The Weekly Update recaps recent legislative and regulatory updates affecting
government contractors and commercial businesses.
If you have questions concerning this content, please email marketing@pilieromazza.com.
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GovCon M&A and Recertification: What Small Business Contractors, Investors, and Private Equity Firms Need to Know, PilieroMazza Client Alert, Samuel S. Finnerty
The Small Business Administration’s (SBA) size and recertification rules have always been central to government contracting. But recent regulatory changes, and where we now stand in mid-January 2026, mark a meaningful shift in the GovCon M&A landscape, particularly for private equity firms and other investors. The “grandfathering” era is over. Successful GovCon M&A transactions now require buyers and sellers to identify, price, and actively manage size-status risk early in the deal process. Those that treat recertification as a post-close compliance exercise risk inheriting unexpected eligibility, revenue, and valuation exposure. Read more here.
Upcoming Presentations
TRAINING: Insights on the Regulations Pertaining to Novations and How It Impacts Company Value, February 11, 2026, Isaias “Cy” Alba, IV, Abigail “Abby” L. Baker
The Rise of OTA in Defense Contracting, Part 5: Commercial Solutions Openings and NDAA FY26, PilieroMazza Blog, Isaias “Cy” Alba, IV, Josie Farinelli, Kristine “Krissy” Crallé
In the evolving landscape of government contracting, non-FAR-based procurements, including Other Transactions Authority (OTA), have become a focal point. A key element of President Trump’s April 9, 2025, Executive Order, “Modernizing Defense Acquisitions and Spurring Innovation In the Defense Industrial Base,” emphasized reforming the Department of War’s (DOW) acquisition process by prioritizing Commercial Solutions Openings (CSOs) and OTA. In November 2025, Secretary Hegseth’s memorandum, “Transforming the Warfighting Acquisition System to Accelerate Fielding of Capabilities,” highlighted that the Under Secretary of War for Acquisitions and Sustainment (USW(A&S)) would soon mandate the use of OTA, among other non-FAR-based procurements whenever feasible. Defense contractors should also take note that the National Defense Authorization Act of Fiscal Year 2026 (NDAA FY26) suggests a broader application of CSOs, indicating Congress’s interest in expanding the use of non-FAR-based procurements like OTA and CSOs. As OTAs and CSOs are used more frequently, defense contractors will gain a competitive advantage for early adoption and greater leverage to negotiate favorable data rights and intellectual property terms outside the FAR. Read more here.
Funding Rescissions, Re-Staffing Initiatives and Other Major Takeaways from the Final FY26 Funding Package, Government Executive
A government shutdown at the end of January is looking unlikely, even as Congress has just more than a week to take critical votes to fund agencies for the remainder of fiscal 2026. Lawmakers again declined to provide Trump with most of the funding cuts he requested. Appropriators this week put forward a fourth spending package, meaning they have reached a bipartisan, bicameral agreement on all 12 of the annual, must-pass funding bills. Half of those have already cleared Congress, while the third easily won approval in the House and is awaiting a vote in the Senate. Read more here.
Pentagon Spending Surge in Fiscal 2025 Set Contracting Record, Bloomberg Government
In a year with a strong White House message of cost-cutting, spending by the Pentagon rose 9.3% to a new record. A new year-end analysis of fiscal 2025 contract spending by Bloomberg Government shows the Defense Department’s unclassified contract obligations climbed to $521 billion in fiscal 2025. Read more here (subscription required).
Department of War (DOW) Memoranda:
- Artificial Intelligence (AI) Strategy for the DOW. On January 9, DOW issued a memorandum outlining its AI strategy in compliance with Executive Order 14179. DOW will accelerate AI integration and implement resources, leadership, and private sector partners to become “AI-First.” Read more here.
- Transforming Advana to Accelerate AI and Enhance Auditability. On January 9, DOW issued a memorandum, effective immediately, to overhaul and restructure the Advana program to accelerate warfighting, intelligence, and enterprise missions and modernize Advana into a War Data Platform. Read more here.
- Transforming the Defense Innovation Ecosystem to Accelerate Warfighting Advantage. On January 9, DOW issued a memorandum, effective immediately, to disestablish the Defense Innovation Steering Group, the Defense Innovation Working Group, and the CTO Council. In their place, the CTO will convene a CTO Action Group. Read more here.
- Class Deviation—Acquisition of Dinnerware and Stainless-Steel Flatware. On January 8, DOW issued a class deviation, effective January 1, 2026, until January 1, 2029, implementing Section 842 of the National Defense Authorization Act for Fiscal Year 2025, adding dinnerware and stainless-steel flatware to the list of covered items. Read more here.
USAF Consolidates Some Acquisition Program Offices Into Mission-Focused Groups, Defense One
The Air Force is sweeping some of the offices that oversee its acquisition programs into groups with similar missions, part of an effort that aligns with—but also predates—recent acquisition-reform guidance issued by the defense secretary. But many of the new “portfolio acquisition executives” were already leading multi-mission efforts. Read more here.
