The Department of Defense (DoD) has shared its message loud and clear: the era of peacetime operations is over. In a recent policy shift, the DoD is taking deliberate steps to streamline spending, in-source more expertise, and refocus on mission-critical activities. While this transformation is essential for national defense, it’s creating real uncertainty for small businesses, especially those providing IT consulting, professional services, and support functions.

If you’re a small business leader or Business Development (BD) professional working with DoD clients, this memo should have your full attention. Let’s break it down, understand the implications, and most importantly, talk about how to adapt and stay competitive in a contracting landscape that’s being reshaped by wartime urgency and fiscal restraint.

The Big Picture: Efficiency, Not Expansion

The DoD is pivoting hard toward what it calls a "wartime footing." That means cutting waste, boosting readiness, and reallocating funds toward combat capability and deterrence.

To do this, the Department is:

• In-sourcing more work. Preference is being given to internal personnel over contractors, especially in IT, management, and advisory services.
• Scrutinizing contracts. Anything over $1 million (for advisory) or $10 million (for IT consulting) is under the microscope, requiring high-level approval.
• Consolidating procurement. The DoD is moving routine purchases to centralized platforms like the GSA to reduce duplication and improve cost-effectiveness.

These policies are aligned with Executive Order 14222, a government-wide mandate to eliminate unnecessary spending and promote operational efficiency.

What This Means for Small Businesses

Here’s how this shift may impact your small business, especially if you support the DoD in IT or professional services.

1. New Hurdles for IT Consulting and Management Services
DoD agencies can no longer issue IT consulting or management contracts unless they’ve exhausted all in-house options and completed a cost-benefit analysis. Even then, contracts must be approved at least 30 days in advance by senior leadership.

🛑 Risk: Delays, rejections, and even terminations of IT contracts that don’t meet strict requirements.

✅ What You Can Do:

• Position your company as a direct service provider rather than an “integrator” or “consultant.”
• Focus on niche, highly specialized capabilities that aren’t easily reproduced in-house.
• Proactively prepare cost-benefit justifications and alternative analyses to support contract proposals.

2. Tighter Controls on Advisory and Assistance Services
Contracts for strategy, planning, studies, and even technical advice are now subject to review and approval at the highest levels. If you overlap with existing in-house expertise, you may not get funded or could even cause in-house teams to lose budget.

🛑 Risk: Losing opportunities due to perceived redundancy or insufficient justification.

✅ What You Can Do:

• Align your offerings with capability gaps inside the DoD such as what they can’t do, not what they already do.
• Emphasize how your services augment readiness or support acquisition programs with measurable outcomes.

3. Contractor Roles Under a Microscope
The DoD is scrutinizing jobs shared by civilians and contractors like admin support, HR, IT, training, and others. You now need a workforce sufficiency analysis to prove a contractor is the only viable option.

🛑 Risk: Your contract positions may be downsized, eliminated, or consolidated with others.

✅ What You Can Do:

• Provide clear productivity benchmarks that show your team outperforms internal equivalents.
• Help your clients develop and document justifications and cost analyses comparing civilian versus contractor roles.

How This Can Hurt If You're Not Ready

The DoD’s new stance is not just a procedural change. It is a paradigm shift. If small businesses don’t adapt quickly, they risk losing recompetes to in-house alternatives, getting shut out of RFPs due to pre-screening, or being labeled “non-essential” in a more austere budgeting environment.

There is a glimmer of hope though.

What to Do Next: Adapt, Align, and Advance

Here’s how your team can keep moving forward:

Refocus Your Value Proposition
You must show exactly why your expertise cannot be easily replaced. Link it directly to mission outcomes. Technical know-how isn’t enough. Show how your work accelerates readiness, strengthens deterrence, and improves cost efficiency.

Build a Justification Toolkit
Help your DoD clients by preparing:

• Cost-benefit templates
• In-sourcing vs. outsourcing analysis
• Productivity comparisons

Make it easy for your clients to make the case for you.

Get Closer to the Mission
Find contracts in direct support of weapons systems, sustainment, or acquisition programs. These types of contracts are exempt from many restrictions and still mission-essential.

Train Your BD Team on the Policy Shift
Make sure your team understands the implications of these changes. They need to speak the language of mission alignment, in-sourcing policy, and Executive Order 14222 in every proposal and pitch.

Final Word: Keep Fighting the Good Fight

This isn’t a death knell for small businesses, it’s a realignment. The DoD still needs outside expertise, but the bar is higher, the rules are tighter, and the expectations are crystal clear. Adapt quickly. Be part of the solution. Stay mission-focused. If you do that, your company won’t just survive the shift, you’ll become the kind of partner the DoD can’t do without.