Shutdown Arrives

In sum, there are rumors this shutdown is expected to last a week or a fortnight. But there is white space to never end in its political drama. What it does do is highlight silent inflammation in industry, and the Department has started taking NSAIDs (but avoiding Tylenol obviously).

My comments are issues the shutdown makes worse - because they’re pre-existing and perhaps do not need insurance:

• Budget and contracts people have left the government and the government needs them more than PMs,
• Shutdown both gives federal civilians time to listen to media - but they’re seldom targeted,
• Many past startups designed for themselves not mission, and there’s no hope in a shutdown (or should be after),
• Long-term shutdown craters many small businesses and integration/consulting firms (GovCons),
• Prime will moan, but their core business (of war) is unaffected,
• Europe is a different government (!) and continues to expand its wallet for Defense, but European Defense means European, not American

The lack of budget and contract personnel is a challenge that worsens

Contracts and Budget Federal Civilians Are Covalent Bonds Industry Needs.

Many have taken the buyout; the rest are now on furlough. If a customer has access to a COR and KO in DOD, they can move paper. If they don’t, they might be in trouble. And the plan to have a single contract of contracts, helmed by GSA, won’t be a reality in time.

The Government is shut down - for those who did not experience this in 2013. The group most affected is federal civilians. In many cases, this doesn’t affect defense startups; however, it does impact some contractors, as many program managers and technical program officers are federal civilians.

However, most contract and budget teams are comprised of federal civilians. Contracts and budget teams, those federal civilians, are unsung heroes of the industrial base. The tedious agreements, pedantic meetings, and unnecessary (it would seem) details and homework on your labor rates and costs are the necessary gauntlet of analysis and documentation to justify tax dollars. Because it is taxpayer dollars, there should be gates to access it. They serve that role.

In my experience, and in most cases, not only are we on the same team, but they are also on your team. They want you to succeed - no one wants you to fail, except others in a schadenfreude-dominated industry. At a time when many norms are being abandoned, including principles and methods, the skill set that contracts and budget professionals possess will be in high demand. If they’re not in the Government, it’s worth it to hire one - because your customers will need their expertise to award you contracts.

Recommendation: Consider hiring a former (recent) contracting officer or contract representative certified professional who can help draft and staff administrative paperwork to get under award. This is true now and will continue to be true into 2026 - until the master contract GSA vehicles project emerges.

Shutdown might be a mere week or longer than “usual”

The political divisions are along a line both sides are comfortable not negotiating on. And a battle over the narratives that change perspectives on these hot-button issues can alter the shutdown timetable. But seems unlikely. Even still, most feedback I have heard is that this might be a week-long thing. However, it’s almost impossible to know because it’s dependent on key political leaders, not staff, or other actors. What it is is political theatre.

The same is true for industry. Many federal civilians are at home, with honey-do lists and limited time, but more time than usual for media consumption. They weren’t reading the deluge of LinkedIn virtue posts, but they might be reading them now - or at least checking in. The typical federal civilian barely has time for their job, and whatever portion of time industry engagement would take up as a second-fiddle to internal communication during work hours. And most are consumed by their family lives before and after.

It is a thing to do that can get eyeballs. In my estimation, there are a maximum of 10,000 eyeballs that vaguely scroll through YouTube and other outlets for defense-related podcasts, with different audiences for both. And to be harsh, there are two categories of audience: those that matter (to the military and therefore to industry) and those that do not (who may or may not matter to both industry and investors). And the dominant eyeballs getting the word out to those who matter (military customers) are the Modern War Institute and War On The Rocks. Even still, engagement numbers are crushed by multiple single-camera news scrolling formats and commentary that are popping up on YouTube. There is something that can emerge in media outreach - and it might be a mix of company-led podcasts to communicate, rather than PR news and new media outlets that military customers plug into.

This is another indication of my current theory that 2026 will be an era where new and more targeted, intense methods of communication are needed to move the needle. A new era where the Department is both open to ideas but intolerant of projects and desires “programs”, as a euphemism for things that are mature and ready to be tested in the field. The field tests and T&E are important, have always been necessary, and are now front and center. This goes to the next reality.

Most designs aren’t tactical; they’re laboratory

The Department is quietly intolerant of science projects as they focus on modernization of programs, cut high-recurring costs, and make trade-offs, but resource technologies that matter in war.

The past few weeks, both stealth firms and customers that I’ve spoken to are more focused on the 5Ws, or concept of employment, although they don’t call it that, than the scientific prowess of a product.

That’s resonant of the coming intolerance of science projects and the desire to build new modern programs = weapon systems, collection systems, etc. Applicance of war. And the bar is now higher, with years of paper cuts in the form of startups from garages and myths around the inherent science, intellectual superiority of start-ups. And, at the edge of foreign policy, a disconnect has existed from the innovation and Pentagon-level markets that have been very active.

The Army, for example, is far more interested in what works in field tests and CONEMPs than a founder's CV. The most important and positive takeaway is that the Department is still not just open ot them but wants start-ups to succeed. But they have to know what they’re doing, or study it, and enter the actual marketplace of ideas in contact with the true customers and prove their mettle.

I can’t tell you how many nonsense pitches even I got at SO/LIC and then USD/I - it was incredible how passionate but delusional these pitches were with zero prospects to be employed by the military. But I figured it was economic activity that would drive a new market, and would, over time, find its footing and align with defense needs, not fantasy. We are almost there, and this admin is in acceleration towards that. Startups won’t be inventing new TTPs because that’s forged in the fire of combat and the training done by those who do the job.

If the Shutdown persists more than a fortnight, it might still be open for business

Shutdowns remove non-essential personnel from the offices. But essential workers are self-assigned by the agencies.

Military operations do not cease. And the technologies that help us conduct, win at war: shoot, move, communicate; collect intel, analyze, and disseminate; target-strike-assess targets - does not change. Like DOGE, the primes will not be affected on their core products and value because these are “commercial” products. Who is in threat? Integrators who don’t really integrate stuff that matters right now, and service providers who aren’t supporting things that are material to operational commands. In many ways, a shutdown forces a perspective that should always be present. Live your life like it’s shut down in Defense.

European Defense market is not letting up

The Europeans might be a better home for science projects and innovation than the US market, as it modernizes its programs

The European market, which semi-includes Britain (due to Brexit), continues to rise. I will post other data-focused assessments on this. But, the bottom line is this: Europeans won’t say what they think, which is Europe first, and it will play out with American firms who seek prime status in Europe. Why would Europeans do that?

But, by definition, that’s a thing that is a product, and as a vendor/supplier. Like in the US, Leonardo and others dominate certain technical product sections of the market. But throes at prime status are troublesome, with BAE as an exception, not a rule.

That aside, the European market has fewer fixed, recurring costs than the Americans and will have more purchasing power over time for innovations - in search of the war-winning platforms programs that become high fixed, recurring costs. Europe is at war, or rather, Russia is in Phase 0 of its war with the whole of Europe. Europe knows this, and the European Rip Van Winkle is up, grabbing some coffee. The rate of European rearmament will continue to cook - and not only over this administration but beyond.