Big ideas and big missions live or die on budgets and contracts. The FY27 request raises questions about execution

Terry Gerton You’ve had about a week or so now to look over the president’s budget for 2027. As you’ve read through it, talk us through the highlights that you see from the Professional Services Council’s perspective.

Stephanie Kostro I will admit fully that I will dork out over the president’s budget request to this time every year. It is one of those documents that we comb through within not only my current job working with contractors, but when I was at the Pentagon and certainly when I was on Capitol Hill, really trying to read the tea leaves here about what the president’s priorities are, how he feels about certain programs, etc. One of the themes that we’ve identified here from the Professional Services Council is that this president’s budget request, even though we as a community of contractors were put through the ringer a bit over the last 14 months, this PBR, the president’s budget request, does reflect a real sense that the administration thinks contractors are an essential part of government operations. We think of the workforce to achieve federal missions as a combined federal workforce. And what I mean by that is that it stresses military personnel, civil servants and contractor personnel. And this president’s budget request really does look at the integral role that contractors will play in achieving federal missions. And so I was very heartened by that.

Terry Gerton There’s some pretty clear realignment of resources. Some of those priorities come through loud and clear in places that get more money and places that get less. As you look at how those priorities are reflected in the funding lines, where do you see the biggest execution challenges?

Stephanie Kostro I know a lot of air time has been spent on this $1.5 trillion figure for the Department of Defense/War, right? It is a huge number, and it represents a 56% increase over what the president requested for FY26. So that is a huge dollar figure. I will say, though, what is telling is that this budget request has in its base budget $1.15 trillion, and then an additional $350 billion for reconciliation. And I think it’s interesting that they’re counting reconciliation money as well as the base budget request to get to that $1.5 trillion. It is a huge increase and it remains to be seen how Congress will respond, because this is quite an uptick for the Department of Defense.

Terry Gerton While Congress is beginning the Appropriations Oversight Hearings this week, what should federal leaders and managers be watching as those roll out to see where priorities are most likely to shift?

Stephanie Kostro What a great question, because in concert with your last question, Terry, about what changes we’ve seen, I want to unpack just a couple of things with you. One is we at PSC look at the president’s budget request for FY27 in comparison to his budget request for FY26. And so you may recall in FY26 when the budget request finally did come out, it was later in the cycle, which was understandable because the president had to get inaugurated. He had to look through, and his team had to look through, all of the budget documents. And so we saw a decrease in some of the budget requests for FY26 to represent his priorities at the time. Congress did come back through the appropriations process and actually plus-up a lot of those accounts. And so, you know, if the president requested — I’ll give you an example, $43.5 billion for Housing and Urban Development, but Congress eventually appropriated more than $84 billion for Housing and Urban Development. And so we look at what the president just requested for ’27 and compare it to what he had requested in ’26. Then we also add in what Congress had decided to do. So I want to run through a few numbers with you, and I hate doing public math, but I’m going to try to do this the best that I can. So there are certain areas where the president has increased, year over year, his request. But it is still less than what Congress ended up appropriating for ’26. It’s higher than what we saw last year at this time for a request, but it’s lower than where Congress ended funding ’26. So there are examples for Health and Human Services; the request this year is down more than 12% over what was enacted for 2026. For the Department of Education, it will come as no surprise that that number is lower as well by about 3%. It’s 13% lower for Housing and Urban Development. So even though the president is requesting much more money in ’27 than he did in ’26, it’s still less than what Congress appropriated for 2026. And I wanted to give you a sense of all of that because it’s interesting to me, the role that Congress plays with the power of the purse — saying, yes, this is what the president requested, but we’re still going to give them more to some of these civilian agencies. So not the $1.5 trillion for defense, but the civilian agencies, and we expect to see that again this year.

Terry Gerton I’m speaking with Stephanie Kostro. She’s the president of the Professional Services Council. Stephanie, I know you and lots of other folks will continue to sort through the budget, but I’m going to switch to a different topic now and let you put that budget under your pillow. I want to talk about space, because Artemis II splashed down on Friday last week, a very successful mission. But NASA and space ops are very different now compared to the Apollo era that we remember for the last moon walk. How are contractors involved in this new public-private approach to space?

Stephanie Kostro I think I joined millions of Americans by being thrilled not only watching the launch, but seeing the images that came back from Artemis, knowing that there were four astronauts, you know, slingshotting the moon, right, going around the dark side of the moon and coming back and then that successful splashdown. I think the NASA administrator and the president would be among the first to say this was a team effort. Certainly the NASA folks have said they could not do that without the combined federal workforce that we talked about earlier, the civilians working alongside contractors. And it is really critical to understand, you don’t have in-house capabilities within NASA to work on propulsion, avionics, life support, the launch vehicle, the spacecraft itself. And so those things were delivered by the contractor community, under contract. And so I’m glad that you said something about Apollo. I, of course, am a child who, in my 6th grade class, watched what happened with the Challenger disaster. And so my heart is in my throat every time I watch folks get launched into space. And I think that’s probably true of a lot of the contractors who are currently of my generation and younger looking at what they can contribute. So I want to give you a couple of examples of how contractors, specifically for Artemis, contributed here. One was Boeing. They built the space launch system, core stage. Lockheed Martin designed, built and integrated the Orion crew vehicle. You know, we’ve also been talking to Amazon Web Services — NASA used them as a primary compute platform, and the 4K images and the video that came back from Orion were sent over the AWS network. So I just want to highlight that there are some really critical pieces that enabled this mission and I’m so proud to call this contract community my own.

Terry Gerton While we think about Artemis III, it’s more than a year away, the next iteration of the Moon mission, what changes might you be expecting in that NASA contractor-community relationship between now and then?

Stephanie Kostro What a fantastic question, particularly because we just went over the president’s budget request, right, which I will highlight for NASA is exactly the same as what he requested last year, $18.8. We didn’t see growth in that budget for FY27. I hope to see some changes there. I hope that we can have these discussions as contractors with folks at NASA and in the White House and on the Hill to talk about the importance of moving forward with this program — this was another example of where Congress appropriated more money than what the president asked for in ’26. And I hope that’ll be the case again in ’27. This is an area where NASA currently is going through this workforce review. They’re talking about insourcing some core competencies and requirements. And I do hope that as we move forward, the centers, whether it’s Goddard or others and folks here at headquarters in NASA, really talk to the contractors about what’s in the art of the possible, what can be accelerated, what can be done more cost effectively, but still retaining the key elements that are required for a successful mission. I have a lot of faith in this group, and I think we’re going to see good things and great things ahead.