The Department of Government Efficiency (DOGE) courses its direction from Elon Musk and Vivek Ramaswamy to achieve the objectives of federal spending reduction, governmental efficiency enhancement, and operational simplification. Small businesses face alarm because the pending mission towards a lean bureaucracy threatens their sole federal contract revenue base.
Small businesses operating in IT, consulting, construction, or logistics sectors risk catastrophic consequences from the budget reductions enforced by DOGE since such measures endanger their revenue flow, job networks, and economic growth for the adjoining communities.
For small businesses it’s now necessary to have better compliance to get to work with the government. It needs the best business tax lawyers to help these organizations operate even in such volatile environments. Here, we will look at some of the elements that businesses in different states can face after the practical actions of DOGE in the US government.
Businesses That Rely on Federal Contracts
Many smaller enterprises base their operations on obtaining federal contracts, delivering more than monetary gains. Through the U.S. Small Business Administration (SBA), small businesses obtained $159 billion worth of federal contracts during fiscal year 2022, which amounted to 26% of total prime contracting dollars.
The contracts enable small companies to deliver cybersecurity protection services to the Department of Defense and provide janitorial maintenance for federal buildings and more. Businesses receive market stability through lengthy contracts because these deals offer extended periods during which they can create recruitment plans and spending strategies.
A Virginia-based small IT organization with 50 employees sustainably performs maintenance of federal agency software as their primary contract. The business agreement supports 70% of its yearly profit. A family construction firm that refurbishes Ohio federal buildings maintains its crew of twenty employees because of its continuous government projects backlog.
The DOGE’s Axe: Potential Challenges for Businesses
The DOGE leadership team has identified three main targets: excessive spending, needless programs, and budget magnification. Existing details about this initiative are still unclear, but preliminary research points to reducing unnecessary contracts and contracts with excessive prices.
During discussions, Musk and Ramaswamy have shown interest in reviewing the $700 billion Pentagon budget and have criticized costly middleman contractors. Small businesses currently face the prospect of project terminations and reduced project tasks and may have to compete harder for a decreasing number of available contracts.
Steps Small Businesses Can Follow to Navigate These Landscapes
In this uncertain time, one can follow several steps when managing the business effectively in such situations.
- Diversifying Sources of Revenue Stream
A business can increase operations by making forward or backward integration or can go into other related products or services. The idea is to reduce the reliance on government contracts and increase revenue from the other side.
- Increasing the Compliance Standards
A business must follow stricter compliance standards to work with the government. The best tax attorneys are the ones who can handle such issues and make your business ready to fall into the strict compliance standard. It will increase the chance of your business receiving federal contracts and thus help you to run your business.
These are some of the issues that the small businesses of the United States can face after the practical work of DOGE on federal contracts.
