Deltek Releases 16th Annual Clarity Government Contracting Study: AI Growth, Compliance Challenges, and Strategy Adjustments for GovCon Leaders
Deltek, a top provider of software and solutions for project-based businesses, has published its 16th annual Clarity Government Contracting Industry Study. The 2025 edition is based on feedback from nearly 900 contractors across various sectors and company sizes in the U.S. and Canada.
This report offers a detailed look at current market conditions, benchmarks, challenges, and strategies influencing government contracting today.
Overview of the 2025 Clarity Study
Government contractors had a strong 2024, with 54% reporting increased government revenue. However, the study points to several emerging challenges that contractors should prepare for in 2025. Political and economic uncertainty in the federal market is rising, putting pressure on contract performance.
Although some performance metrics did not reach the highs of 2022, optimism remains, with 59% of contractors expecting revenue growth this year.
Key Findings from the 2025 Report
- Decline in Contractor Confidence: The Government Contractor Confidence Index dropped 3.5%, marking its lowest level in six years. This reflects growing caution about federal spending and growth possibilities.
- Focus on Efficiency: Rising labor and material costs are top concerns. Improving internal efficiencies is the primary approach firms are using to manage these challenges.
- AI Adoption Increases: Usage of artificial intelligence has jumped to 45% of respondents, a 10-point increase from last year. Contractors use AI to streamline operations and boost business development.
- Small Business Challenges Persist: Many small contractors face slower growth and limited access to federal support programs. Nearly half (46%) are not utilizing federal programs like 8(a), which can help overcome growth barriers. Small businesses also report greater difficulty adopting AI and managing rising labor and compliance costs.
- Compliance Costs Rise: Over half of contractors expect compliance costs to increase due to updated CMMC requirements. Larger firms have already invested around $100K or more, while the Department of Defense estimates that small and medium businesses will also face similar costs to achieve CMMC Level 2 Certification.
- Proactive Business Development Needed: The biggest challenge is identifying opportunities early enough. Top performers, those with the highest new bid win rates, are using AI, proposal automation, and early lead identification to stay competitive.
"Contractors face a complex environment but also have more chances to innovate and grow," said Kevin Plexico, Senior Vice President of Information Solutions at Deltek. "Top firms are adopting AI, strengthening compliance, and refining business development to capture opportunities while controlling risks and costs. Success depends on proactive, data-driven decisions across the business."
The full Deltek Clarity 2025 report is available for download along with an on-demand webinar.
For contractors looking to expand their AI capabilities and improve efficiency, exploring practical AI training courses can provide a competitive edge. Visit Complete AI Training for relevant resources on AI adoption and business automation.
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