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Introduction
This report was created by GrantExec, a Reston-based technology company that tracks and matches grant funding from federal, state, and private sources to nonprofits, researchers, startups, and local agencies, and Arlington Consulting Group—an Arlington-based Government Technology and Federal Market Intelligence company that helps small and mid-size firms navigate the new administration and identify and capture top opportunities. Since the new administration’s recent executive orders, we’ve been closely monitoring how federal agencies respond and how these changes provide challenges and opportunities in the contracting and grant space.
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Our latest data confirms that over 400 previously open federal grant programs have disappeared in the past three weeks—some closed prematurely, others quietly rebranded under new agency priorities. Meanwhile, state and private funding sources fill gaps, though many organizations remain vulnerable to sudden program terminations. These abrupt changes reflect a broader shift in federal spending priorities, driven by the newly formed Department of Government Efficiency (DOGE) under the new administration.
Drawing on real-time grant market intelligence from GrantExec and early contract cancellation data from Arlington Consulting Group, we detail how the new administration is reshaping everything from USAID missions to contractor roles, while revealing emerging avenues for growth and partnership.
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Key Takeaways
Massive Federal Spending Cuts & Disruptions
Over 400 open federal grant opportunities terminated in just three weeks.
$5.87B in grant funding frozen, preventing organizations from applying.
Federal contract obligations plummeted from $25.6B (Jan 2025) to $11.8B (Feb 2025).
The newly created Department of Government Efficiency (DOGE) is driving these rapid reductions.
Workforce & Economic Impact
Federal contracts and grants support 11.3M jobs—more than triple the federal civilian workforce.
Potential 1.1M–2.2M job losses nationwide if budget cuts persist.
The Virginia-Maryland-D.C. region could see 135K–270K job losses due to federal downsizing.
USAID impacted—230 contract terminations led to a staff reduction from 10,000 to just 300.
Policy Shifts & Funding Trends
Federal grant obligations for February 2025 dropped 96% compared to January.
Emergency contracts expected as agencies struggle to cover service gaps.
Defense & Homeland Security budgets increase, while social and climate-focused programs are slashed.
Key federal focus areas: AI-driven modernization, cybersecurity, defense logistics, and infrastructure.
Opportunities Amid Uncertainty
Alternative funding sources are growing—state & local grants total $22.47B, private philanthropy adds $1.09B.
Businesses must pivot to cost-efficiency solutions, strategic partnerships, and agile response strategies.
Agencies seek ROI-driven proposals, prioritizing measurable cost savings & operational efficiencies.
Strategic Actions for Organizations
Adapt Quickly—align with new spending priorities (defense, infrastructure, AI).
Diversify Funding—explore state, local, and private grants as federal streams shrink.
Refocus Value Propositions—demonstrate cost-effectiveness and mission alignment.
Build Stronger Partnerships—collaborate with established players for competitive positioning.
Executive Summary
The new administration’s reforms are significantly reshaping federal contracting and grant funding, driven by the newly established Department of Government Efficiency (DOGE). In a matter of weeks, over 400 federal grant programs have been restructured or discontinued, and more than 1,382 contracts valued at $4.3 billion have been canceled, leading to major operational shifts for agencies like USAID and creating challenges for small and mid-size businesses. While federal spending remains substantial—totaling $740 billion in contract obligations and $1.21 trillion in grants—these changes are reshaping an ecosystem that supports 11.3 million jobs, including contractors, grant-funded workers, and military personnel.
While the administration aims to eliminate waste and reduce bureaucracy, such sweeping measures risk collateral damage—curtailing essential services, triggering workforce layoffs, and destabilizing local economies. As more than 200,000 federal employees already face layoffs and additional cuts loom, emergency contracts will inevitably surface to address critical operational gaps. Meanwhile, the FY25 appropriations cycle hints at a potential pivot toward rebuilding and modernization, with a proposed $300 billion boost to Defense and Homeland Security offset by steep reductions elsewhere.
This report offers a strategic roadmap for contractors and grantseekers navigating these transformations. By focusing on solutions that deliver rapid ROI, maintaining agility through partnerships, and identifying resilient niches (like defense, VA, homeland security, and infrastructure), businesses can mitigate disruption and seize emerging opportunities. Ultimately, a balanced approach—targeting genuine inefficiencies without sacrificing core public functions—will be essential to preserving both innovation and economic well-being under the new administration.
