Federal Contracting Trends to Watch for the Rest of 2026

Federal Contracting Trends to Watch for the Rest of 2026

If you're a small business chasing federal work — especially if you're carrying an SDVOSB, VOSB, WOSB, HUBZone, or 8(a) certification — this is not a quiet year to sit on the sidelines. Between a rulebook rewrite, a stalled cybersecurity mandate, and a budget picture that's still being finalized, the rules you bid under in January aren't quite the rules you'll bid under in December. Here's what's actually moving, and what it means for how you position your business.

The FAR rewrite is real, and it's moving fast

The Revolutionary FAR Overhaul — the biggest rewrite of the Federal Acquisition Regulation in roughly 40 years — stopped being a policy conversation and became formal rulemaking this summer. On June 23, 2026, the FAR Council published four proposed rules touching 20 parts of the FAR, with the public comment window closing July 23. A few pieces worth knowing if you're a small or veteran-owned contractor:

• Set-asides and the Rule of Two are staying put. Every version of these proposed rules explicitly preserves small business set-asides — contracting officers still have to identify set-aside type in solicitations, and Part 19 protections aren't going anywhere.
• Some thresholds are moving up. The dollar level that triggers mandatory public announcement of a contract action is proposed to rise from $4.5M to $5.5M — meaning fewer mid-size opportunities will automatically show up with a public notice. If you rely on catching opportunities as they post, this is worth watching closely.
• Commercial-first is now the default posture. Revised FAR 7.201(f) directs contracting officers to check existing contract vehicles — Schedules, GWACs, Best-in-Class vehicles — before considering a new procurement. If you're not on any of those vehicles, this makes teaming and subcontracting relationships more valuable than ever.

None of this eliminates set-aside programs. But several outside analyses of the overhaul have flagged that the practical effect — more work routed through consolidated vehicles, less new-procurement volume — could squeeze the smaller, standalone opportunities that a lot of small businesses have historically relied on. Worth reading the fine print on any FAR deviation your target agencies publish.

CMMC just hit the brakes — for now

If you've been bracing for third-party CMMC certification to become mandatory this November, take a breath: on July 13, 2026, the Department of War suspended the planned Phase 2 rollout (mandatory C3PAO third-party certification) and launched a 60-day "top-to-bottom" review of the entire program. Phase 1 — the Level 1/Level 2 self-assessment requirements that took effect November 10, 2025 — remains in force. But the harder requirement that was supposed to hit in a few months is now paused, with further guidance expected around mid-September.

This doesn't mean cybersecurity compliance stopped mattering. NIST 800-171 self-assessments and SPRS scores are still very much part of how contracting officers evaluate you. It just means the "third-party audit or lose eligibility" deadline that a lot of contractors were racing toward has moved — and given that fewer than 100 authorized assessors exist for an estimated 80,000+ contractors who'll eventually need Level 2 certification, that capacity crunch was never going to resolve itself by November anyway.

SDVOSB still sits at the top of VA's own pecking order

Worth a reminder for veteran-owned firms specifically: VA's Veterans First Contracting Program (38 U.S.C. §§8127–8128) puts SDVOSB ahead of every other socioeconomic category — VOSB, 8(a), HUBZone, WOSB — when VA decides who to set a contract aside for. That's a VA-specific rule, stronger than the general federal SDVOSB posture. Government-wide, SDVOSB firms pulled in roughly $28.6 billion across about 52,000 contract actions in FY2025 against a 3% statutory goal — so there's real room to grow that share, particularly at agencies that have historically underperformed on veteran contracting.

The budget picture is still the wildcard

The FY2026 discretionary budget hasn't fully shaken out, and continuing resolutions plus the fallout from 2025's DOGE-driven contract terminations have made the spending environment choppier than usual. Defense and intelligence spending is broadly expected to hold up better than civilian agency budgets this cycle. If your pipeline leans civilian, it's worth diversifying where you're watching — and if you haven't looked at teaming into defense-adjacent facilities or construction work, this may be the year to start those conversations.

The practical takeaway

None of these shifts are reasons to pull back — they're reasons to be sharper about where you're looking. Keep your certifications current (SDVOSB re-verification timing rules have gotten stricter, not looser), watch the FAR Overhaul's final rule when it lands later this year, don't let a paused CMMC deadline turn into a false sense of security, and lean into the socioeconomic categories where you have a real, documented edge. The businesses that will do well in this environment aren't the ones waiting for clarity — they're the ones already positioned for whichever way it lands.

Sources: Federal Register (FAR Case 2026-002, 2026-005), Federal News Network, Deltek GovWin's 2026 Federal Contracting Trends analysis, Congressional Research Service, and SBA/VA program guidance current as of August 2026.