinda get a clear picture of where the actual contract opportunities are expanding in in contracting. So again it's just another data point to say you know you have to follow the money, really dig into customer intelligence and really understand your agencies and how they have changed because we saw a lot of changes last year. In many cases, those are things that were introduced last year that are being implemented this year. And so we may not be done seeing some of those those changes. So with that, let me wrap up with some thoughts here. You know, there's a high level, conclusions here. So first, the budget's clearly squarely built around the president's management agenda and shouldn't surprise anyone. National security, immigration, law enforcement, energy, space, AI, those are the through lines and every dollar is being directed towards or away from things that don't align with those priorities. Right? So if your worker lines, you're in a growth market. If it doesn't, you might need to reposition. Second, the defense strategy is deliberately too too tracked. Right? There's a 9% base discretionary increase is one lane and then banking on a $350,000,000,000 reconciliation bill. And it's unusual, to kind of bank on that much being used for in a mandatory funding for defense. But contractors don't care where the money's coming from. Right? It creates both opportunity, but also uncertainty because reconciliation has to it relies on well, all funding relies on congress, but reconciliation in particular, that's a harder sale sometimes. So but if it passes, the defense industrial base is looking at a pretty unprecedented surge. And even if it doesn't, we're still looking at a pretty strong base, growth. Third within defense, the investment accounts are where the action is. So the, you know, mine what's going on in procurement? Some of those new programs I mentioned. RDT and E, that's very very much where the golden dome stuff is. So getting smart about following that money and that's what, you know, GovWind is here for as well. And then lastly, or sorry, for the the r and d, if you're in that space, you know, these are cross government wide opportunities. That may be a a good area to kinda figure out how you can translate your offerings if you're you know in that space. Because everyone's kind of looking at that. And then lastly the civilian IT budget returning to hopefully to FY 25 levels. Very clear prioritization pattern in what the favored agencies are. And then a few recommendations. First expect a contentious appropriations fight. This budget is a proposal. Congressional dynamics are challenging. We just, you know, got the a reconciliation bill passed. We've got midterm elections in November that could change the composition of congress. One thing I will say about congress and the budget is that we saw similar steep cuts for f y twenty six, in discretionary budgets. And for the most part, congress, even the republican led congress, did not have an appetite for those steep cuts, which is a a good thing. Right? So whether it stays the same after midterm elections or if it's mixed or the Democrats have control both chambers, we may or are likely not gonna see appropriations that map directly to these steep cuts. Just keep that in mind. So watch a second reconciliation bill very closely. That's a a big chunk of more money potentially coming for defense. Get ahead of the regulatory environment. So throughout the budgets, you know, they're talking about some of the priorities and you know they're emphasizing things like supply chain security, cyber requirements, and you know they are eliminating some climate programs, but you know trying to understand where those programs are. They wanna kind of know all the information. So you know build resiliency and traceability into your internal processes. Because these requirements you know, they're obviously gonna show up in contract clauses and evaluation criteria. And that is on top of the revolutionary FAR overhaul. Last you know, lastly stay alert on the ongoing restructuring of agencies because it's clear that they're not done. They continue to propose eliminating or at least reorganizing components. As I mentioned before, HHS undergoing a major reorg, and these changes create disruption. Right? Not just in general for, an agency, but disruptions and things that impact the flow of contract contracting officers, you know, program managers, things like that. That can create disruption. So with that, I wanna thank you for your time. And I want to go ahead and, I did I was able to reserve some time for q and a. So if you haven't already, if you have a question, you can drop it in the q and a box there. Let's see. Oh, there I'll just go ahead and say there is a, question about copies of the slides. You will get the on demand and and slides, I believe it's within twenty four hours. I'm not sure. There was a question. I believe this is referencing the contractor addressable slide I showed. And it's IT services and products are buried in these categories across the board. Correct? Thank you for that question. That is a great reminder, because, yes, those category there is no IT category called out. And if you recall that slide, it was you know, the categories are equipment, supplies, advisory, and assistant services. IT is embedded in almost all of those. So, but, typically, we would have a stand alone IT budget. So, you know, pairing those two together usually would give you a good sense of of what's going on. Let's see here. So there was a a question about our feds moving more contracts to GSA schedules and GWACs given Trump's executive order. The answer is, they're planning to. They're starting to. They've taken, it's been a long road on that. They're still kind of sifting through all the contracts that they have responsibility for reconciling and, you know, so they spent the better part of a year just trying to learn what's what and and the landscape of things. I think on the surface, though, we've already seen that there was a push for GSA even before the executive order to push, to motivate agencies to use GSA schedules more and to use, those best in class and top tier contracts under the category management initiatives. So this executive board really just kinda threw some gas on that, so to speak. But I think as they are sifting through, we are going to see, more you know, some decisions come out about which contracts. For example, the CIO s p four was canceled, after some analysis. And that was in an interesting position because they had been protested for a long time. But, you know, they're still sifting through that. So I would still be on alert to those GWACs and, the, you know, the top tier agency specific IDIQs. Alright. Let's see. There was a question about to what degree is spending for Golden Dome flowing through MDA versus Space. I actually had some data on that. One sec. So like I said, most of the Golden Dome, at least what is called out as Golden Dome in the defense budget with what we have right now, is in their RDT and E budget. And so looking at that, there's about, let's see. So in 2026, for RDT and E was about $21,000,000,000, and I'd say about half of that was, classified as space programs. So about $10.10 about 10,800,000,000 of that was, Golden Dawn for America for space programs. Missile Defense Agency comparatively was about 4,000,000,000. When we look at what they're trying to do for f y twenty seven, let's see. I see about 4 and a half billion for space programs, and about a little over 7,000,000,000 for missile defense agency. So it it's I think, it's, you know, that positioning is gonna flip a little bit. And then you also have some of that spending, you know, air force, army, DARPA has a little bit. So, you know, it's kind of been spread around, but it looks like, about 7,000,000,000 for MDA for that and RDT and E. Keep in mind that out of the seven point let's say 7,200,000,000, 6,800,000,000 they're banking on coming out of that second reconciliation bill. So take that. It's central for what it's worth that, you know, they're they're really looking to that bill to add funding, at least for m NDA. I think I'm gonna take one more question because we're running up on time. There's a really interesting question that we're watching around if agencies are canceling all previous eight a set aside contracts. And if you've been watching kind of all of that stuff roll out, the short answer is no. There's some things in the the FAR overhaul that basically said that, agents that agencies that have ADA contracts, if they wanna recompete, if it's going to go to another type of set set aside, that that they can do that. So we I think for sure there's that scenario where they can transition a contract or recompete of an eight a contract to HUBZone or, you know, some other set aside. And and but then, you know, contractors have a lot of discretion with the overhaul on how they want to navigate that. But we have not seen a kinda clear pattern of contracts being canceled. But I would say that there's probably evaluations coming, as things are, you know, coming up on their expiration date. So so I think that's all the time that we have. Thank you again for joining, and and for your questions and all that, and I appreciate you, spend some time with this. So, Alex, I'll turn it back over to you. Thank you, Denise. Before we officially conclude, just a quick reminder that you will receive the on demand recording of today's webinar via email within twenty four hours. If you still have a question and you are a GovWinIQ customer, please, you can submit a research ticket at any time, and we can get back to you on that. And with that, I'd like to thank you again for joining today, and please visit deltech.com for any more upcoming Deltek events. Thank you.