Watch the original Substack video, or listen below while you read.

In the midst of military operations in the Middle East, The White House quietly released its proposed budget for FY27. And it contains a number I don’t think most people in government contracting have fully processed yet.

Depending on how you calculate it, this is a roughly 40% increase over last year’s defense spending. If you isolate just the Pentagon budget, you’re looking at closer to 28%. Either way — that is the largest defense budget request in American history.

I broke down the full picture in this week’s YouTube video. But here’s the intelligence brief version.

Important caveat: this is a proposal. The president’s budget still has to go through Congress. It will change. It usually does. But the direction of travel is clear — and has been for years. We spend more on defense every year, almost without exception.

The shift that matters here isn’t just the dollar amount. It’s what they’re buying. The budget is explicitly targeting the defense industrial base — expanding it, modernizing it, and moving away from legacy systems toward next-generation capability. That has major implications for small businesses, consultants, and account executives who know how to read the signal.

SPENDING PRIORITIES BY TIER

TIER 1 — HIGHEST PRIORITY

• AI & data decision systems

• Drones & counter-drone tech

• Missile defense & sensors

• Shipbuilding ($65.8B proposed)

• Munitions production

TIER 2 — SIGNIFICANT GROWTH

• Space systems & launch infrastructure

• Industrial base manufacturing

• Nuclear modernization

• Next-gen air dominance (F-47)

TIER 3 — MEANINGFUL OPPORTUNITY

• Warfighter health tech

• Aerospace subsystems

• Electronic warfare

• Navigation & comms systems

WHAT THIS ACTUALLY MEANS FOR SMALL BUSINESSES

I know the instinct when you see numbers like $65.8 billion for shipbuilding is to think — that’s Huntington Ingalls territory, not mine. But that’s the wrong read.

Every major contract that goes to a prime has a mandatory small business subcontracting plan attached to it. The large primes have their own small business offices actively looking for suppliers. Engineering services, software, logistics, navigation systems, electronics — the subcontracting ecosystem on something like a shipbuilding program is enormous. Same goes for the F-47 and missile defense.

The bigger opportunity signal here is in AI and unmanned systems. The government is spending aggressively in these areas — and they’re using faster acquisition pathways to do it. Other Transaction Authority. SBIR. Commercial Solutions Openings. These are mechanisms designed to bring non-traditional companies in the door without the full FAR gauntlet. If you’re an AI company or a drone technology company trying to figure out how to access federal money, this is your environment.

One thing I want to flag directly: there was a new executive order on equity-based contracting and subcontracting. If set-asides or certifications have been your primary strategy for winning work, you need to rethink that approach. I’ve said this for years — I never awarded a contract because a company had a certification. It was always about capability and fit. Build your strategy around that, and you’ll be positioned regardless of how the policy landscape shifts.

The mindset shift I’d recommend: stop thinking about legacy sustainment and start positioning around next-gen capability. The budget is explicitly cutting funding for old systems and redirecting it toward new ones. Where are you on that spectrum?

For consultants, I'll say it plainly: this is a once-in-a-generation moment. There is a historic amount of money flowing into federal contracting, and almost nobody who can help companies access it competently. That gap is where your value lives.

I recommend watching the attached video for the full breakdown. If you’re interested in truly learning the art of government contracting and how to build a profitable business with this expertise, check out an overview of the GovClose 1-year certification and implementation program.

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If you think you have what it takes, set up an enrollment interview with the GovClose advisory team.