Inside the high-stakes world of government contracts

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Frank Konkel: I think it’s pretty clear this administration wants to move as quick as possible. They’re okay with breaking a few things.

OpenAI is a company that prior to two months ago had zero government contracts. Since Anthropic, OpenAI, Google and xAI all have received $200 million ceiling value contracts from the Pentagon.

Just because you’re a big contractor and you have billions of dollars in contracts historically, does not mean you’re going to be guaranteed anything in this administration.

Bob Safian: That’s Frank Konkel, Editor in Chief of GovExec, a media outlet that covers the business side of US government activities, from Doge to the Department of Defense. With the Trump administration aggressively trying to remake how government operates to make it more businesslike, I wanted to talk to Frank about what’s really changing. And it’s a lot. Today’s episode delves into the tumult in government contracting, how tech firms and particularly AI firms are putting pressure on legacy providers, and where the power and money is increasingly moving. It’s a hidden world where the stakes are high, so let’s get to it.

I’m Bob Safian and this is Rapid Response.

[THEME MUSIC]

I am Bob Safian. I’m here with Frank Konkel, Editor in Chief of GovExec, which is dedicated to covering the intersection of business and government. Frank, great to have you on the show.

KONKEL: Thanks, Bob, for having me. Appreciate it. We’ve got a lot to talk about.

SAFIAN: Yeah. I’ve been curious about how the business of government contracts has been impacted during this really kind of tumultuous year. GovExec’s site says you’re the leading sales and marketing intelligence company for government leaders and contractors. Can you explain what that means for folks who aren’t in that world?

Copy LinkGovernment transformation under Trump and Musk

KONKEL: So our parent company, GovExec, was first and foremost a media company and have invested heavily in the data and intelligence business. I oversee all of our editorial operations, so that means five publications that cover everything from the day-to-day business of government to workforce impacts, federal contracting and the future of national security.

They’ve all been disrupted somewhat by the administration change, and this administration change is a bit more unique than what we’re used to. There’s been a lot of disruption to how contracts are awarded, even contract cancellations. And it’s coming at this time where we have a sea change afoot with a lot of nontraditional government contractors, Silicon Valley companies, startups coming to the government and wanting to do business. And they’re finding a fairly willing business partner, which hasn’t always been the case.

SAFIAN: Yeah. I imagine with any new administration there are changes, but the conversations are different this time around.

KONKEL: Since January, we have seen an exodus of more than 215,000 federal employees. You’ve also had a pretty impacted contracting workforce, which is just as large or larger than the number of federal employees, which is somewhere in the 2 million range. Companies like Deloitte, Accenture, Federal, those types of companies who have also had layoffs, it’s just been less visible.

There’s also been a lot of these efforts led by the Department of Government Efficiency, which was the new agency headed for a time by Elon Musk, who has since departed the administration. And they had a big emphasis on reducing the federal headcount using technology to offset some of those losses, and trying to make the government run a little bit more like a business. I think that’s been one of their primary goals.

And it’s not all negative though, I don’t want to say it’s been all bad. Because industry, there have been some examples of companies that have really come and used it as a way to catapult them either into government for the first time or to expand their business a little bit.

SAFIAN: There’s been a trope, I guess, that sort of government contractors sometimes are not the most edgy of parts of the private sector. That in order to get contracts or to keep contracts, they may be a little bit more old guard. Is that storyline, is that fair? Is it kind of over simplifying what’s going on?

KONKEL: Yeah. Well, I’ve heard that for many years as well, but I think this administration change has forced a lot of that old guard you talked about, sometimes they’re referred to as legacy contractors, to rebrand themselves. The old way of doing business just doesn’t work anymore.

Just because you’re a big contractor and you have billions of dollars in contracts historically, does not mean you’re going to be guaranteed anything in this administration.

Copy LinkThe rise of GSA and its impact on federal contracting

A really good example of this is the General Services Administration. They have grown so much in terms of influence across the government. And I always refer to GSA as the most important agency you’ve probably never heard of. They manage the entire federal government’s real estate portfolio, which is vast. I mean, it’s the biggest on the planet. And they also manage a majority of government contracts.

Some of President Trump’s early executive orders back in March really increased the influence that GSA has, in part because they want to consolidate all government contracts through GSA. They don’t want the energy department and the FBI and all these other big agencies to buy separate instantiations of technology.

And so GSA has quadrupled the amount of goods and services that go through the agency, totalling more than $400 billion annually. And that’s everything from pencils and paper to pretty modern emerging technology and AI.

This small agency, that itself has gone through reductions in workforce, has just taken over government contracting space. If you want to do business with the Trump administration, you really need a relationship with GSA now. And it’s never been more influential than it is right now.

