Name: Speed or Control Is Not a Choice: What the 2026 Clarity Data Reveals About Winning in GovCon
Uploaded: 2026-05-14T16:30:54.048Z
Duration: 59 min 52 s
Description: Speed or Control Is Not a Choice: What the 2026 Clarity Data Reveals About Winning in GovCon

Transcript for "Speed or Control Is Not a Choice: What the 2026 Clarity Data Reveals About Winning in GovCon": Hello, everyone. Welcome to today's presentation. I am Reagan Ridock. I am the senior director of product marketing for our GovCon solutions at Deltek. And before we get into the good stuff, just wanted to, let all of you guys know while you're joining, a few housekeeping notes. For the best webinar experience, we do suggest that you use Google Chrome. If you do have a question during our presentation, please type that into the q and a box during at any time during the presentation. We're going to get those questions answered for you at the end. We wanna make sure that we have enough time to get through some of the content before we address any questions. But if there are any questions left unanswered at the end, we will just be sure we will address them. You will get an answer to your question. We will just do those offline following the presentation. So, also another call out for you is on, your screen. You will see that there is a resources or a docs tab, right, where you can download the presentation slides. You can also download the report or some other, applicable assets that might be of interest to you. You will also receive the on demand recording of today's webinar via email within the next twenty four hours after the webinar ends. So I think that's enough for housekeeping right now. Looks like we've got a good group here for today, so let's get started. Alright. So speed or control? It's no longer a choice. That is the title of today's session, and it is not a question. It is a statement. For years, gov confers have been might making that quiet trade off. Right? Move fast or stay in control. Choose your pursuit velocity, choose your compliance or choose your compliance posture. Choose growth or choose defensibility. What the 2026 clarity report data is telling us is that trade off is no longer available to you. You've gotta do both at the same time and the market is demanding it. The firms that can't deliver both at the same time are the ones that are already starting to show a few cracks, right? So over the next hour, we are going to make sure that you have a clear picture of where the market is actually now. Not an abstract where we're going kinda situation. Exactly where the market is now because we pulled the market and they told us exactly what's going on, why performance is breaking down, and how some firms are thriving within this kind of a an environment. So, let's talk about what's in the report and, dig in to some of the good stuff. Alright. So as previously mentioned, I'm Reagan Ridock. I am the senior director of product marketing here at Deltek. I'm gonna be your host, and I will follow-up at the end with the q and a. But the real reason you are here today is because joining me today, we have Kevin Plexico, who is our senior VP of information solutions here at Deltek. He leads our GovWin team. It is the industry's leading government market intelligence platform, GovWinIQ. And then the GovWin team is our largest team of analysts focused on the GovCon industry. He's recognized as one of the top 100 most influential leaders in government contracting, so we welcome Kevin. And then Denise Peterson, who is our VP of Federal Market Analysis here at Deltek. Now Denise Denise leads that analyst team of GovWin, strategic research, you know, federal budget spending, market trends, stuff like that. She has been collaborating on this report and this benchmark study for years, and there is genuinely nobody in this industry who knows this data better than she does. So, Denise, we're glad to have you too. So between the two of them, we are gonna cover a lot of ground, but we promise to keep it focused and useful for your time. Thank you for spending your time for the next hour with us, And thank you, Denise and Kevin, for being with us as well. So before we get into the findings, it's important to just say where the data comes from. Right? Because you wanna trust that we know what we're talking about. This is the seventeenth annual government contracting industry study. This year, we talked to 917 government contractors. They were surveyed across almost 200 questions covering every major function of the government contracting life cycle, business development, finance, project and risk management, contract management and procurement, estimating and pricing, HR, manufacturing, all the good stuff. Right? This shows that this is a cross refer or a cross functional view of this industry. So this report is giving us, a comprehensive idea of what the industry is really dealing with right now. And to add just a little bit of a cherry on top is we've also incorporated 32 industry influencer voices, which really adds that layer of real world context to the quantitative data. And because we've been doing this for seventeen years, we're also gonna bring in those insights of year over year trends, and we know what structural and what might just be noise because of, you know, certain events. So most importantly, you are going to hear from us throughout this session. We're gonna reference high performers or top performers. That's something that we've been able to distill in our report and our survey to be able to give you some better insights on, you know, see, this is what the top 10% of firms are doing. That's not directional. That's based on this benchmark data, and that's something you can tangibly use leaving this meeting to go, you know, improve and bring value to your own firms. So, just a quick before I hand the mic over, I did mention that we participated or we surveyed 917 government contractors this year over 200 questions. That is a significant sample, okay? And it's genuinely cross functional as you can see here. No single function of respondent dominates. I think we've got a really nicely balanced and intentional survey that gives us a real full life cycle picture. And then when it comes to roles, that's important too. You know, these are the people making the decisions for their firms, right? This is not a practitioner survey. This is the people that are making the decisions on how their firms compete and make profits, right? So when they say something's a challenge, you can trust them. And as you can see as well, the company size spans the gamut as well. So we're not just here talking about what the primes are dealing with, right? We are here talking about everyone big and small across the whole market. Okay. So with that, let's get into it. I'm gonna hand the mic over to Kevin. He's gonna take us into what