Government Contractors NAICS 23, 54, 56, 61, 517, 5182, 7223
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Industry Summary
The 205,500 government contractors in the US sell a wide range of goods and services to agencies of the federal government, state governments, and local governments. Goods range from advanced military jets and weapon systems to office supplies. Services range from complex information systems design to janitorial services and food contracting services. Contract types vary from firm fixed price contracts to cost reimbursement or time and materials contracts.
Qualifying For Procurement Preferences
Contractors will be at a competitive disadvantage in winning federal government business if they do not qualify as a preferred vendor.
Cost Overruns Hurt Profits
Government contractors must possess strong project management skills to successfully manage large, complex projects and avoid cost overruns.
Recent Developments
May 5, 2026 - Trump Order Prohibiting “Racially Discriminatory DEI Activities” Challenged
- A lawsuit has been filed which argues that President Trump’s Executive Order (EO) barring contractors from engaging in “racially discriminatory DEI activities” violates First Amendment free speech and freedom of association rights of federal contractors and exceeds the President’s authority under the Procurement Act. The EO seeks to restrict contractors’ and subcontractors’ diversity, equity, and inclusion (DEI) efforts, imposing numerous restrictions and risks on government contractors and subcontractors, according to the Mondaq business briefing service. The lawsuit seeks to have the EO deemed unconstitutional or otherwise invalid, according to Mondaq.
- President Trump has said that he wants the advanced weapons that the US relies on for military dominance produced more quickly. The president has made military production a priority and has used tariffs as leverage to try to bring back more manufacturing to the US, according to Daily Fly, a Pacific Empire Radio Corporation news site. The US General Accounting Office (GAO) reported in 2025 that "major weapon costs continue to rise as DOD [Department of Defense] struggles to deliver innovative tech quickly." The GAO noted that "DOD plans to invest nearly $2.4 trillion to develop and acquire its costliest weapon programs. But it continues to struggle with delivering timely and effective solutions to the warfighter."
- Several companies are now marketing their products directly to federal government agencies as a way to survive the US Department of Government Efficiency's (DOGE) cost-cutting demands, according to the Axios news service. DOGE is expected to lean more heavily on third-party security vendors to help dismantle longstanding information silos, according to Axios. Axonius, an Israeli cybersecurity startup, told Axios that it has started pitching its product to agencies as a tool that can help them avoid the most severe DOGE audits. Many vendors have increased their lobbying activity in recent months, particularly with Trump-aligned lobbying firms. At least nine security and consulting firms, including Zscaler, Accenture, and Booz Allen Hamilton, have registered with Ballard Partners into 2025, according to congressional lobbying disclosures.
- US government contractor industry sales are forecast to grow at a 3.1% compounded annual rate from 2026 to 2030, slower than the growth of the overall economy.
Industry Revenue
Government Contractors
Industry Structure
Industry size & Structure
The average government contractor generates about $5-6 million in annual revenue.
- The government contractor industry consists of about 205,500 firms that generate $1.1 trillion in annual revenue.
- The federal government is contracted to spend $557.7 billion in FY 2024 on contracts, or 10.4% of the total federal budget. State government contract spending on goods and services is slated at over $558.3 billion.
- There are over 41,600 defense contractors in the US.
- The largest government contractors are Lockheed-Martin, Northrup Grumman, Boeing, SAIC, Raytheon, General Dynamics, Hewlett-Packard, and Booz, Allen & Hamilton.
Industry Forecast
Industry Forecast
Government Contractors Industry Growth
Source: Vertical IQ and Inforum
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