Tracking agency operations through Presidential transitions is always challenging. For those focused on agency spending, FY25 was like flying in Instrument Flight Rules conditions without reliable instruments.
Part of the challenge was practical. For the first time ever, federal agencies operated under a full-year Continuing Resolution (CR) with top-line levels set during the Biden Administration. Within those totals, President Trump, Office of Management and Budget (OMB) Director Vought, the Cabinet, and a Republican-controlled Congress pursued dramatically different spending priorities.
The spending data desert continued through release of President Trump’s FY26 and FY27 Budgets.
Part of that challenge was operational. Delayed action on appropriations meant that OMB databases on current year spending projections were locked before annual appropriations were finalized.
Part of it was procedural. President Trump and Congress prioritized approval of over $365 billion in new 5-year spending in the July 2025 One Big Beautiful Bill Act (OBBBA) focused on the Department of Homeland Security (DHS), the Department of Defense (DOD), the Federal Aviation Administration, the National Aeronautics and Space Administration, and the Department of Energy over the annual appropriations process. OBBBA gave those agencies broad authority over spending and proved to be a major factor in delayed action in finalizing FY26 appropriations.
Part of it was political. As part of OMB Director Vought’s push to assert great executive branch control over spending, federal agencies have been slow to release detailed FY25, FY26, and OBBBA spending data to Congress.
We now have Treasury Department data on FY25 contract obligations.
FY25 contract obligations totaled $792.8 billion including $491.6 billion (62.0%) from DOD and $301.2 billion for Federal Civilian Executive Branch (FCEB) agencies. Despite operating under a full-year CR through FY25 based on FY24 spending levels federal contract obligations increased $37.7 billion (5.0%) in FY25.
The Government Accountability Office (GAO) has done excellent work aggregating and sorting Treasury and USASpending.gov contract obligation data. Chart I aggregates FY25 obligations for Civilian and Defense agencies and highlights contract data for major agencies. A deeper dive into GAO’s analysis is revealing.
Chart I. Source: GAO
CIVILIAN AGENCY ADDRESSABLE MARKET SNAPSHOT
FY25 civilian agency contract obligations included $249 billion (82.6%) for services and $52 billion (17.3%) for products.
The top 5 service categories are Medical/Managed Health Care ($23.6 billion), Building Operations ($18.8 billion), Professional Support/Other ($18.0 billion), IT/Telecom Business Applications and App Development Support ($15.1 billion), and Government Health Insurance Programs ($10.8 billion).
The top 5 product categories are Drugs and Biologicals ($18.4 billion), Medical and Surgical Instruments, Equipment and Supplies ($3.6 billion), IT/Telecom Business Applications Software ($3.2 billion), Precious Metals ($2.1 billion), and Motor Vehicles ($2.0 billion).
DEFENSE ADDRESSABLE MARKET SNAPSHOT
With the Defense Department’s mission, it is no surprise that FY25 contract obligations feature a very different mix between services $238 billion (48.4%) and products $253 billion (51.5%).
The top 5 service categories are Professional, Engineering/Technical support ($25.7 billion), Medical/Managed Care ($14.3 billion), National Defense R&D Services, DOD Military, Experimental Development ($9.2 billion), Professional Support/Other ($9.0 billion), and IT/Telecom Business Applications and App Development Support ($7.6 billion).
The top 5 product categories are Aircraft, Fixed Wing ($41.9 billion), Combat Ships and Landing Vessels ($37.1 billion), Guided Missiles ($20.6 billion), Gas Turbines and Jet Engines, Aircraft and Components ($8.4 billion), and Marine Lifesaving and Diving Equipment ($7.9 billion).
POST-COVID TREND ANALYSIS HIGHLIGHTS
FBIQ analysis typically focuses on five-year spending trends. Because FY21 was an anomaly that included trillions in emergency COVID-19 pandemic-related expenses like the $1.9 trillion American Rescue Plan Act (ARPA), a better comparison is FY22 to FY25 data.
Under budgets set during the Biden Administration (the FY25 full-year CR was based on FY24 top-line levels approved by President Biden), defense contract obligations rose 258% more than civilian agency obligations. That’s a larger difference than we expected.
The likely explanation affects our FY27 outlook. We suspect that a significant portion of FY22 civilian agency contract obligations from all sources is skewed by billions in obligations from ARPA funding for civilian agency activities normally funded through annual appropriations. Expect OBBBA to have a similar impact on FY26 and FY27 contract spending.
Chart II. Source: GAO and FBIQ
FBIQ’S FY26-7 FORECAST
Based on enactment of FY26 appropriations to date that fund civilian agencies in aggregate by over $150 billion above the levels proposed in President Trump’s FY26 Budget, over $350 billion in approved 5-year One Big Beautiful Bill Act funding, roughly $70 billion in 4-year DHS-focused funding in the reconciliation bill moving through Congress, and discussion of a third reconciliation bill that could include $350 billion for DOD, FBIQ’s forecast through FY27 calls for continued growth in the addressable market for federal contractors.
Trump Administration plans to move aggressively to implement OBBBA-approved spending increases for DOD and DHS were affected by delayed actions on FY26 appropriations. As a result, expect billions in planned FY26 obligations to shift into FY27.
While at this stage it appears unlikely that Congress approves President Trump’s full $1.5 trillion defense budget, expect defense contract spending totals in FY26 and FY27 to increase more than total contract spending for civilian agencies.