How Much Does the Federal Government Spend on Contracts? ($681 Billion in FY2025 — Full Breakdown)
The federal government awarded $681 billion in contracts in FY2025. Here is exactly where it went — by agency, NAICS code, set-aside type, contract vehicle, and state.
$681 Billion in FY2025 — The Number Behind the Number
The federal government awarded $681.3 billion in prime contracts in FY2025 across 312,000+ individual awards. That makes the U.S. government the single largest purchaser of goods and services on Earth.
But the top-line number hides the real story. Where that $681 billion goes -- which agencies, which industries, which types of businesses -- determines whether there is opportunity for your company or not.
By Agency: Who Is Buying?
The top 10 contracting agencies account for 89% of all contract spending:
Department of Defense — $429.2 billion (63%)
This includes the Army ($148B), Navy ($121B), Air Force ($98B), and defense agencies like DISA, DARPA, and MDA. DOD buys everything from aircraft carriers to cybersecurity services to cafeteria management.
Department of Energy — $42.8 billion (6.3%)
Dominated by national laboratory management contracts (Los Alamos, Sandia, Oak Ridge) and nuclear weapons program support.
Department of Health and Human Services — $38.1 billion (5.6%)
CDC, NIH, CMS, and FDA. Fastest-growing civilian agency for IT modernization and data analytics contracts.
Department of Veterans Affairs — $36.4 billion (5.3%)
Medical supplies, healthcare IT, facilities management, and professional services. VA has the most aggressive small business targets of any major agency.
General Services Administration — $24.7 billion (3.6%)
GSA manages government-wide contract vehicles (GSA Schedule, GWACs). Many GSA dollars flow through to other agencies via task orders.
Department of Homeland Security — $21.3 billion (3.1%)
CBP, ICE, TSA, FEMA, CISA. Cybersecurity spending growing 15%+ annually.
NASA — $19.8 billion (2.9%)
Launch services, R&D, engineering, and IT. High barriers to entry but premium pricing.
Department of State — $12.1 billion (1.8%)
Diplomatic security, facility management, IT modernization.
Department of Justice — $9.8 billion (1.4%)
FBI, DEA, BOP. Incarceration services, IT, and professional services.
Department of the Interior — $8.3 billion (1.2%)
Environmental, construction, scientific research, wildfire management.
By Industry: What Are They Buying?
The top NAICS codes by contract value:
The trend is clear: services dominate federal procurement. IT services alone account for over $89 billion (combining 541512 and 541519). If you sell professional services, the federal market is massive.
By Business Size: Who Wins?
Large businesses: $502.9 billion (73.8%)
The top 100 contractors capture about $320 billion. Lockheed Martin leads at $52.8 billion, followed by RTX ($28.1B), General Dynamics ($24.6B), Boeing ($21.3B), and Northrop Grumman ($19.7B).
Small businesses: $178.3 billion (26.2%)
This exceeds the 23% statutory goal. Broken down by set-aside program:
The most important insight: small business contracting is not a consolation prize. $178 billion is larger than the GDP of 140 countries. And within specific NAICS codes and agencies, small businesses win the majority of awards.
Use the NAICS Competition Analyzer to see exactly how many firms compete in your space and what the dollars-per-firm economics look like.
By Contract Type: How Do They Buy?
Fixed-Price contracts: $298B (43.8%) — The government pays a set price regardless of actual costs. Most common for well-defined requirements. Lower risk for the government, higher risk for the contractor.
Cost-Reimbursable: $241B (35.4%) — The government reimburses actual costs plus a fee. Used when requirements are uncertain. Common in R&D and complex systems development.
Time & Materials / Labor Hour: $87B (12.8%) — The government pays hourly rates for labor and actual costs for materials. Common for IT support, maintenance, and advisory services.
Other (IDIQs, BPAs, etc.): $55B (8%) — Indefinite Delivery/Indefinite Quantity contracts and Blanket Purchase Agreements that establish ceiling values with individual task orders.
For pricing strategy, knowing the contract type distribution in your NAICS code is critical. The Pricing Intelligence Engine breaks down historical awards by competition type so you can benchmark your rates against what agencies actually pay.
By Competition: How Competitive Is It?
This means 43.6% of contract dollars are awarded without full competition. Sole-source awards and set-asides are not random -- they follow specific rules and patterns. Understanding who gets sole-source awards and why is a significant competitive advantage.
The Trend Line: Growing or Shrinking?
Federal contract spending has grown in 5 of the last 6 fiscal years:
The growth is concentrated in IT/cybersecurity (+12% CAGR), healthcare services (+9%), and professional services (+7%). Traditional categories like construction and manufacturing are roughly flat.
For FY2026, the enacted defense budget is $895 billion (up 3.1%), and civilian IT modernization funding is up across HHS, VA, and DHS. The market is expanding.
What This Means for Your Business
$681 billion sounds abstract until you narrow it to your specific opportunity:
The federal market is not one market. It is 300+ agencies, 1,100+ NAICS codes, and 5 distinct set-aside programs -- each with different dynamics. The firms that win are the ones who know exactly which slice is theirs.
Related Guides
More from the Federal Spending Trends FY2026 series