Faster, Leaner, More Competitive: How the 2025 Federal Contracting Reforms Reshape the Game for Small Businesses
In May 2025, the Trump Administration dropped a procurement policy bombshell: a sweeping Executive Order, backed by a DoD memo, that rewires how federal contracts—especially defense contracts—are awarded. If you’re running a government contracting business, or thinking about jumping in, this just changed the landscape.
At the heart of the reform is a push for speed, flexibility, and commercial innovation—using tools like Commercial Solutions Openings (CSOs) and Other Transaction Agreements (OTAs) to bypass red tape and bring in nontraditional vendors. Translation? Small businesses, startups, and even nonprofits with the right tech or service have more federal contracting opportunities than ever before.
What Changed? A Plain-English Rundown
The Executive Order directs the Department of Defense to prioritize:
CSOs (Commercial Solutions Openings): A way for agencies to post problems and let industry—especially small businesses—propose innovative, commercially available solutions.
OTAs (Other Transaction Agreements): These agreements sit outside traditional Federal Acquisition Regulation (FAR) contracts, allowing for more agility, faster timelines, and custom-negotiated terms.
The DoD memo from Secretary Pete Hegseth goes further, mandating these tools as the go-to for software development and technology prototyping. If you're in the business of solving problems, not checking compliance boxes, this is your lane.
Why This Matters to Small Businesses
If your company is SBA-certified, working on your 8a certification assistance, or recently secured your women owned small business certification, you may already know how tough it is to break into the federal market. These reforms level the playing field—especially for:
8a businesses looking for more than just set-aside crumbs
Disabled veteran-owned firms targeting DoD contracts
Startups with commercial products that have federal use cases
Nonprofits working on R&D or public service tech, looking for grant writing for nonprofits support
Here’s what’s in it for you:
Fewer Compliance Barriers: CSOs and OTAs drastically reduce traditional red tape. You won't need a full-blown compliance department to bid.
Faster Decisions: Instead of waiting 12–24 months on a proposal, you could win an award in weeks.
Negotiable Terms: You can better protect your IP, suggest milestones that match your business model, and negotiate commercial-style terms.
New Market Entry Points: If you’ve never held a federal contract, that’s no longer a deal-breaker. Innovation and speed count more than past performance.
Action Steps for Businesses Looking to Compete
Here’s how to prepare your company to take advantage of this moment:
Monitor SAM.gov for CSO postings related to your NAICS code for government contractors. These are often written more like problem statements than solicitations.
Join a consortium aligned with your industry. Many OTA opportunities are only open to members of sector-specific groups—space tech, health tech, AI, and more.
Explore dual tracks: If you're already pursuing SBIR grant assistance, use those wins to springboard into CSO or OTA deals. SBIR Phase III contracts can even be awarded without competition.
Strengthen your proposal game: Streamlined doesn't mean sloppy. Bring your A-game when it comes to government contract proposal writing, especially for competitive CSOs.
Leverage your certifications: While CSOs and OTAs don’t fall under traditional small business set-asides, your SBA 8a certification or disabled veteran small business certification still adds credibility—especially when teaming with larger vendors.
Bigger Picture: The Certification Still Matters—But So Does Agility
Yes, the traditional government contracting certification process—including 8a, SDVOSB, and women business certification—still plays a big role in many solicitations. And yes, agencies still use small business set-asides. But these reforms are building a parallel pipeline for small, innovative businesses who can deliver results fast.
If you’re a tech startup, a minority-owned business, or just a nimble company with a fresh solution, these new tools open doors that used to be locked behind compliance-heavy procedures. The trick is knowing when to use your sba 8a certification services and when to go in as a nontraditional vendor ready to solve a real-world problem.
Want to better understand which contractor NAICS code gives you the best shot? Check out our post on The Best NAICS Codes for Small Business Contractors to make sure you’re aligned with how agencies are buying in 2025.
If you aren't a Squared Compass partner, what are you waiting for? From getting your business set up with specific government set aside programs at both the State and Federal level, to being empowered by a Fractional Capture team to win government contracts, to receiving tailored government contract opportunities Squared Compass delivers immense value which helps propel our partners to success. Schedule a chat with our team today.