Government Accountability Office (GAO) Report: Navy Shipbuilding: Improving Warfighter Engagement and Tools for Operational Testing Could Increase Timeliness and Usefulness
On January 15, GAO released a report detailing its review of operational test and evaluation documentation related to Navy vessels, interviews of officials from the Navy and the Office of the Secretary of Defense, and site visits to three naval warfare centers and the Navy’s self-defense test ship. GAO is making three recommendations to the Navy, which are intended to ensure that the Navy (1) has consistent representation from warfighter organizations in test planning, (2) makes a decision about maintaining the test capability currently provided by its self-defense test ship, and (3) establishes a cohesive plan for investing in digital test infrastructure. Read more here.
I ‘Did Not Expect to be Told to Build A Battleship,’ Navy’s Surface Warfare Director Says, Defense One
The Navy was not planning to unveil a new class of ship last year, much less two, but November and December brought the cancellation of a frigate program, the launch of another, and the comeback—at least in name—of a type the service had largely deactivated by 1947. The Trump administration’s priorities are forcing the service to rethink its shipbuilding plans. Read more here.
Upcoming Presentations
PM WEBINAR: Warfighting at Warp Speed: Why Defense Contractors Must Track the DOW’s Acquisition Overhaul, January 28, 2026, Lauren Brier, Josie Farinelli
PM WEBINAR: PilieroMazza Annual Review: 2025 GovCon Year in Review, January 29, 2026, Jon Williams, Lauren Brier, Meghan F. Leemon, Eric Valle
WEBINAR: 2025 Small Business Regulatory Year in Review, February 4, 2026, Jon Williams
PM WEBINAR: DCAA’s Annual Update, February 24, 2026, Isaias “Cy” Alba, IV
No Interest, No Protest: The Critical Importance of Understanding the “Interested Party” Standard, PilieroMazza Blog, Katherine B. Burrows, Eric Valle, Josie Farinelli
Last week, the Supreme Court declined to review Percipient.ai, Inc. v. United States, 153 F.4th 1226 (Fed. Cir. 2025), a high‑profile Federal Circuit decision that limits who may bring a protest at the U.S. Court of Federal Claims (COFC). Percipient.ai invested years and untold legal fees in protesting and appealing COFC’s “interested party” standard, underscoring just how consequential meeting that definition is for government contractors seeking to challenge federal procurement decisions. In this blog, we explain why positioning your company as an “interested party” is one of the most important actions you can take to preserve your ability to file bid protests before COFC. Read more here.
PilieroMazza Partner Nichole Atallah Appointed to WIPP Board, Advancing Women-Owned Businesses in Government Contracting, PilieroMazza News
PilieroMazza is pleased to announce that Partner Nichole Atallah was appointed to the Board of Directors of Women Impacting Public Policy (WIPP) for the 2026 term. Read more here.
Senate Bill Will Require DOD to Review Cyber Workforce Gaps, Federal News Network
A new bill will require the Pentagon to assess whether its current efforts to recruit, train, and retain cyber talent are working — and to produce a new department-wide plan aimed at addressing persistent cyber workforce gaps. Read more here.
Democrats Question White House Tech Lead on How Workforce Churn Will Impact AI Action Plan, Government Executive
Office of Science and Technology Policy Director Michael Kratsios shed light on the Trump administration’s artificial intelligence policy plans in a Wednesday House hearing, highlighting the role federal agencies will play in executing these efforts despite mass employee terminations that have taken place over the past year. Read more here.
DoD Lacks Reliable Data on the Number of Civilians Teleworking, Working Remotely, Federal News Network
The Pentagon doesn’t know exactly how many civilian employees telework or work remotely across the Department of Defense, according to the Government Accountability Office. GAO found that while most DoD civilians are back in the office, the Pentagon doesn’t have detailed data on employee use or the impact of telework or remote work. Read more here.
Federal Unions, Employees Urge Senate to Take Up Bill Restoring Collective Bargaining, Federal News Network
Hundreds of federal employees, union members, and other workforce advocates gathered in front of the U.S. Capitol building on Wednesday afternoon to urge the passage of legislation that would restore their collective bargaining rights. After the Protect America’s Workforce Act cleared the House, federal unions have been pushing for the Senate to take up the bill’s companion legislation. Read more here.
BGOV Bill Analysis, Bloomberg Government:
- R. 2262, Unpaid Employer Job Training: Employers would be able to hold voluntary job-related trainings after hours without compensating employees for attendance or participation under H.R. 2262. Employers could exclude training from employees’ work hours for minimum wage and overtime compensation purposes if the training occurred outside of the employee’s regular working hours, attendance or participation is voluntary, and the employer doesn’t take adverse action against the employee for not attending or participating. The employee also couldn’t perform any work during the training. Read more here(subscription required).
