Government contracting outlook

President Joe Biden signed the fiscal year 2024 National Defense Authorization Act (NDAA) into law in December. It includes provisions to expedite the U.S. Department of Defense (DOD) procurement of goods and services, strengthen the defense supply chain, protect the nation and increase the use of artificial intelligence (AI) to improve data analysis.

Middle market defense contractors must understand the changes in the DOD acquisition landscape and keep up with defense priorities. Having a clear understanding of how the government can acquire their services or products will help contractors win and expedite government procurement.

The United States’ industrial policy includes vertically integrating defense manufacturing by reshoring semiconductor production and investing in research and development to create the technology needed to compete globally, providing the bandwidth, tactical prowess and speed to defend our nation.

As tensions continue to rise between the U.S. and China, and conflicts persist elsewhere in the world, our nation’s leaders are assessing the current state of our military. The technology our defense industrial base provides will be vital in maintaining a competitive military advantage over near-peer threats with greater size and scale.

The government will likely leverage the rapid advancement of artificial intelligence (AI) and further development of unmanned vehicles to accelerate military capacity while improving tactical prowess. Government contractors, in turn, will need to align their strategies and enhance their functional operations to meet the demands of their federal government customers with equal speed and technical advancement. 

Rising interest rates are restricting capital investment and slowing nonorganic growth, which affects the mergers and acquisitions (M&A) and venture capital markets. However, defense technology—and specifically space—is getting a lifeline from the government, which is still investing in critical cutting-edge opportunities.

The newly established Office of Strategic Capital (OSC) is expected to play a pivotal role in providing funding for technology that supports national security and advances space innovation and exploration. The government's involvement in the space and defense sectors is vital due to its interest in protecting national security and outpacing global space competitors.