Establishing the Scope of Disruption
Over the past decade, the federal market has experienced historic growth, significantly reshaping the economic landscape. Federal contract spending surged dramatically from approximately $440 billion a decade ago to $740 billion in FY24, representing a substantial 68% increase—and notably, a 28% rise since FY19 alone. Concurrently, federal grant obligations have expanded even more significantly, reaching $1.21 trillion in FY24, marking a staggering 101% growth over the last decade and a 58% increase since FY19. Despite the federal civilian workforce remaining relatively stable at around 2.1 million employees in 2023, employment tied to federal contracts has soared from 2.8 million in 2002 to approximately 5.2 million today, with grant-funded positions nearly doubling to 2.3 million in the same timeframe.
These figures reveal the tremendous economic and employment footprint of federal spending, underscoring the critical importance of maintaining thoughtful, strategic, and empathetic approaches to federal budgetary cuts. While addressing inefficiencies is vital, abrupt or indiscriminate reductions could trigger severe economic disruption, job losses, and weakened community stability across the country. Policymakers and business leaders must carefully balance cost-saving objectives with preserving essential public functions and minimizing adverse economic impacts.
Data Points
Grant Funding Opportunity Disruptions:
$5.87 billion in congressionally-approved funding opportunities suspended across 432 federal grant solicitations since January 20, 2025
Only 8% of affected funding opportunities have been restored (33 opportunities worth $596 million)
399 funding opportunities totaling $5.28 billion remain in limbo, preventing organizations from even applying
February 2025 grant obligations plummeted to $12.2 billion — a staggering 96% drop from January's $292 billion and 47% below February 2024 levels
Contract Cancellations:
1,382 contracts worth $4.3 billion terminated since January 20, averaging $3.1 million per cancellation
Federal contract obligations collapsed to $11.8 billion in February 2025 — down 54% from January 2025 ($25.6 billion)
DOGE claims responsibility for 10,372 terminations: 4,083 contracts ($15B) and 6,289 grant actions ($15B)
Independent verification by G2X confirms 5,809 canceled contracts totaling $11.2 billion in Total Contract Value
Agency Disruptions:
USAID contractors were hit hardest, with 230 terminations totaling $7.5 billion and a workforce reduction from 10,000 to just 300 employees
NIH commercial research was effectively halted when more than 1,200 Phase II SBIR grants were delayed after peer review panels were halted
The DOT’s National Electric Vehicle Infrastructure program was frozen, locking $3.3 billion in unspent funds and leaving 51 operational stations nationwide without any plans for expansion
EPA's Environmental Justice Small Grants Program and USDA's bioenergy initiatives were indefinitely paused
Economic Impact:
Federal ecosystem supports 11.3 million jobs (2.1M federal employees, 5.2M contractors, 2.3M grant-funded positions, 1.7M military and postal)
200,000+ federal employees in probationary roles targeted for immediate layoffs
Virginia particularly vulnerable: federal spending comprises 8.9% of state GDP (double the national average)
A 10% federal workforce reduction in Virginia could trigger statewide recession, eliminating all projected 2025 job growth
Emergency Contracts Looming:
Critical operational gaps already emerging in IT systems, public health programs, and safety measures
FY25 budget proposes $300 billion increase for Defense and Homeland Security while slashing $2 trillion from mandatory spending
These developments underscore how swiftly the federal landscape is shifting under new administration. While a push to eliminate fraud, waste, and abuse is warranted, the cumulative effect of these changes places a significant strain on agencies, contractors, and local economies.
The Central Theme: New Administration & DOGE’s Mandate
Under the second Trump Administration, the Department of Government Efficiency (DOGE) has been empowered to slash what it considers wasteful federal programs. The approach includes:
Freezing or Halting Expenditures: Delaying or re-scoping pending programs to align with evolving political objectives.
Terminating Grants and Contracts: Open and awarded agreements related to foreign assistance, climate resilience, environmental justice, abortion, gender, diversity, equity, inclusion, and accessibility face broad cancellation under DOGE’s directive to purge perceived inefficiencies.
Auditing Contractor Roles: Hundreds of thousands of contractor positions could be eliminated, particularly those deemed nonessential.
Canceling Non-Essential Consulting: A Government-wide initiative now targets any contract that “merely generates a report, research, coaching, or an artifact.”
While these measures aim to curb unnecessary spending, the ripple effects can be far-reaching, destabilizing programs central to public health, foreign aid, and other core missions. The recent surge in USAID contract terminations, for instance, illustrates how swiftly entire agencies can be upended.