the market conditions are actually telling us. Thanks, Reagan. Yes. Really? appreciate everybody's time today, Reagan. Thanks for the introduction. We thought we'd start with just a little bit of the backdrop of the the the survey and and sort of what was going on in the market on the we'll say on the government side during, during the the time we executed the survey. As Reagan mentioned, the survey was conducted in the January, so roughly coincide with the one year anniversary of the the new administration. And that, you know, that really set the table for the year in a lot of different ways. The the the Trump administration came over or came into office, laid down a record number of executive orders, in in many cases, undoing initiatives created and established during the Biden administration, and in other cases, creating new organizations and new structures such as the Doge initiative and and in some cases, undoing some activities that were taking place in areas like, agency for international development. So we've had some significant shifts in spending and disruption to spending streams. The Doge organization, obviously, last year created a lot of, a lot of challenges for a a lot of companies. We we looked at the volume of contracts that were terminated for convenience last year on a run rate basis. That was at least $5,000,000,000 affecting about 7,000 companies that are priming in the market. So, that that basically equates to about 10% of companies getting impacted by, by DOSH in some way, shape, or form, whether it's contracts terminated. And then you weave in the companies that were impacted by, we'll say, the, the cuts in the agency for international development, department of education. We saw significant reductions in and then, then we also saw a lot of uncertainty around appropriations. Obviously, we have a a split congress, in terms of of, bipartisan involvement. Obviously, the house and senate are controlled by, by the Republican Party, but with a razor razor thin margins and and in the senate have to break the filibuster in most cases to get, to get appropriations through. So we had a record government shutdown, record length, creating a lot of uncertainty, multiple continuing resolutions, and just recently got the, the DHS appropriations done for the rest of the year. And we also saw a lot of changes in terms of, acquisition reforms and changes to small business policies and and initiative. We saw the unveiling of the, the FAR overhaul and, essentially, the rewrite and streamlining of, the entire, library of FAR parts. Those are, are out there in what is called the FAR overhaul, site where you can see the the various revisions. And many agencies, even though they're not finalized and through the rulemaking process, have already, adopted those those FAR clauses in the form of what they call class deviations. And we've also seen just recently pushes by the administration to, to move government spending to, adopt fixed price contracting, commercial products first and solutions first. So lots of activity, lots of changes, and certainly lots of disruption to the market, and all that really sort of serves as the backdrop for, for the environment that we're in. So the environment clearly has shifted dramatically. While I think last year, we did see growth in the market, it was very uneven. We we saw a record number of companies not growing in the market. When we looked at the balance of companies that are prime prime contractors in the market, on average over the last fifteen years, that represent about represents about 45 to 50% of companies that are growing in in any given year. This past year, that dropped to a a fifteen year year low of only 40% of the companies reported growth. Another way to look at that, a glass glass half empty, view is that 60% of the companies in the market did not grow. And, and that's a significant change from, from the the more sort of consistency that we've seen in the market. So as we, as we pull the, the the the people that participated in the survey, growth expectations remain. Companies are still expecting a good year for 2026. That's a rare company that expects contraction, but profitability is down. We saw profitability decline by about three percentage points, from prior year, and so there's a lot of cost pressure and cost, impact on companies from labor costs, the cost of compliance, the cost of c m m, CMMC, for example. Those are all having an impact on companies and their compliance, requirements. I think, unfortunately, for for, for many, what you might have viewed the FAR overhaul as a streamlining activity, I think, frankly, is a streamlining of the FAR from the view of of government, reducing the the regulatory burden, really giving more control and and, latitude to the contracting officials and acquisition professionals to make decisions about what approaches are best for them, and their agency and their situation. Unfortunately, what that means is not necessarily streamlined acquisition regulations, for the contracting community. We still see the same essentially, same compliance requirements with some puts and takes here and there, impacting the industry. And in some cases, those compliance requirements have real cost, like like in the areas of, of cybersecurity. And then AI adoption has skyrocketed. Last year when we did our survey, just 45% of the companies had reported that they had adopted AI in their business. That has grown to 90% of companies, yet many of them are over their skis in terms of how they're approaching this. And I think just 5% reported that they have the necessary governance in place to manage the AI that they're using. So so, clearly, people are making use of AI across firms and across their various functions, but many companies feel like they don't have the right governance processes in place to make sure they're using it appropriately. And so that's sort of the the the backdrop for the environment and how companies are thinking about the market. I then wanted to shift to some of the key themes that we see in the data this year. Reagan mentioned this. This is front and center in the, in the title, speed versus control. It is a balancing act. I think the administration and the changes that they're making are are really demanding speed. And the defense department, they're they're asking for solutions quicker, and willing to compromise completeness for, for, for, capability quicker. We're also seeing with the the shifts to things like IDIQ contracts and, the administration pushing even more adoption of IDIQs and best in class contracts, as well as the military leaning in on, other transaction authorities, which allow defense acquisitions to to circumvent traditional federal acquisition regulations to to move quicker. And so that's putting pressure on contractors to make quicker decisions, to to really figure