At noon on January 20, Chief Justice Roberts administered the oath of office for our 47th President completing the peaceful transfer of power for the most powerful country in the world. Regardless of your politics, that’s a moment to celebrate.
By the end of the day, President Trump signed dozens of executive orders. Several halted Biden-Harris Administration initiatives. Others declared emergencies that expanded executive powers focused on Trump campaign priorities like securing the border. None of that is a surprise. In January 2021, President Biden took similar steps to reverse or halt Trump initiatives and jumpstart several of his own.
Senior federal employees are used to disruptive political transitions. In the 21st century, they have experienced five—2001, 2009, 2017, 2021, 2025. Federal agency managers, Office of Management and Budget (OMB) staff, and senior staff on the Congressional Budget and Appropriations Committees understand that each Presidential and Congressional transition has major implications on funding, policy and procurement priorities across government altering funding totals, timing, and priorities for the next three to five years.
The 2025 Transition is Different.
Federal agency managers face more funding uncertainty now than at any time this century. FBIQ’s November forecast outlined how a long-term continuing resolution (CR) and political transitions would slow FY25 procurement spending through April. Since then, discussions with Administration officials, Congressional staff, and contractors confirm that contracting activity at most agencies has slowed to a trickle.
In November, it was clear that President-elect Trump Administration would issue a series of Day 1 Executive Orders like, ordering Return to In-Person Work, instituting a Federal Civilian Employee Hiring Freeze,and Reinstating Schedule F (which removes civil service protections for senior officials). Together, these initiatives aim to reduce both the size and influence of the federal work force. They will also accelerate the demographics-driven government-wide “brain drain” challenge caused by retirement of baby boomers, increase the technical skills gap at key agencies, and reduce the number of experienced procurement officers.
Since early 2024, FBIQ predicted that if Trump won and Republicans regained control of the Senate, Republicans were likely to lean on the budget reconciliation process to achieve some of their objectives like clawing back billions in funding for elements of President Biden’s “Build Back Better” agenda approved in the Democrat-controlled 117th Congress using the same process. Together, the 2021 American Rescue Plan Act, the 2021 Infrastructure Investment and Jobs Act (IIJA), the 2022 Inflation Reduction Act (IRA), and the 2022 PACT Act, moved trillions in spending traditionally funded through annual appropriations outside the appropriations process.
For President Trump and Republicans in Congress, the two biggest targets for reduction are both in the Inflation Reduction Act— billions in new funding “clean, green initiatives” and over $50 billion in unspent funds for Internal Revenue Service modernization to boost tax compliance.
Want proof? A Day 1 Executive Order paused dispursement of “green new deal” funding under the IRA and IIJA.
House Speaker Johnson (R-LA) and Senate Majority Leader Thune (R-SD) have discussed competing reconciliation strategies. Thune has advocated a two-step approach. The first reconciliation bill would boost funding for Defense and Border Security well above current Fiscal Responsibility Act cap limits. The second focuses on extending the 2017 tax cuts, the signature legislative achievement of Trump’s first term. Precedent suggests that Thune’s two-step approach would take a full year to implement. Speaker Johnson is pushing a single reconciliation bill designed to achieve the same objectives as Thune’s two-step approach. Johnson’s goal is to complete that process by Memorial Day 2025. Precedent and narrow House and Senate GOP majorities suggest that Johnson’s timetable is wildly optimistic.
Whatever reconciliation strategy Congressional leaders pursue will increase funding uncertainty for most federal agencies for the next 6 months.
Forecast
80% Access to agency funding increases approved in the 2025 Budget Reconciliation process is unlikely before June.
How Does This Affect Agency Planning and Execution?
- For federal agency managers and contractors, Biden’s FY25 Budget initiatives become less relevant every minute.
- The absence of a top-line agreement on FY25 appropriations increases the odds that most federal agencies end up with funding through a restrictive full-year CR at levels lower than those enacted in FY24.
- For a combination of political and budgetary reasons, VA is the cabinet-level agency facing the least funding uncertainty in FY25.
- Of the twelve annual FY25 appropriations bills, the two most likely to be approved before the end of March are Defense and Military Construction-VA.
- For agencies funded under a full-year CR, approval of final FY25 spending and apportionment plans is unlikely before late April.
- Defense and border enforcement programs are likely to receive billions in additional funding through reconciliation.
- President-elect Trump may release a summary of his FY26 Budget in February. With competing House and Senate plans, a detailed economic agenda is unlikely to emerge before March.
- Release of the full FY26 Trump Budget will be delayed to late April or early May (the norm for incoming administrations).
- The threat of impoundment (a tactic advocated by Russ Vought, Trump’s nominee for OMB Director) adds more uncertainty to the FY25 appropriations process.
- By July, expect Congress to approve a 2-year debt limit extension and spending cap deal that sets the parameters for the remainder of the 119th Congress.
All-of-the-above slows procurement activity for all but mission-critical systems until June.
Forecast
90% Contractors should expect the most back-loaded FY25 procurement process in over 25 years.