Early Indicators of Contract and Grant Cancellations
In its latest report, DOGE credits itself with terminating 4,083 contracts—realizing nearly $15 billion in purported savings—and shutting down another 6,289 grant programs valued at roughly $15 billion.
Since January 20, G2X, a government contracting market intelligence platform, has tracked 5,809 canceled contracts totaling $11.2 billion in TCV, with an average contract value of $1.9 million. HigherGov data further shows that USAID—an early target—lost $7.5 billion across 230 terminations, slashing its staff from 10,000 to 300. The abrupt scale of these cancellations demonstrates how the new administration’s mandate to dismantle bureaucracy and reduce federal waste directly affects agency operations and the contractors who support them.
Simultaneously, federal contract spending has been on a steady upswing for the last decade, climbing from roughly $440 billion to $740 billion in FY24. That’s a 68% increase overall, with a 28% bump since FY19 alone. Federal grant obligations, now $1.21 trillion, have risen 101% over the decade—58% of which transpired in the last four years, propelled in large part by COVID-related programs.
Federal grant obligations in February 2025 plummeted to $12.2 billion—a stark decline from $292 billion just a month earlier, and well below the $23.2 billion figure in February 2024 and $45.1 billion in February 2023. Federal contract obligations followed a similar trajectory, dropping from $25.6 billion in January 2025 to $11.8 billion in February—further underscoring the ongoing contraction in federal spending.
While eliminating waste is an important objective, these congressionally-appropriated funds have underpinned millions of jobs across federal contracting, state and local government, scientific research, and nonprofit sectors—generating tangible public benefits alongside economic impact. Thus, curtailing these programs without a measured strategy could undermine broader national interests.
Impact on the Federal Workforce & Local Economies
Although the federal civilian workforce has hovered around 2.1 million employees for decades—unchanged since 1984 despite a significantly larger U.S. population—the contractor workforce has soared, from 2.8 million in 2002 to 5.2 million in 2023. Grant-funded positions also nearly doubled in recent years, rising from 1.2 million in 2017 to 2.3 million by 2023. Including the military (1.18 million) and postal workers (0.52 million), the entire federal ecosystem now surpasses 11.3 million jobs.
Source: Paul Light Opcit, Governance Studies at Brookings
Proposed sweeping cutbacks could jeopardize millions of good-paying jobs, particularly at smaller and mid-sized businesses lacking the resources and lobbying power of large prime contractors. Since these contractor and grant-funded positions aren’t easily repurposed in the private sector, local economies around federal hubs (like the DMV region) risk severe disruption. To stay competitive, smaller firms will need proactive strategic support—from diversification planning to targeted partnerships—as heightened scrutiny reshapes agency mandates.
With nearly 450,000 civilian federal employees in Virginia, Maryland, and D.C., and indirect employment through contractors and grant-funded positions estimated at two to three times that figure, even modest cuts could have outsized economic impacts.
A 10% reduction in Virginia’s federal civilian workforce (~18,000 jobs) could result in nearly 40,000 total statewide job losses, erasing all projected employment growth for 2025 and potentially triggering a recession—an especially severe risk given President Trump’s pledge to cut up to 100,000 federal positions from the DMV area (VPM). Economist João Ferreira highlights likely consequences including reduced consumer spending, real estate market instability, and significant layoffs in sectors heavily dependent on federal contracts (VPM). Given that federal civilian and military spending comprised 8.9% of Virginia’s GDP in 2023—more than double the national average—Virginia’s economic resilience hinges on swift, proactive responses from policymakers and businesses to mitigate potential economic disruptions (The Commonwealth Institute).
What Comes Next: “Bureaucracy Destruction” & Beyond
Over the next few months, DOGE is expected to remain in a “bureaucracy destruction” phase, aggressively pushing downsizing across agencies. More than 200,000 federal employees in probationary roles are being targeted for layoffs — not counting simultaneous contractor reductions. As critical functions become understaffed, essential government services may falter, creating crises DOGE itself is unable to resolve. In such scenarios, agencies will likely turn to emergency contracts for urgent gaps in IT systems, public health programs, and safety measures.