out how do they get into these opportunities early when there is, in in many cases, diminishing insight on where they're appearing. Put it's putting pressure on your pricing, as we see the administration pushing agencies to adopt fixed prices that, clearly puts more burden on the contractors to take on more risk. It does give opportunity for additional profit, but, you need to really understand your cost structure to make sure that those fixed prices you're putting out there, you can stand behind them. Because if you're if you're wrong, you bear the profitability impact, versus the government, which is a big change. Given the major pivot that we're seeing in spending from, some civilian agencies, again, we talked about, HHS and education and agency for international development, just to name a few of the civilian agencies that had cuts last year. Looking at the Trump budget, there's more cuts that are called for. Obviously, appropriators have a say in that. But the biggest change I think we've seen is the major pivot to defense and DHS spending. Immigration enforcement with the one big beautiful bill, got a multibillion dollar investment that's a a multi year investment. The the the president's request for 2027 for the, defense budget is a new record, $1,500,000,000,000. That's a combination of a over $1,000,000,000,000 base budget request, with an additional 350 doll $50,000,000,000 reconciliation request. The key thing to note about that $350,000,000,000 reconciliation request is it would not, not require the the senate to to to get through the filibuster. That could be passed by simple majority, and that's what the administration is banking on with that, with that move. So there's a major shift in spending from, from many civilian agencies to areas like DHS, law enforcement, and defense. And so diversification and companies thinking about how do we pivot to some of these faster growth streams is another major, major change that we've seen in the themes that this for this year. Compliance is another one. We we talk about, increased competition, and I think the the key message there is the competition is getting more sophisticated, and compliance is becoming a lever, not as something that the government's requiring you to do. It is sort of a begrudged task that you have to do to do business with the government. It's really becoming a a competitive differentiator, and those companies that are willing to invest in cybersecurity compliance, and cost accounting systems and business systems that, that separate you and differentiate you from from other companies in the market really gives you a competitive, competitive advantage. And, of course, AI AI adoption, as I mentioned, is is nearly universal. 90% of companies reported using AI, but only 5% are reporting that they're mature in their governance. So that is a a clear, red flag for companies. You wanna be using AI. It's it's a huge advantage in driving efficiencies and effectiveness in your organization, but misuse can really lead to some significant mistakes. If you don't trust the data that your AI decision making is relying on, that can be a major problem. We've seen that with hallucination in in AI utilization. So you don't have to look far from the front page news to see examples of that showing up in, courtrooms around the country and and even in news organizations, miss, miss citing data. So I think that's the key challenge for many is when you're leaning in on AI, it has to be using data that you trust, and it has to have a process for verifying the information that's generated, by the organization and by people in the organization as part of that. And then integrating systems. I think one of the things that showed up, profoundly is connecting systems internally to make sure that you've got line of sight on your project profitability, your costs, your cost structure, how pricing changes and cost changes might impact your profitability, and how you can manage those risks that are associated with that and making sure that your systems are connected and audit ready as you, as you're embarking on embarking on your growth strategies for the year ahead. We talked about market conditions already a little bit. I don't want to repeat the market conditions, but it has created some significant market challenges that are worth mentioning. One, rising labor costs, despite the economic challenges that we've had or at least, things that we thought would have an impact on on the economy. Employment levels are still pretty, in pretty good, pretty good state, and as a result, there's still a real war for talent in this industry, fighting for capable resources, talent that can differentiate you and your proposals, as well as predictability in your cost of goods. Obviously, the the tariff of people that we've seen this past year has created a lot of uncertainty around your cost structure, and, obviously, the the the fuel costs and and oil costs that we're seeing now with the, the the activities in Iran are also creating havoc in your in the predictability of your cost structures. We're seeing contract consolidation. We actually saw consolidation accelerate this past year. It had been on a a two year percentage decline in the number of unique primes this past year in '25. It accelerated to 4%. So there's fewer prime contractors and fewer prime contract opportunities that are available, which is what's really driving that increase in competition. And we'll talk about about more what that means, in just a moment. So how are companies responding? One, front and center cost is a major, concern. Companies are looking at their cost structures and being laser focused on where can we drive efficiencies and where can we drive accuracy of our existing business processes so that we have better insight and better in, data to rely on. Changing our pricing strategies. How do we manage our our pricing in an unpredictable environment and make sure that that proposal that were submitted, that the government's asking us to lock in prices for a five year period, is something that we can really stand behind and manage from a, from a from a, a profitability point of view. And I think one of the areas that companies are are leaning into is how can we use AI to help mitigate risk and automate capabilities. And then, obviously, investing in automation goes right along right alongside that. And then as they look for growth, diversification. How do we find more growth opportunities when we're maybe stuck in in some agencies that that that clearly don't have a path to growth or at least are gonna be facing flat flat budgets at a minimum as the years, in the years ahead, at least for the next three years. So let's switch gears and talk about what we're seeing around, sort of around the organization and around the various business functions. I'm gonna kick it off with