Just a few days into Donald Trump’s presidency, he has already taken actions that raise potential challenges and opportunities for federal contractors. In his Memorandum of January 23, 2017, Trump imposed a hiring freeze on civilian employees.  The order also states that “[c]ontracting outside the Government to circumvent the intent of this memorandum shall not be permitted.”  The order requires the director of the Office of Management and Budget (OMB) to “recommend a long-term plan to reduce the size of the Federal Government’s workforce through attrition” within 90 days (i.e., late April of this year). The order will expire upon implementation of the OMB plan.  In the short-term, this creates obvious challenges for agencies and their contractors seeking new employees to perform government services.

While we do not yet know what recommendations OMB will make, the order seems to signal a more accelerated continuation of the trend of reducing the overall size of the federal workforce.  One possible long-term result could be to continue the shift toward utilizing outside contractors in lieu of direct employees.  This means more services will be outsourced to contractors, which may present opportunities to government services contractors to find new revenue streams by performing services that have in the past been done by direct government employees.

Even in the short-term, the order contains important exceptions to the freeze, including those “necessary to meeting national security or public safety responsibilities.”  This could open new opportunities, especially for IT and cybersecurity contractors.  Defense and intelligence agencies are big consumers of IT solutions.  Also, cybersecurity is a major focus of the government following high-profile data breaches, such as OPM and the IRS.  Depending on how broadly the government defines “national security or public safety,” federal IT and cybersecurity contractors may be well-positioned for new growth as the government hires ever fewer direct employees.