Beyond immediate upheaval, the FY25 appropriations cycle may herald a shift toward rebuilding. The latest House budget resolution calls for a $300 billion boost to the Department of Defense (DoD) and Department of Homeland Security (DHS), offset by $2 trillion in cuts to mandatory spending (primarily Medicaid and SNAP) and $4.5 trillion in tax reductions over a decade. While these large-scale changes could further reorganize federal agencies, they also highlight growing demand for solutions to modernize processes and achieve cost efficiencies—especially in areas where budget cuts have left operational voids.
Alternative Funding Landscapes: State, Local, and Private Sector Opportunities
As federal priorities shift, organizations must pivot toward alternative funding streams that remain robust despite the changing landscape.
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Current State, Local, and Private Grant Market
GrantExec’s real-time grant market tracking reveals substantial funding opportunities actively accepting applications today, state and local grantors will likely face pressure as federal pass-through dollars decrease:
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Organizations previously dependent on federal funding should immediately assess alignment with state and local grant priorities. Several states have indicated they may strategically allocate resources to address critical gaps left by federal reductions, though the sustainability of these efforts remains uncertain as pass-through funding diminishes.
Private Sector Mobilization
The private philanthropic sector has responded rapidly to federal funding reductions. In just five weeks following the announcement of cuts to international development, global health, and social services, major foundations have launched targeted initiatives:
MacArthur Foundation has increased its annual payout from 5% to at least 6% of its endowment over the next two years, directing an additional $150 million toward areas facing federal cuts.
Pivotal Ventures has established a $250 million fund specifically focused on improving women's health and rights globally, with emphasis on organizations losing USAID support.
Elton John AIDS Foundation has created an emergency fund directly targeted at countering the 90% reduction in USAID contracts, implementing expedited review processes for organizations facing immediate funding gaps.
Bloomberg Philanthropies has pledged to cover the U.S. share of the UN climate budget, demonstrating how private philanthropy is stepping in to maintain international commitments.
Freedom Together Foundation has doubled its grantmaking to 10% of its $4.2 billion endowment while simultaneously streamlining its application process—reducing decision timelines from months to weeks to address urgent needs.
Founders Pledge has expanded its Global Health & Development Fund to specifically address critical funding gaps left by federal cuts, focusing on evidence-based interventions.
GlobalGiving has initiated emergency fundraising campaigns to support grassroots international organizations directly impacted by the federal aid freeze, creating rapid-response mechanisms for affected communities.
Navigating the New Funding Landscape
Organizations seeking to capture these alternative funding sources should:
Reframe value propositions to emphasize efficiency, accountability, and measurable outcomes that align with foundation priorities
Develop multi-funder strategies that blend smaller grants from diverse sources to replace larger federal awards
Build collaborative consortia with complementary organizations to present more comprehensive solutions to funders
Invest in relationship development with program officers at key foundations aligned with your mission area
Demonstrate adaptability by showing how your core mission can be maintained and enhanced through more diverse funding models
While these alternative funding streams cannot fully replace federal support at scale, organizations that act swiftly to diversify their funding base—emphasizing efficiency and measurable outcomes—will be better positioned to weather the current transitions and sustain critical programs. The private philanthropic response, while substantial, remains targeted primarily toward international development, global health, and climate initiatives where federal cuts have been most severe.
Conclusion: The Imperative for Strategic Alignment
The federal landscape is undergoing unprecedented change. Contractors and grant seekers can no longer rely on previously stable pipelines of federal dollars. With DOGE actively reshaping agency budgets and priorities, disruption is inevitable. Yet, amid this turbulence, opportunities for innovation, cost savings, and transformation abound—particularly in infrastructure, defense, homeland security, AI-driven modernization, and emergency response. Key technology priorities including AI, cloud, cybersecurity, analytics, and CX will also remain key priorities.
Organizations that act swiftly—refining their value propositions around efficiency and measurable outcomes—stand the best chance of securing new business and withstanding the waves of reform. Those who hesitate risk being left behind in a market that increasingly rewards agile, data-backed, and mission-focused solutions. Ultimately, a thoughtful administration strategy must combine aggressive waste reduction with a commitment to preserving core government functions, ensuring that cuts do not inadvertently undermine the nation’s long-term economic and societal well-being.
If you have any questions or need further guidance, reach out to us at GrantExec or Arlington Consulting Group. We remain committed to helping you navigate the shifting currents of the new administration, preserving mission-critical work while seizing the next wave of federal market opportunities.
Contact Information
Andrea Avendano, Arlington Consulting Group, andrea.avendano@arlingtonconsulting.io
Ryan Alcorn, GrantExec, ryan@grantexec.com