business development, and then I'm gonna turn it over to Denise to take you through a few other business functions, and then I'll I'll pick it back up as we work our way from business development, finance, HR, IT, manufacturing, etcetera. So let's talk first about business development. You know, we hear a lot about the, the challenge of competition. The number one challenge companies mentioned this past year was increasing competition, but that that is such a generic description. What does it mean to have increased competition? Because frankly, there's fewer competitors, that, that you're running into, at least on the prime competition side. I think what that really means is that the competition is a lot more sophisticated. They, they're able to meet the unique compliance requirements that, that many of these large scale IDIQ contracts essentially demand. If you look at any of the major, IDIQs, for example, that GSA puts out, front and center, you'll notice you'll get about 15 to 20 percentage of the points just by having, approved accounting systems, approved business systems, ISO certifications, CMMI certifications. And now with the with CMMC, clearly, the defense department is, is embracing CMMC as a lever to make sure that their contractors are managing the data that they're touching that's government data, effectively. And so so I think that's what we what we mean when we talk about increased competition is the sophistication level of the competition. Another challenge that we see is opportunity visibility as as, agencies move to adopt things like OTAs that don't go through traditional federal acquisition regulations or IDIQs that don't generally get announced in in, sites like sam.gov. It's a challenge for, for companies to have visibility on the opportunities that are coming out, and that's a big area of challenge that we noticed. I think also, this market really hasn't fully recovered from, from the COVID environment when so many government workers were were not going to industry events and not in office. It's just not as easy for the business development functions to to get face to face time, with the government decision makers to establish those relationships and help influence those procurements the way, the way that they used to. We're also seeing, obviously, with the with the new administration, brings new leadership. We saw a new leadership. We saw a lot of agency reorganizations, some major reorganizations in the army with the the change from the PEO to the PAO, changes in structure in organizations like education and HHS and who has the power over IT investments. So, just reorganizing and reorienting reorienting your business development staffs to really understand the structure of the agency and who's influencing those decisions and what is their decision making authority going forward. So what are what are contractors doing about it? We did see an increase. You're gonna hear about this in the finance section, increase in business development, and BNP investments. So clearly, they're investing more in, in business development to get in front of opportunities earlier. Identifying those opportunities early is really critical to to winning a deal. They always say if you find out about an opportunity first on Sam, you're way behind the competition, and that that that is really a true, a true statement. I've seen that in my career many, many times that sophisticated business development organizations are, are meeting with those decision makers and those program offices, well in advance of a procurement so that they can help shape, how does that procurement come about and and what types of technologies and capabilities, are gonna go into that. And then improving and strengthening your sales and business development processes. And I think this is something that's that's also coinciding with the adoption of AI. AI really has a profound impact on the capture and proposal management functions of the business development team. It can obviously be a real accelerator and efficiency driver in your in your bid and proposal costs. And so companies are looking at their sales and business development processes to see how can AI be woven into those processes to make them more effective. And then building relationships for nontraditional contracting. We've heard about commercial solutions offerings and other transaction authority. And while those are mainly tools used in agencies like DOD and DHS, they're not available for every organization. The fact that the DOD, with its growth and its prioritization with the secretary of defense saying that our preferred mechanism for defense systems is OTAs is a profound statement, and that's something that every company needs to understand. How do OTAs work? How do you, participate in them? What's the role of the consortiums that, that engage in those? So this is, this is all activity that's driving investment in, in business development and I think sharpening everybody's tools to make sure that they're, they're doing their business development as effectively as possible. So I'm gonna go ahead and turn it over to Denise to take you through estimating and pricing. Denise, over to you. Alright. Thanks, Kevin. So with estimating and pricing, I think when we look back at the cost scrutiny that was ushered in, with the new administration, the importance of getting pricing right for both compliance and to be competitive has grown exponentially. The top challenges here remain pretty consistent, you know, developing competitive pricing strategies, accurate cost estimation, and the consequences of getting that wrong are, you know, obviously have escalated. Pricing lacking auditability or defensibility is now the number one reason why proposals fail. And, you know, this is that's tied with, you know, inadequate proposal quality and technical deficiencies and things like that. So So there's a lot more pressure on getting the pricing right. Not a lot of booger room there. The certified cost and pricing date environment is also expanding. So over over a third of our respondents now bid on 11 or more of those contracts with those requirements. Again, explaining the importance of estimating, you know, the accuracy part has always been there, but, you know, the defensibility and being able to trace document and defend how you arrived at a price matters as much as the price itself. So, for some organizations, you know, it's it's all about tooling. There's this gap between kind of spreadsheet based pricing and kind of governed pricing workflows. That difference is not theoretical. It it really does, drive win rates and post award risk. But a lot of folks over half are still using, excel for pricing workflows, despite, you know, that defensibility being in an issue. And I wanna call out, you know, top performers. Nearly 70% are looking at that kind of tooling, maturity and using formal estimating and pricing tools, which I think makes sense in this environment. So they integrated pricing tools with their ERPs. Again, a positive side of the ledger, a lot have taken that integration step and the data shows that it matters. You know, firms that are integrating with their ERP report pretty high confidence in producing winning bids, so it's been a a good investment making integration kind of more than nice to have. It's kind of a confidence multiplier. So what how they're responding, you know, most 78% are looking to improve their existing processes first. 