SAFIAN: Yeah. And this consolidation around GSA, does it make the government more efficient? Is it an effective way to sort of get more out of it?

KONKEL: Will it make things more efficient is really a TBD. I wish I could give you an answer on that.

GSA certainly thinks so. I interviewed the acting administrator on stage at one of our events Thursday. They’re internally tracking some of their own metrics on use of technology, for example. Use of AI was one that he talked about where they’ve saved some 300,000 hours in employee hours through the use of automation and AI technologies. Which is definitely a good win.

But when you start talking about handling acquisition for a federal government that spends more than a trillion dollars a year on goods and services, including the defense department, it really is a massive undertaking. And probably be a couple years before we know if it really is more efficient.

SAFIAN: And this group, as you’re saying, they have twice as much power, money, coming through them as they used to, but there’re fewer of them there to manage this bigger load.

KONKEL: You hear this all the time in private sector, do more with less. And I think GSA really believes that. They have made some pretty big strides.

I mean, I don’t think anyone really thought that the Trump 2.0 was going to come in and fix government contracting. But I have to give them credit, just objectively speaking, taking on the FAR, which is the Federal Acquisition Regulation, which is a 3000-page series of laws and statutes and recommendations for how the government should buy things. And they’re rewriting that to completely reduce that document down to only the bare minimum laws and statutes.

And one other way that GSA and Trump 2.0 has been able to change the game a little bit is working with a lot of these new AI focused companies that didn’t have a government footprint before. And bringing them into government and establishing direct partnerships with them, which prior to this administration rarely occurred.

SAFIAN: And the old legacy contractors, I mean, they used to sort of, I don’t know, spread or talk about how, “Oh, these newer companies, they don’t really understand all the things that they have to do to be compliant with government contracting. That there’re risks with dealing with these newer companies,” right?

Copy LinkLegacy contractors adapt to a changing procurement landscape

KONKEL: The big companies who, like the Leidos’s and GDIT’s of the world, those companies are now looking more to partner with some of the more innovative firms. Because regardless of their historical reputation and how long they’ve had government business, that’s not enough to keep it anymore. And they want to be able to bring to the table honest to goodness tech solutions. And this administration is very much show and tell, not just show or tell.

The GSA administrator is the kind of guy who likes to bring in people for demo days. They like to go out and meet industry where they are. I’ve seen a lot of industry companies opening up basically demo studios in their offices or in some instances in their classified facilities, where they can actually bring in federal officials who have the proper clearances to see this sort of stuff and demonstrate what they do. And they need to be able to make their case a little bit different than they had before.

And also, there’s been a lot of change in personnel. I mean, most of the people who came in from the Doge front were younger technologists, right? They don’t have biases about who should get what. They don’t know the history of a lot of these agencies. They don’t know the big integrators. They just want to see stuff that works. And if it works and it’s easy to buy, let’s make it as easy to get as we possibly can.

I don’t need to tell you that government has a horrible track record of buying large technology projects under budget and under time delivery. It’s always the opposite, you’re talking about tens of billions of dollars that are wasted because of that. So I think this administration, boy, if you’ve got a history of doing that kind of stuff, you’re not a favored child.

SAFIAN: For a lot of technology businesses in Silicon Valley, they’ve sort of avoided doing business with the government because they feel like the government moves too slow. It feels a little bit like that’s changing also, that Silicon Valley seems to be more eager to work with the government.

Copy LinkFast-paced innovation within the Defense Department

KONKEL: Much more eager. OpenAI is a company that, prior to two months ago, had zero government contracts. They were on a panel with us as well, talking about their first defense contract, which was a $200 million contract for large language modeling. Prior to two months ago, the government had no direct LLM contracts.

Since that conversation, Anthropic, OpenAI, Google and xAI, xAI is a company started by Elon Musk under Twitter, X, all have received $200 million ceiling value contracts from the Pentagon. That’s all happened in two months.

Google deserves a lot of credit for being proactive in dealing with the administration. When a lot of companies were pulling back and saying, “Oh, we don’t know how to approach these guys. Maybe we shouldn’t say anything.” Google actually went to the table and said, “Hey, we will offer you guys a discount on our workspace software.” In government, Microsoft dominates that arena with O365. Billions and billions of dollars of revenue they get.

Google said, “We’re going to discount our workspace software significantly,” on the order of a couple billion dollars over a three-year period. That’s taxpayer savings, that’s agency government savings. So they were going to take a hit on their own offering in order to potentially grow their market share a little bit. Like if they get a few agencies to switch over from Microsoft, it’s a good thing for them.

