The 2026 Market Reset at a Glance

• The shutdown revealed a market already in transition.
• 2026 brings faster decision cycles, higher expectations, and fiercer competition.
• Contractor advantage now depends on speed, senior access, mission alignment, and provable impact.
• Mission-critical priorities are intensifying across cyber, AI, autonomy, CX, space, munitions, and SLG modernization.
• Decision authority has consolidated with fewer leaders making faster, higher-stakes calls.
• Defense and global markets are accelerating more quickly than the domestic federal market.
• SLG remains a stable, innovation-forward market.
• Contractors who move boldly in the next six months will define the next decade.

The longest funding lapse in history didn’t break the government market. Instead, it stripped away any lingering ambiguity about where things are heading.

As agencies restart, clear backlogs, and reestablish priorities, a new dynamic has emerged: one that divides the market into companies that adapt and those that fall behind.

At GovExec’s annual Market Preview, CEO Tim Hartman, Editor-in-Chief Frank Konkel, and Defense One's Science & Technology Editor Patrick Tucker unpacked the reset. What they described was far beyond a temporary disruption.

This structural realignment was already underway well before the shutdown.

1. The market had reset long before the shutdown made it obvious.

The most significant change heading into 2026 is the narrowing of distance between mission owners and solution providers. The mechanics of government buying had fundamentally changed prior to the shutdown. Agencies have already reoriented how they identify problems, evaluate technology, and engage with industry.

The new engagement model is:

• More direct (fewer intermediaries)
  Agencies are reducing layers between themselves and solution providers.
   
• More accelerated (shorter cycles)
  Engaging in faster, more direct conversations.
   
• More selective (higher expectations for mission relevance)
  Reassessing and scrutinizing legacy partnerships.

Decision-makers have changed, and so, too, has what they value: speed, clarity, mission relevance, and demonstrable impact.

Your Top Takeaway: Access and influence (not incumbency) drive opportunity.

2. What are the urgent mission priorities?

Mission-critical areas are racing forward, while legacy programs are being reevaluated under closer scrutiny.

Agencies have returned to work with heightened urgency around:

• Modernization at scale: AI, automation, and low-lift modernization tools
   
• Cyber resilience: Zero trust maturity, identity + credentialing
   
• Mission systems: Real-time data, sensing, autonomous decision support
   
• CX-driven operations: Especially after delivery delays during the shutdown
   
• Space and air defense: Golden Dome is the golden child

What’s slowing or consolidating?

• Long-tail modernization without clear ROI
   
• Multi-layered vendor ecosystems
   
• Legacy IT modernization with unclear mission impact or measurable outcomes

Your Top Takeaway: 2026 is a year of intensified urgency, especially where mission and modernization converge.

3. How are agencies buying differently, and who gains from it?

The shutdown forced agencies to work through new backlogs with less time, fewer staff, and greater pressure. When combined with ongoing acquisition reforms, the result is a procurement environment where agencies are:

• Launching pilots earlier
   
• Engaging vendors more directly
   
• Compressing buying cycles
   
• Favoring mission-ready solutions

This new path to market favors clarity, speed, and proof, and disadvantages vendors still clinging to long capture cycles, compliance-only proof points, or generalist messaging.

Who gains:

• AI-native companies
   
• Commercial tech entering the government market for the first time
   
• Agile defense startups
   
• Vendors who can prove impact immediately

Who risks losing relevance:

• Companies selling capabilities instead of outcomes
   
• Firms with slow legal and compliance review processes
   
• Legacy companies without proof-of-impact storytelling
   
• Vendors relying solely on compliance and incumbency

Your Top Takeaway: Procurement is becoming faster, flatter, and more experimental, favoring vendors who deliver outcomes quickly. 

4. What is changing most in the defense market?

The Pentagon’s acquisition rhythm is accelerating, prioritizing next-generation technology, including:

• Autonomy across domains
   
• Rapid munitions production
   
• Advanced Intelligence, Surveillance, and Reconnaissance (ISR) and sensing systems
   
• Golden Dome and air defense innovation
   
• Space resilience and proliferated LEO architectures

The Pentagon’s proposed acquisition reforms aim to:

• Shorten evaluation cycles
   
• Reduce bureaucratic layers
   
• Increase openness to commercial tech
   
• Prioritize mission-ready impact over process fidelity

For defense-focused contractors, this means:

• Faster cycles to pilot and deployment
   
• Higher stakes in demonstrating readiness
   
• Greater competition from nontraditional entrants
   
• A premium on senior-level access

Your Top Takeaway: Vendors must show defense-readiness now, not later.

5. Is the global market expanding, and where is the growth happening?

The global defense expansion is substantial, accelerating, and materially relevant to U.S. contractors.

Europe is undergoing its fastest defense modernization in decades:

• Poland nearing 5% GDP defense spending
   
• Nordic states accelerating air/missile defense modernization
   
• Germany, the U.K., and France investing in ISR, autonomy, and readiness

In the Indo-Pacific:

• Japan, Australia, and South Korea accelerate modernization
   
• Maritime and space capabilities expand
   
• Interest in U.S. commercial defense tech grows
   
• Upgrading deterrence capabilities

This is a parallel market opening right now.

Your Top Takeaway: The addressable market is now global. Those who stay domestic-only risk missing out on the fastest-growing segment of the defense industry.

6. What trends define state and local government post-shutdown?

While federal agencies halted operations during the shutdown, state and local government did not. In fact, state and local agencies doubled down on modernization.

SLG has become a proving ground for:

• Infrastructure and mobility systems
   
• Cyber upgrades driven by data liquidity and regulatory needs
   
• Digital service delivery
   
• Public safety transformation
   
• Emerging workforce modernization programs

For contractors, SLG offers:

• Stability during federal pauses
   
• Faster buying cycles
   
• More direct access to decision-makers
   
• Clearer paths to demonstrating impact

Your Top Takeaway: SLG in 2026 offers consistent, practical modernization, and there’s an outsized advantage for contractors who invest early.

7. How has relationship-building changed for 2026 and beyond?

The fundamentals of relationship-building remain. But how relationships form, deepen, and convert has transformed.

What works in 2026:

• Senior-level engagement
   
• In-person presence and proximity to the mission
   
• Proven impact and speed
   
• Consistent visibility and alignment with the mission
   
• Bold, differentiated positioning
   
• Expansion into SLG or global defense, where growth is accelerating

What no longer works:

• Overly formalized capture sequences
   
• Compliance-focused messaging
   
• Slow, bureaucratic storytelling
   
• Generalized messages detached from mission realities

Your Top Takeaway: The new relationship model is based on credibility, speed, and repeatable proof.

8. What moves should contractors make in the next six months?

To stay competitive as the reset accelerates, the next six months are pivotal.

1. Increase senior-level engagement immediately.
   You must be in the room and at the right altitude. Be present where decisions begin.
    
2. Accelerate proof-of-impact.
   Remove legal bottlenecks. Publish results fast.
    
3. Own a mission-critical topic.
   Become synonymous with a priority area.
    
4. Enter faster-moving markets.
   Expand into SLG or global defense.
    
5. Tighten your narrative.
   Focus on clarity, not complexity.
    
6. Align BD, sales, and marketing around influence.
   Process alone won’t win.

Your Top Takeaway: The companies that seize the moment will define the next decade of government modernization.

What’s next?

Your next moves will determine everything.

If you’re planning for 2026 and want clarity on where to focus, how to position, and where the market is heading, connect with GovExec.

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