58% are kinda reexamining their pricing strategies altogether. Also looking at technology to help. So 40% investing automation, implementing AI for, pricing to address that estimate accuracy and to help kinda model different what if scenarios. And the top performer data makes this case clearly, as I mentioned with the formal estimating tools. Compare that to about 57% overall are using those tools. Top performers, about 90% of them are integrating their, pricing with their ERP versus 78% of kind of the overall sample. Okay. So now getting into, contract management and procurement. So that really sits at the intersection of every pressure facing con organizations this year. There's rising compliance requirements, contract vehicles are being consolidated, there's supply chain, you know, instability and a technology landscape that is moving faster than most organizations can absorb. So the top challenges really revolve around complexity, right, so ensuring that, you know, compliance to contract clauses, managing negotiations, tracking resources and budget, also subcontractor management, and risk there is a particular concern. Less than 10% of our respondents had full confidence in their ability to verify subcontractor compliance. And by the way, 66% of our folks, said they require CMMC compliance from their subs. So this represents quite a risk that transparency there. Supply chain challenges also top the list of challenges. You know, cost of goods, talent, supply chain security. Cost of goods is even more heightened, obviously, when you start looking at small businesses. We also have tariff volatility to kind of that is compounding that and adding another layer of unpredictability, and, you know, issues coming out of the geopolitical environment. What makes it harder is fragmentation. So, again, spreadsheets remain the most common, tool for managing contracts, especially for smaller companies. 55% use some kind of content management software, but all this means that contract data is not always centralized in a single system for most organizations. And so there's this reliance on some disconnected tools that is often at the the root cause of visibility and control challenges that they're reporting. We we have more than 60% saying they're confident in how in their ability to kind of interpret and track complex requirements. And interestingly, that confidence is higher about 70% among small businesses, which should be fair, maybe pursuing smaller contrast, less complex work. But overall, that means that nearly four and ten are not highly confident in their ability to kind of break down these contracts, making sure that they're understanding all the requirements and what the comp, compliance, requirements are. And that is compounded by the fact that a lot of those compliance obligations continue to change because of policy that was initiated last year, but are now kind of we're seeing the rubber meet the roll road this year. So it'll be interesting, to see how contractors kind of deal with that operational risk. So a little over third said that they verified their subcontractor compliance with spreadsheets. You know, firms relying on manual processes are at risk for mistakes and therefore, you know, all of these things impacting CPARS scores, which obviously impact future competitiveness. So the way a lot of these companies are responding is investing across several fronts. So addressing supply chain issues with, you know, new tools and processes, identifying kind of new domestic vendors. So which is really spurred by kind of the Buy American, policy out of the administration. You know 44% are trying to optimize their business processes and a similar amount are prioritizing contract management technology and tools including AI, and they're using it to, you know, help improve summarizing and classifying contracts, extracting data, and flagging compliance risk. And, you know, 38% are saying, hey. We need to increase our, stringency in managing and evaluating subcontractors. Top performers, that distinction matters here. About 41% say they're very confident in being able to kind of track all the compliance within at the prime level as well as down to the subcontractor level. That's about 34% for the overall group. And part of that difference, I think, traces directly back to, a lot of those top performers have ERP integrated vendor management systems, versus relying too heavily on manual spreadsheets. When you look at the data, only 9% across the board say that they're fully confident in this area, which tells us that there's, you know, quite a bit of room to to grow there. Alright. So now getting into human capital management. You know, this is interesting because when we look at overall market conditions, we look at any of the roles that we talk about here, talent rises to the top of of issues for for everyone. So not just in terms of the role, but in terms of just enterprise wide trying to figure out how to allocate resources. So labor is the number one anticipated cost driver heading into, you know, working through this year. Talent shortages rank as the top business risk and workforce issues, directly impacting profit profitability was noted for the majority of organizations. So, about seven out of 10 firms say that, workforce management issues are directly impacting their bottom line, in either a moderate or a significant HR issue, it's a business performance issue that's touching project delivery, client satisfaction, and ultimately, you know, margins. So the challenge is multidimensional. It's about finding it's not just about finding people. Even when the talent is available, they're struggling to deploy them effectively. So utilization gaps and, like, skills matching, time tracking, resource allocation is kinda creating this friction that can erode, project margins and delivery timelines. You know, we still again, with the spreadsheets, over a third are relying on spreadsheets or manual methods for workforce tracking, which, you know, are useful but can limit visibility and forecasting accuracy across projects. We asked how long does it take to fill a position? So the average time was four to six days. So over six weeks per hire and that's the average. Right? When you start getting into the specialized