- R. 4366, Joint Employer Definition: A business would be considered a “joint employer” only if it exercises significant control over the terms and conditions of employment of another company’s workers under H.R. 4366. The measure would codify the definition of joint employment — where two or more businesses are responsible for an employee’s working conditions — under both the National Labor Relations Act and the Fair Labor Standards Act. Read more here(subscription required).
- R. 2270, Child and Elder Care Overtime: Employers wouldn’t have to include the value of child and dependent care benefits when paying overtime to workers under H.R. 2270. The bill would exclude the payments, reimbursements, or value of such services from an employee’s regular rate, which is paid at 150% for time worked in excess of 40 hours per week under the Fair Labor Standards Act. The provision would apply to overtime accrued after the bill’s enactment. Read more here(subscription required).
Upcoming Presentations
CONFERENCE: 2026 Employment Law Rescue Guide for Contractors, January 28, 2026, Nichole D. Atallah
PM WEBINAR: You’re Hired! Restrictions on Hiring Former Government Employees for Government Contractors, February 3, 2026, Sara Ryan, Abigail “Abby” Finan
PM WEBINAR: PilieroMazza Annual Review: Workforce Updates for Multijurisdictional Employers—What to Watch in 2026, February 11, 2026, Nichole D. Atallah, Sarah L. Nash
AUDITS & INVESTIGATIONS
Bill to Improve Government’s Anti-Fraud Checks Heads to Trump’s Desk, Government Executive
As the Trump administration continues to respond to a fraud scandal in Minnesota social services that has raised attention to fraud in government programs overall, lawmakers passed a bipartisan proposal to improve a Treasury Department system meant to prevent government money from going to the wrong people. House lawmakers passed a bipartisan proposal on Monday to give the Treasury Department’s Do Not Pay system permanent access to death records at the Social Security Administration. Read more here.
Government Accountability Office (GAO) Report: Combating Fraud: Approaches to Evaluate Effectiveness and Demonstrate Integrity
On January 14, GAO released a technical appendix to its Fraud Risk Framework to aid program integrity, protect taxpayer dollars, and maintain public trust. GAO identified examples, methods, and considerations that can be used to help evaluate the effectiveness of fraud risk management activities. Read more here.
Department of War (DOW) News Release: War Department Enacts New Cybersecurity Program to Safeguard Service Member Data
On January 15, DOW issued a news release detailing the implementation of the Cybersecurity Maturity Model Certification (CMMC), a landmark cybersecurity program, in November 2025 to better protect sensitive information across the U.S. defense industrial base. CMMC establishes a mandatory framework to ensure that thousands of companies contracting with DOW have verified cybersecurity measures in place to protect the department’s data they handle. The program is especially critical for protecting the personally identifiable information of service members and their families, particularly during the permanent change of station process. Read more here.
Federal Risk and Authorization Management Program (FedRAMP) Blog: Realizing the FedRAMP Authorization Act
FedRAMP is releasing the final set of proposed changes to complete the program’s modernization under the FedRAMP Authorization Act and OMB Memorandum M-24-15. These six Requests for Comment (RFCs) represent the culmination of nearly a year of planning, testing, and community input, marking a significant milestone in realigning FedRAMP with its new statutory mandate. Read more here.
House Explores Grid Cybersecurity Boosts Amid Growing Threats, Route Fifty
Several bills before Congress would reauthorize or bolster various programs designed to strengthen the nation’s electric grid against cyber threats and help cash-strapped public utilities bolster their defenses. Read more here.
Lawmaker Eyes Bill to Codify NIST AI Center, Federal News Network
A top House lawmaker is developing legislation to codify the National Institute of Standards and Technology’s Center for AI Standards and Innovation into law. The move to codify CAISI comes as lawmakers and the Trump administration debate and discuss the federal government’s role in overseeing AI technology. Read more here.
Report: Workforce Shortages, Security Fears Among Biggest Hindrances to Agency AI Adoption, Government Executive
A report issued by Google Public Sector shed light on the state of play for federal AI adoption, finding most efforts are currently in pilot programs and held up by security concerns. Artificial intelligence adoption within federal agencies feels inevitable, but major concerns around cybersecurity, procurement and workforce challenges could hinder this progress, agencies say. Read more here.
General Services Administration (GSA) Blog:
- Restoring Common Sense to Government Acquisition: On January 12, GSA released a blog highlighting its progress in 2025. Since January 20, 2025, GSA has driven more than $60 billion in contract savings across the federal government and cancelled more than $500 million in contracts. Read more here.
- Advanced Notice for MAS Refresh 31 and Upcoming Mass Modification: On January 12, GSA released a blog outlining its plan to issue MAS Solicitation 47QSMD20R0001 – Refresh # 31 in February 2026. The mass modification applying the changes associated with Refresh 31 has to be accepted by the subject contractor no later than 90 days after the modification has been issued. Read more here.
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