Federal Layoffs Are Hitting Northern Virginia Hard—Here’s How Contractors Can Pivot and Thrive

If you’ve been feeling the tremors from the federal downsizing earthquake in Northern Virginia, you’re not alone. Over 11,000 federal jobs have already been eliminated in Virginia this year under the Trump administration’s Department of Government Efficiency (DOGE) initiative. And with even more cuts likely, small businesses and government contractors in the region are facing a new reality: fewer federal buyers, delayed contract awards, and a local economy in flux.

But this isn’t just a crisis. It’s also an inflection point—and for those who move strategically, it could be an opportunity.

What’s Happening (And Why It Matters to You)

Let’s break it down. The federal government is shrinking fast. Northern Virginia—home to the Pentagon and thousands of civilian and defense agency offices—is bearing the brunt. By mid-2025:

• Virginia lost 11,100 federal jobs in six months

• Fairfax County saw a 34.7% increase in unemployment year-over-year

• Contractors like Mitre and Leidos have begun layoffs tied to reduced federal awards

• UVA forecasts a net loss of 32,000 Virginia jobs by year’s end

Many agencies (especially Defense and Veterans Affairs) are cutting both staff and contracts. Procurement cycles are slowing. For small businesses that depend on federal dollars, the message is clear: business as usual is over.

Here’s the good news: this environment, while painful, is also full of possibility. If you're a small or disadvantaged business with federal contracting certifications like 8a certification assistance, women owned small business certification, or disabled veteran small business certification, you’re already positioned to compete—but the game board is changing.

Let’s talk strategy:

Reposition Around Critical Agencies and Missions

While some departments are cutting, others—like DHS, DoD cyber, and energy resilience programs—are likely to see increased funding. Look beyond traditional contracting channels. Identify where the administration is investing, not just trimming. Realign your capabilities and messaging accordingly.

Pivot Into State and Local Government Procurement

With federal job cuts straining local economies, states are stepping up. Virginia’s “Virginia Has Jobs” portal is just one example. States like Maryland, Hawaii, and Pennsylvania are actively trying to absorb laid-off federal talent—and that means new hiring, new training contracts, and new systems. Now is the time to:

• Map your NAICS code for government contractors to similar codes used in state systems

• Register with Virginia’s eVA portal and other SLED procurement systems

• Offer staff augmentation, workforce development, and training services

Get Serious About Your Certifications

Many contractors still underestimate the power of federal contracting certifications. Now more than ever, small businesses need an edge in an increasingly competitive market.

• Ensure your SBA 8a certification is up to date

• Consider applying for women business certification or disabled veteran government contracts support if eligible

• Look into SBIR Grant Assistance if you’re in a technical field

Federal agencies are under pressure to meet small business contracting goals even as budgets tighten. Certifications help you stand out—and in some cases, keep sole-source opportunities on the table.

Expand Your Grant Strategy

While direct federal contracts may slow, grants are still flowing—especially for nonprofits and innovation-focused companies. If you’re not pursuing opportunities through Grant Writing for Nonprofits or SBIR/STTR programs, you’re leaving money on the table.

Use this time to build your internal capacity or work with a grant writer who understands how to align your mission with available funding streams. Don’t ignore federal grants tied to workforce development, energy transition, or digital equity—these are hot areas in the FY2025 budget pipeline.

Rethink Your Proposal Writing Approach

With tighter budgets comes tougher competition. Now’s the time to level up your Government Contract Proposal Writing process.

• Tighten compliance with updated Government contracting certification process rules

• Refresh your pricing strategy in response to shifting scopes

• Invest in storytelling—especially how your company creates local jobs or supports displaced workers

Remember, contracting officers are also under pressure to do more with less. Make it easy for them to say yes.

This moment demands agility. The companies that will survive—and thrive—aren’t necessarily the biggest or most established. They’re the ones that can:

• Translate capabilities into relevance

• Spot emerging contracting niches before they’re crowded

• Align with shifting federal priorities without losing their core identity

There’s no sugarcoating the disruption happening across Northern Virginia. But for prepared small businesses, this is also a rare chance to expand into new markets, win trust, and become indispensable partners in the reinvention of government services.

Looking for more insights? Read our follow-up post on how to identify high-opportunity NAICS codes even during federal budget cuts. If you’re reassessing your pipeline, that’s the place to start.

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.