people specialized, people that need clearances or certain credentials take longer. And so, you know, for organization staffing against active contract requirements, every day of vacancy is a day of lost build, billability, basically. So speed to hire directly impacts revenues and delivery. Over half have taken the integration steps, so they're tying HCM to their ERP systems. They're managing workforce data. A lot of them managing through disconnected systems. Right? So the fix for that is, like, figuring out how do we integrate these so we have a bigger, cross project, view, and trying to use do kind of integrate that so they can see better forecasting, resource needs, tracking utilization in real time, connecting workforce decisions to, you know, project and financial outcomes. Small businesses are hanging in there. They have a higher retention rate than a lot of the mid and large sized businesses. So not much, 78% compared to 75% for mid size and 67% for large businesses. But they're competing with those companies for talent. Talent really is locked into compensation and remote work flexibility. So they are all these companies are trying to shift from this reactive hiring to more strategic workforce management. So over 70% are investing in time tracking systems with ERP integration. They are investing in or or at least reevaluating the areas that attract and retain employees. Right? So development opportunities, learning opportunities, mentorship, upskilling, also looking at compensation and benefits, and, creating or expanding career development pathways. So however they can hang on to the institutional knowledge or attract, more knowledge in house. Also looking at processes. So they're prioritizing performance management solutions over the well, almost 30% are using AI to streamline onboarding and the new hire processes. And a side note here, AI seems to have the strongest traction in, HCM. 98% of respondents are planning to use it in 2026, making it one of the highest adoption areas for AI, likely because, you know, I think the use cases are operational, repeatable, somewhat lower risk than, say, in finance or pricing. Top performers are leaning into career development with over 60% saying that's their number one initiative. You know, kind of recognizing that developing and retaining existing talent consistently outperforms having these constant, you know, recruitment cycles. And now let's get into project management and and risk. This, you know, these responses reflected a paradox that I think should kind of concern leaders, GovCon leaders. So organizations said they recognize the importance of risk management. You know project execution is rated as the number one risk domain by thirty eight percent of respondents, but risk analysis is actually concentrated at the front end of that project life cycle. And it kinda drops off during execution, which is exactly when risk events are most likely to occur. Only 9% said that they manage risk continuously across the full life cycle, which is kind of concerning. Right? It it despite project execution being the number one domain, you know, barely one in 10 are maintaining some kind of risk management discipline from proposal through delivery, and it holds true across business size sizes. It you know, our data shows that firms that do conduct risk management during execution are measurably more likely to deliver on schedule and on budget. Some of the challenges here, that are are compound the problem. Forecasting gaps, disconnected systems, insufficient project controls, and staff turnover, all contributing to kind of inaccurate, you know, timelines, cost forecasting, leading to nearly one third of respondents reporting projects going over budget. And I'll add that it's about the same amount set that they were going over schedule as well. So in a market where margins are compressed, lots of scrutiny, budget overruns carry consequences that extend beyond that individual project. Right? It affects your CPARS scores, indirect rates, competitiveness, all of that. So that's quite interesting to see. You know, managing changes is is a persistent challenge. Tool fragmentation, again, that's another thing we're seeing. So you know contractors are trying to look at risk process and technology here. So using project level qualitative risk, management, mitigating project risk, trying to really looking at inefficiencies in the delivery process. They're looking at, business processes, investing in AI for, like, scenario modeling and predictive analytics. And top performers are kind of have cornered this a bit. So 40% of them said their budgets are excuse me. Their projects came in under budget and under schedule, in 2025. And then that's much lower. It's about 20% for the overall benchmark. So that difference is, you know, you know, traces back to integration and continuous risk management and kind of a bit more formalization in the project, controls. And I think here okay I've got one more before I hand it over to Kevin. Manufacturing. So the priorities here shifted a bit. If we look back over, Clarity history, supply chain resilience and domestic sourcing mandates overtook operational costs as a number one concern this year and that's a direct reflection of kind of a lot of the policy stuff that was coming out of the administration, kind of reshaping how manufacturers plan, resource, and and and produce and and also potentially cost savings, from automation. Quality traceability, you know, audit grade documentation and kind of tracking the genealogy of parts, is a major, challenge. And, you know, things like CMMC, requirements, Buy American, you know, defrost policy. There's a lot converging to reshape operations. So it's kind of raising compliance from what is the back office function for many to an operational driver, and cost to quality has risen as a number one KPI for a lot of these manufacturing companies. So, you know, there's somewhat of a shift from measuring throughput to measuring compliance and accountability outcomes and making that, that balance. We also have some issues, but they're looking at system integration, automation, workforce development, and upscaling. So those are kind of the the areas that, manufacturers are are looking at, and the top performers as well I mentioned. Okay. Let me, kick it over kick it back over to you. Thanks, Denise. Yeah. We have two more functions to work through. One, obviously, the, one of the most important oops. I think I skipped a slide. Sorry. There we go. Finance and and and sort of financial operations. I always view the the finance organization sort of the heart, as it it draws revenue in and and pumps expense out. And, one of the challenges as we talked about, this year is really a focus on costs. Reducing costs is has displaced profitability is the number one finance challenge, which is, I think, really goes hand in hand. I mean, there's a sort of hard to do one without the other. And, clearly, finance teams are focusing on how do we how do we manage our costs when we know our costs are going up. As you can see here from the margin compression, bullet, bid and proposal costs are are on the rise. Companies are investing more in BNP, which is is not unusual when there's this kind of pivot that's taking place in the market and they need to invest more in, in business development to get into opportunities early, shape them, and make sure that their proposal operations and business development function is is operating in a way that's gonna allow them to differentiate. But we're also seeing increasing costs around fringe and overhead, that is, that is challenging organizations and their profitability, especially in their cost structures. So, and then CMMC is another one. Right? That's your cost of compliance. We we ask companies what they're spending on, CMMC compliance. 