It’s also a win for the administration, because guess what? Efficiency, dollar savings and technology acquisition, it makes them look really good too.

That started a bit of a chain reaction. So you’ve had Oracle, you’ve had Adobe, you’ve had Salesforce, you’ve had Elastic, you’ve had Uber and Google now go through and offer big discounts to their software.

Government spending on technology is actually up. It’s up. No one would suspect that. I certainly was surprised, and then double and triple-checking the data on it. Very clearly, the government doesn’t want to spend as much money on big consulting contracts. You’ve seen somewhere in the order of 30 companies that have consulting contracts have those reviewed and they’ve had a bit of a target on their backs.

At the same time, AI firms, cloud firms, hyperscaler cloud companies have gotten a lot more of those dollars. And those are considered to be more modern technology.

So it really is a fascinating time to be covering this. And some people don’t like the fact that this administration wants to deregulate and make it so easy for companies to come in. And there’s business reasons for that, there’s privacy reasons for that, of course. And they’re all viable arguments. Credible, for sure.

But I think it’s pretty clear this administration wants to move as quick as possible. They’re okay with breaking a few things. And they’re going to be focused more on the outcomes and less on the processes and the bureaucracy of getting things done in government. I think that’s very clear.

SAFIAN: As Frank calmly walks through these changes underway, it’s almost startling. Despite all the news coverage of Trump 2.O’s disruptions, the inside workings of government contracting aren’t often in the spotlight, but their impact is huge for the future of the US, for the economy, certainly for tech firms.

So what’s happening inside the all-important US Department of Defense? We’ll talk about that after the break. Stay with us.

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Before the break, GovExec Editor in Chief, Frank Konkel, explained how the Trump administration has upended the world of government contracting. Now he talks about the fast-paced changes underway at the US Defense Department, and the White House’s big-picture plans for the next three years. Let’s jump back in.

You mentioned some of the defense-related contracts. You run a site called Defense One that writes about the buzz at the Pentagon. The $200 million AI contracts with DoD that you mentioned from all those tech firms, I mean, $200 million is a big number, but compared to a lot of defense contracts, it’s small, right? What does this indicate about where the future of defense, of war, whatever it is, is moving in terms of technology and in terms of spending?

Copy LinkModern technology reshapes the battlefield

KONKEL: I mean, 200 million, yes, you’re exactly right, for DoD is a drop in the bucket. I mean, their overall defense budget is somewhere around a trillion dollars at the moment. Defense spending keeps going up year over year.

But I think with some of these really advanced large language model technologies, they’re starting small. And I wouldn’t be surprised if we have more companies getting contracts by the year’s end.

DoD is actually pretty proactive about this. Early on, Secretary Hegseth on the DoD said, “We’re going to default to fast buying.” I mean, they’re buying satellites and launching them in a matter of six months now. It used to take six years to do that. They want to get it down to 30 days. That’s crazy. But that’s how you need to buy technology if you want to be viable, you can’t be waiting six months or six years to get a system in place.

And the DoD realizes that from a national security imperative, that just doesn’t work anymore. So they’re even experimenting with different types of contracts, Bob. They’re even thinking about instead of traditional contract awards, using more of what’s called an OTA, or other transactional authority. Where they can pilot or prototype technology even through something as simple as a one-page white paper and see if it is viable. And if it is, then they can spend more money on it and keep buying along the way.

SAFIAN: When you look at how the expectation of what happens on the battlefield, if you look at Ukraine, in just a few short years we’ve seen that AI-controlled networked drones, that those things matter as much or more than boots on the ground. So how much of this is about being able to change the way the military operates, the priorities in it, the sort of structure of it?

KONKEL: I think the DoD has realized in the last couple of years, especially in the last six months, that buying technology that way, the same way that you buy ships or airplanes, it’s not a good way to do it.

I mean, everything you just said about technology on the battlefield is exactly right. The systems that underpin those things, like the systems, the sensors, the data to and from, the tactical edge technology that’s required to have, say, things like augmented reality helmets on soldiers in the field, which is a multi-billion dollar project underway right now, that’s a partnership between Anduril and Meta, a company that not many would associate with government.

They’re using that AI technology in augmented reality helmets that war fighters can wear, three to five pounds, on the battlefield. I’ve worn one of these demo helmets before at a facility when they invited a few of the press corps to check these things out. It can be infrared. It connects to your weapons. Bluetooth connection. I mean, it’s crazy, but that’s the kind of stuff that-

SAFIAN: It sounds like a video game.

Copy LinkContracting risks and efforts to safeguard fairness

KONKEL: It is much like that. It looks like a video game, only it’s real. And it’s critically important to what the modern battlefield is now. Other countries can move pretty quick in acquiring technology, and the US has not kept up.

