The One Big Beautiful Bill Act (OBBBA) is a massive legislative package that touches nearly every aspect of federal operations, from defense appropriations to environmental review reforms to sweeping tax policy changes. For government contractors looking to stay ahead of the curve, it represents both a wealth of new opportunities and a series of new risks that will require careful planning. 

Passed after months of rapid revisions, the OBBBA spans over 1,000 pages and includes funding and policy shifts that could significantly affect contracting pipelines in the coming months. The provisions of this bill are worth close attention for every government contractor. 

Opportunities for Increased Government Contracting Spending 

Increased areas of spending 

The bill includes approximately $150 billion in appropriations dedicated to defense and broader national security priorities for shipbuilding, weapons systems, training, and logistics. 

H.R. 1 provides $170.7 billion in additional funding for immigration enforcement through FY2029, with expenditure flexibility across: 

• Border wall and checkpoint construction. 

• Patrol agents, vehicles, and training. 

• Technology, detention capacity expansion, processing, prosecutions, and relocation support. 

Contractors can target: 

• Construction and engineering for physical infrastructure. 

• IT, surveillance, and security systems deployment. 

• Logistics and facility support (maintenance, operations, training services). 

Financial and operational opportunities 

The OBBA also contains tax provisions that can improve cash flow and financing options for small GovCons.  Section 179 rules allow full expensing of qualified purchases such as back-office software in the first year, making it easier to invest in equipment, software, and facilities that directly support federal contract performance.  

Another notable change is the expansion of Qualified Small Business Stock (QSBS) provisions, which could make it easier for growing firms to raise capital or plan for eventual ownership transitions. For GovCons looking to attract outside investment, this is a potentially powerful incentive. 

Tax changes for Small GovCons 

The One Big Beautiful Bill Act brings several significant tax benefits for small government contractors (GovCons). Enhanced R&D expensing and refundable credits benefit firms investing in innovation, including SBIR/STTR projects and prototype development for agencies like DoD and DHS. Immediate expensing for domestic R&D costs has been restored, allowing eligible firms to deduct these expenses in the year incurred, which boosts cash flow and encourages innovation. Full 100% bonus depreciation is now permanent for qualified assets placed in service after January 19, 2025, enabling GovCons to fully expense investments in equipment, IT infrastructure, and facilities up front. Additionally, the pass-through deduction (Section 199A)—a 20% deduction on qualified business income for S-corps, LLCs, and partnerships—has become a permanent provision, reducing taxable income and increasing available capital for owner-operators. 

Other key changes include a temporary increase in the state and local tax (SALT) deduction cap from $10,000 to $40,000 for tax years 2025–2029, especially benefiting firms in high-tax states, and the permanent extension of the lower individual tax rates established in the 2017 Tax Cuts and Jobs Act. These provisions together provide more certainty, improved deductions, and greater flexibility for small GovCons as they plan for growth and investment. 

Recommended actions for GovCons 

GovCons should be adjusting strategies in several ways now. This may include securing additional funding capacity, expanding your talent pool, and strengthening supplier relationships before competition for these resources intensifies. Proposals should be revised to incorporate potential tax advantages from depreciation and R&D provisions, while also accounting for any additional compliance costs tied to OBBA-funded projects. 

Close collaboration with tax advisors will be critical to maximize the bill’s benefits, especially for firms balancing rapid growth with the need for financial stability. GovCons in renewable energy or related sectors should maintain a close watch on evolving subsidy rules to avoid surprises during project execution. 

GovCons should monitor the federal budget process, as there are many steps and chances for things to change as appropriations and reconciliations will continue to happen.  

• Focus on how OMB requests align with HR1 priorities, as these confluences often have a better chance of materializing as real opportunities. 

• Align your products and services with key agency objectives. Clearly demonstrate how your solution, pricing, and support address both critical objectives and provide the best value. 

• Formulate approaches to explore adjacent markets or target new agencies that may benefit from stabilized funding through H.R. 1. 

• Anticipate a rise in information technology initiatives focused on supporting AI-driven business system consolidation, research and development, and energy exploration, which may be integrated into broader non-IT mission projects such as telecommunications orbiter integration for deep space exploration. 

• Continue monitoring the federal budget process, noting the possibility of additional reconciliation legislation in FY 2026. 

Looking forward 

The OBBBA presents a rare mix of short-term urgency and long-term potential. GovCons that act quickly to effectively align and manage their resources, update bidding strategies, and leverage new tax incentives will be well-positioned to capture the most promising opportunities. At the same time, the bill’s complexity demands discipline: careful compliance, strategic scaling, and proactive risk management will be the keys to turning legislative change into sustained business growth. 

Looking to learn more about how you can equip your business with the solutions you need to stay disciplined? Connect with a  Unanet expert today.