46% said they expect to spend a 100 to 250 k, last year on it. And as we look ahead, 37% expect to to spend over 100 k in the next three years. So this is essentially a new permanent cost that's going into your business that has to be maintained to retain that. And and if you're a prime, you're passing it down to your subs if they have any kind of, of touch points with that same controlled, unclassified, or sensitive data that you have. So, I I promise this was not a plant. We asked companies the that, and their finance organizations where their top initiatives. While we are from Deltek, I promise we did not plant leverage an ERP system to manage accounting and invoicing. This is, organically, generated, but, clearly, companies are looking at their financial management system and their ERP system to really get control and visibility into their cost so that they can manage those costs more effectively. And then you'll see other other ways that I think are more mitigation approaches, hiring third parties to make sure that your audit support and your audit ready in case the government comes in. You don't wanna find out from a government auditor that you weren't doing things properly. You'd rather find out from somebody that you're paying to do your audits first. Leveraging more analytics and business intelligence, I think this goes hand in hand with AI as many of those tools are are embracing AI as a way of giving you more readout reporting on that that data versus leaving it to business users to interpret that data themselves. And I think once you get past the ERP system, there's a lot of initiatives that, that are pretty common across the organization, from a finance point of view that they're taking to to try to get better visibility and control over their cost structures. And the IT function, clearly, this is the organization that's, on the front line of things like CMMC, but it's also on the front line of things like AI adoption. And this is the first year, I think, that I've been involved in Clarity that I've seen AI bubble up over cybersecurity as the number one concern for, for, for for companies and their IT functions. So so clearly, AI has has taken on a a number one, frontline task for, for companies to think about how do we apply AI, not only effectively and make sure that we're doing doing in a secure way, but also doing it in a way that we can reduce the cost of our IT operations and look at ways that IT can help embed AI into the various business functions to help those business functions, find more cost effectiveness. So you can see that on the right hand side in terms of how contractors are responding, clearly implementing AI, implementing cybersecurity and security monitoring, and then, of course, things like using AI to mitigate your help, help desk and IT support costs clearly are front of mind for, for companies that are trying to manage and and control their their IT support costs. From, from an AI challenge, this is the first year where we really had a devoted section to AI. I won't go through these individually because I think the themes are the same across. It really boils down to trust and confidence and the AI utilization of the people in your firm as we we talked about earlier. Virtual ever virtually every company is using AI, but that doesn't mean they're comfortable with how they're using it, and they don't have good visibility and governance on how the people that are using AI in the company are doing so. So as you look across the functions, you have concerns about inaccuracies and hallucination, generating cost structures, pricing information that might not be grounded in ground truth, and trusting the data that you're leveraging AI to use, I think is a key key component. So it doesn't drift off into the the large language model's own knowledge. You want it to really be relying on the knowledge of your firm and make sure that the firm knowledge that you have is accurate and reliable as well to make sure that your firm is using data that's, grounded in truth so that AI can generate accurate results for, for the teams that are making use of it. Obviously, one of the natural questions that we get, with clarity is is what are firms that are performing well doing differently? And we wanted to highlight some of the patterns. So some of this is is sort of self self fulfilling. When we look at top performers, we look at firms that have higher profitability, firms that are growing faster, firms that, that feel good about their their outlook. And as we see what we, the patterns of top performers, some of them, highlight integrated systems across the life cycle. They feel good about their business systems and that their business systems are working well together. They feel better about their pricing confidence. They they feel like they can bid that fixed price contract confidently. They have faster cycle times by having efficient business systems. They can invoice faster. They can collect money faster. They can generate revenue faster and collect on that revenue faster as well. And they also have better win rates, though I will say, win rates is one of those, those factors that, that you want it to be high, but you don't want it to be too high. You don't wanna be, not bidding on opportunities that you could win because you're so focused on having a high win rate. Sometimes you need to take some chances. You need to take some risks, but they need to be calculated. But overall, firms that, that are high performers have higher win rates. And what's everybody else doing? Disconnected workflows, systems that aren't working efficiently together, lower confidence on the numbers that they see. You might see numbers from, from one team that you that you give the side eye to and wanna make sure that you've got finance teams giving you reliable data, but sometimes even the finance teams are, are