So how can we pull out the stops to do that? How can we take the best of what’s out there in the commercial world somewhere, even if it’s from a company like Meta that we’re not really familiar with that much in the government space? Bring them in, have them partner with the people who are getting stuff done, and turn them loose.

SAFIAN: You talked about how the White House is pushing to have the government run more like a private corporation. There are some folks who express some concerns about the threats or the way government contracts are awarded. That whatever, we don’t want leaders just giving their friends a lot of money, right? How much of that is realistic worry and how much of that is just politicizing?

KONKEL: There is still a very real fear about relationships-based contracting. I will say though, there is a pretty rigorous legal system in place around contracts. There’s a mechanism in place to challenge a contract award. And that goes through either the Government Accountability Office, which is the investigative arm of Congress, or generally through the Court of Federal Claims in the judicial branch.

I do think though that one thing I’ve noticed is more of an indirect way of influence, which is a lot more lobbying firms on behalf of tech companies getting in front of lawmakers, getting in front of administration officials. Who the decision makers in the Trump administration just happened to be a little bit fewer and farther between than what a normal administration might have, maybe because there’s a fear of them getting out in front of the boss. You don’t want to do something that’s going to get you whacked down.

SAFIAN: What do you feel like is at stake right now in the world that you look at?

Copy LinkStrategic shifts and the future direction of government operations

KONKEL: The next four years would be pretty impactful in terms of shaping what your future government looks like. Six months in, I would kind of liken it to how the GSA administrator talked about it last week, which is a phase one. New people coming in, many people leaving the government, and getting priorities for what this administration is going to do.

There’s a management agenda, President’s management agenda, that will soon be released by the White House, which is what their core focus areas will be. Now, year two, three, four is going to be where they try to implement those goals and focus areas. And I think we’ll continue to see big changes to government contracting.

I mean, this big far rewrite is just one thing, GSA’s consolidation of contracting is one thing, but they’re going to add up to massive changes. You’re starting to see departments like the Defense Logistics Agency, which is responsible for logistics of all the US military, implement agentic AI. What does that look like in two or three or at the end of four years? I mean, we’re seeing it change the commercial sector pretty drastically already.

Is the whole government going to run on an AI cloud system at some point? I mean, maybe. What it has been is a decentralized set of fiefdoms, different systems, many of them operating similarly, carrying out tasks that you could say would be duplicative.

We won’t have that at the end of this administration, at least if they get their priorities. If they can meet those priorities they’ve set out, you’re going to see the entire power of the government as a buyer used. You might have fewer winners. The winners could be big winners. Government contracting won’t look the same after this administration. Now, will those changes hold over and carry over? TBD.

SAFIAN: And what might seem like it’s a little bit chaotic, it sounds like you’re saying there is a plan there. And it sort of depends on how all that plan comes together and whether it does what they expect it to.

KONKEL: Yeah. I mean, certainly there is a plan, but I don’t want to say that there’s always been a plan. There have definitely been instances where some of the decisions made were viewed questionably by the public and questionably by the federal workforce themselves, many of whom are our readers. And so there were plenty of examples where decisions were made quickly, and I think even Elon Musk and Trump himself owned up to that.

And one example that always stands out to me is getting rid of nuclear scientists. Well, they decided that wasn’t a good idea after they fired them, and so brought some back. That’s just one example.

Maybe there wasn’t always a plan for every specific thing, but I think generally around contracting in the increased use of emerging technologies in government to make it a more modern system, there certainly is a plan. And a cadre of folks who understand technology pretty well, meshing with a cadre of expert procurement officials who are really engaged in changing how the government buys nearly a trillion dollars worth of goods and services.

So like I said, I think it’s an interesting time, for sure.

SAFIAN: Well, Frank, thank you. Thank you so much for doing this and taking us through these weeds. I really appreciate it.

KONKEL: Happy to, Bob.

SAFIAN: Listening to Frank, I found my thoughts and my emotions moving all over the place. I’ve been wary, candidly, about many of the Trump administration’s actions so far this year. There’s been a lot of ready, fire, aim, and details that Frank shared reinforce that concern.

But there’s also a strong thread of hope for improvement, for ripping out the most sclerotic parts of US government contracting, a slowness that’s out of sync with the fast-paced changes in our world today.

Where I land on all this is where Frank lands, TBD. Changes can be both good and bad at the same time. It’s a lesson for all of us, how we manage change, how thoughtful we are about what trade-offs are worthwhile, about mitigating the downsides on the road to better. That’s what the hard work of progress is all about. I’m Bob Safian. Thanks for listening.