Over 10,000 federal contracts terminated. Roughly $61 billion in claimed savings. And according to multiple reports, more than 60% of those canceled contracts were held by small businesses.
If you're a small or mid-sized business owner who depends on government work, those numbers aren't abstract. They're the difference between making payroll and shutting your doors.
The Department of Government Efficiency — DOGE — has been the dominant force in federal contracting since its launch in January 2025. And while the headlines focus on billion-dollar cuts, the real story is more nuanced than "government contracting is dead." Federal agencies still need to buy things. The Department of Defense alone is requesting over $66 billion in IT and cybersecurity spending for FY2026. The money didn't disappear — it moved.
This article breaks down what DOGE has actually done, where small businesses are getting hit hardest, and — most importantly — where the opportunities are right now.
What DOGE Has Actually Done
Let's start with the facts. According to DOGE's own reporting, the initiative has terminated over 13,000 contracts totaling approximately $61 billion. Beyond contracts, nearly 16,000 federal grants worth roughly $49 billion have also been cut.
But those numbers come with a big asterisk. CBS News and other major outlets have identified significant errors in DOGE's accounting. The task force calculates a contract's value based on total potential value — not what was actually being spent — which inflates the savings figures considerably. FedScoop reported that at the SBA alone, DOGE's claimed savings fell billions short of the administrator's public statements.
That said, the impact is real. The cuts have landed hardest on civilian agencies. Consulting, administrative support, DEI-related programs, and foreign aid contracts have taken massive hits. The Small Business Administration itself has seen at least 26 contracts terminated along with dozens of office leases, and the agency faces a 43% workforce reduction.
On the other side of the ledger, more than $220 million in previously canceled contracts have been reinstated after agencies determined the work was essential. So while DOGE is moving fast, the situation is still evolving — and not every cut is permanent.
Why Small Businesses Are Feeling It Most
Here's the uncomfortable truth: small businesses are bearing a disproportionate share of the pain.
Large defense contractors like Lockheed Martin or Raytheon have diversified portfolios and deep agency relationships. When one contract gets cut, they absorb the loss. But a small business that depends on two or three government contracts for the majority of its revenue? Losing even one can be devastating.
The SBA recently moved to terminate over 620 firms from the 8(a) Business Development Program for not turning over financial data. The Department of War has expanded its audits to include all small business set-aside contracts over $20 million — covering 8(a), WOSB, SDVOSB, and HUBZone awards. Many of the SBA contractors that have been cut are owned by people of color or women, or operate within HUBZones.
The small disadvantaged business contracting goal was also reduced from 15% to the statutory minimum of 5% — a significant pullback, according to the Congressional Research Service. The overall 23% small business prime contracting goal remains intact by law, but the enforcement environment has clearly shifted.
And then there's the uncertainty factor. Even contractors whose work hasn't been cut are feeling the chill. It's hard to hire, hard to invest, and hard to plan when you don't know if your contract will exist next quarter.
Where the Money Is Moving
Now for the part that matters most: where the opportunities actually are.
DOGE's mandate is efficiency — not the elimination of government spending. And several sectors are not just surviving, they're growing.
Defense and cybersecurity. The Department of Defense's FY2026 IT and cyberspace budget request is $66.1 billion, including $14.3 billion specifically for cybersecurity investments and $3 billion for cloud migration. The DOD is also requesting $13.4 billion for autonomy and AI systems. These aren't speculative numbers — they're in the budget request. If you have capabilities in IT modernization, cybersecurity, or artificial intelligence, the defense sector is actively looking for contractors — including small businesses.
CMMC compliance services. The Cybersecurity Maturity Model Certification deadline is October 31, 2026. Every company that wants to bid on DOD contracts handling controlled unclassified information needs to be certified — and the certification process takes 12 to 18 months from scratch. That means companies that haven't started preparing are already behind. The DoD Office of Small Business Programs has published extensive resources for small businesses navigating this requirement. The compliance wave is also creating demand for assessors, consultants, and managed security providers — so if cybersecurity is your business, CMMC is a growth engine.
Infrastructure and border security. Physical infrastructure, surveillance technology, and border modernization are all receiving significant new investment under the current administration. Construction, engineering, and facilities management contractors should be paying close attention to opportunities posted on SAM.gov. This is one of the clearest areas where new contract dollars are flowing in, not out.
IT modernization. This is directly aligned with DOGE's stated mission of making government more efficient. Agencies are under pressure to replace legacy systems with modern, cost-efficient alternatives — and they need contractors to help them do it. Nextgov reported that the government is actually pacing toward increased IT contract spending despite DOGE cuts. Software development, cloud services, data analytics, and systems integration are all in demand. If your company helps agencies do more with less, you're exactly what the current environment is looking for.
What Smart Contractors Are Doing Right Now
The businesses that are winning in this environment aren't waiting for things to "go back to normal." They're adapting. Here's what the most strategic small business contractors are doing:
1. Updating their SAM.gov profiles. Your SAM.gov registration is how contracting officers find you. If your profile still reflects pre-DOGE priorities, you're invisible to the buyers who are spending right now. Review your NAICS codes — make sure you're registered under codes aligned with defense, cybersecurity, IT modernization, and infrastructure. Update your keywords and Capabilities narrative to reflect current agency priorities.
2. Pivoting toward defense and DHS. Civilian agency budgets are shrinking. Defense, the Department of Homeland Security, and the intelligence community are not. If you've been exclusively focused on civilian work, now is the time to explore how your capabilities translate to national security missions. That doesn't mean abandoning what you know — it means reframing it. An IT services company supporting a civilian agency can often support a defense agency doing similar work. The Capabilities is the same; the customer is different.
3. Getting certifications in order. CMMC certification, security clearances, and small business program certifications (8(a), WOSB, SDVOSB, HUBZone) are table stakes. The SBA's contracting assistance programs page outlines the current requirements for each. If you qualify and aren't certified, you're leaving money on the table. If you are certified, make sure your documentation is audit-ready — because audits are happening.
4. Building teaming relationships. Joint ventures and mentor-protege arrangements are one of the most effective ways for small businesses to access larger contract vehicles. Under FAR Part 19, the government is required to give small businesses maximum practicable opportunity to participate. Teaming with a larger prime — or with complementary small businesses — expands your reach without requiring you to scale overnight.
5. Watching the reinstated contracts. Some of the work DOGE canceled is coming back. Agencies are realizing that certain contracts were mission-critical. If you have relevant past performance, keep an eye on re-solicitations. Being ready to bid quickly when a contract comes back gives you a real advantage.
6. Documenting everything. In an environment of increased audits and scrutiny, your past performance records, subcontracting plans, and compliance documentation need to be airtight. This includes contract performance reports, subcontracting plan compliance, and any certifications or recertifications. Don't wait for an audit to get organized.
The Bottom Line
DOGE has created real disruption in government contracting — and small businesses have absorbed more than their share of it. But disruption creates openings, and the federal government is still one of the largest buyers on the planet.
The 23% small business prime contracting goal is still law. Defense and cybersecurity budgets are growing. IT modernization is a top priority. And agencies that rushed to cancel contracts are already bringing some of them back.
The contractors who come out ahead won't be the ones who waited for the storm to pass. They'll be the ones who updated their profiles, pivoted to where the money is flowing, locked down their certifications, and positioned themselves as the efficient, capable, mission-ready partners that agencies are actively looking for.
The deck has been reshuffled. The question is whether your business is playing the hand it's been dealt — or still holding cards from last year's game.