working hard to pull that data together on an ad hoc basis versus having it handy and ready. And then higher operational costs. Clearly, if you're not working efficiently, you're not working effectively, and your operational costs and your operational risk can go hand in hand. And those are challenges for companies that are that are looking to have more rigor and more process and more reliability in their business functions. So where should you focus? What are some of the areas that, that companies can take steps to be more effective? One in your business development shops, really focusing on early, visibility into opportunities, and this does take manpower. It does take, drawing on resources that can help you. Obviously, selfishly, in in GovWind, I manage our research organization. We put a lot of emphasis in our research team on helping companies find opportunities earlier in that business development cycle, qualifying whether recompetes are being, conducted, on a contract that's expiring long before it gets into the procurement shop so you have a chance to get in there early. Connecting your pricing, finance, and delivery teams together so that you can, price confidently and you can, manage delivery confidently and that you know that what you've, what you've put in front of a company or an agency is a proposal is a proposal you can stand behind. Really looking at ways to implement AI governance now, and we we can see that it's being used. But if you don't have control over its utilization, this is a great example of speed over control. If you're moving too too fast, it's easy to make mistakes and cost real money to your business in a proposal or taking risk in your finance organization by not having trusted data. And treating compliance as a front end differentiator, not as a, again, a sort of begrudged task that you have to do in this market, but something that really can differentiate you from companies that maybe aren't willing to make those same investments across the organization to differentiate you into some of those large IDIQ contracts that can position you for contract opportunities and task order opportunities for years to come. Alright. Well, with that, I'm gonna turn it back over to Reagan to, to wrap up for us, and then we'll we'll go ahead from there and jump into q and a. So, Reagan, back over to you. Yeah. Thanks. So, Kevin, Denise, that was a lot of ground that you covered today. But I think the big takeaway, right, is that the firms that are winning are figuring out how to move fast and stay in control at the same time. Right? So what do you as the audience do with that? Well, step one is to download the full report. You've got a button on your screen where you can download the full report, read it, share it with your leadership team. Number two, at the back of the report is a scorecard that you can use to benchmark yourself and your firm. So find out where you stand against those top performers and find out where that comparison is because that's where that real insight is gonna be to help you do step three and step four, which is identify your exposure. Right? Where are you running on disconnected systems? Where is the exposure? Where is the risk happening? Where are you using AI without governance? Stuff like that. You need to be honest about it to be able to identify it. And then step four, fix it, but don't try to fix everything right out of the gate. Pick one or two things to start with first and start there. So, again, the report is available for you to download right now. At this time, we will jump into some q and a while we have a little bit more time, but we are going to open up a poll to the audience. Okay. And so, everybody, you have time to enter your feelings about this poll. But while you're doing so, since we are, short on time, I'm gonna jump over to the questions that you all sent in before so that we can get a little bit of insight from our experts here. Okay. So, Kevin, Denise, let's start with here's a good one. And both of you guys can chime in on this one as you see fit. But what's gonna be the biggest challenge for GovCons going into 2026 as opposed to how it was last year in 2025? Let's start with Denise. Ladies first. Thanks. For me, I think the biggest challenge is going to be kind of, pivoting. So a lot of what happened last year is kind of volatile as it it felt was just stage setting. It was setting the policy. It was doing the analysis and collecting the data and and all of that. It's this year that all that is going to start, you know, really start to kinda take hold. And I think the hardest thing for companies that are not kind of thinking about this now is going to be pivoting, following the money. Right? If you have to pivot to a different agency, you have to pivot to, leaning harder on fixed price contracts versus, you know, other types of contracts, pivoting from always having custom noncommercial solution to commercial solutions. I think that's gonna be the biggest issue because all of these things from last year are going to kind of be start to become normalized this year, and everyone needs to kinda be prepared and positioned, to diversify and to pivot. What do you think, Kevin? Yeah. I totally agree. The pivot is is huge for companies, especially those that might be stuck in some agencies that are that are slower growth. So that's, that's gonna be critical for companies to find growth. I would give a sec number two second place would would be, AI adoption and and embracing it, in a in a way that brings you confidence that it's being used appropriately, and also woven into your business systems. I think, you know, right now, it's it's still, people largely using the the the the traditional front end interface that the consumers have in terms of cloud and chat g p t, but but embedding that same capability in your business systems and where your business data is is really gonna be, critical for companies to capture the full power of this, whether that's in your proposal, development processes, or your ERPs, or your project management tools, that you have. You you really need to look at how you can embrace AI in a confident way to to make sure it's built on trusted information as well. So true. So true. Okay. Well, since we are coming up on time, we want to be very cognizant of your time today. Thank you for spending the last hour with us. Thank you to Kevin and Denise for bringing this data to life today. Thank you to everyone who joined, asked questions. Like I said, if you sent in any questions, we will answer them. We'll just have to do that offline after, we wrap this up, and you will be getting this recording and the full report link to your inbox within the next twenty four hours. So we hope today gives you something concrete to take back to your team, and we hope you have a great rest of your day. Thank Thank you. you.