DHS Contracting in FY 2026: Stability, Scrutiny, and a Shift in How Work Gets Bought

The Department of Homeland Security (DHS) enters FY 2026 in a familiar but more constrained position. Contract spending remains substantial and mission-critical, yet the way DHS buys—and what it prioritizes—is clearly evolving under the Trump 2.0 administration.

For contractors, the message is not to exit the market, but to recalibrate.

A Consistent Market Share, With Internal Rebalancing

Over the last five years, DHS has maintained a steady share of total federal contract obligations. That consistency masks important internal shifts. While overall spending has not collapsed, recent quarters show notable pullbacks in certain components, particularly in professional services-heavy areas.

Q3 FY 2025 contract obligations dropped sharply compared to the prior year, signaling a pause rather than a retreat. The data suggests DHS is reassessing where dollars are most directly tied to mission execution.

Who Is Still Spending

Among DHS components, Immigration and Customs Enforcement (ICE) and the Office of the Secretary were the only organizations to increase Q2/Q3 obligations year over year. This aligns with broader administration priorities around enforcement, border operations, and centralized oversight.

Other components experienced declines, reinforcing the reality that DHS contracting is becoming more uneven across the enterprise.

Winners, Losers, and What That Means

NAICS-level analysis shows clear divergence. Construction, security services, software publishing, and IT services saw growth, while several consulting and management-focused NAICS codes experienced steep declines.

This is not accidental. DHS is signaling a preference for tangible outputs—facilities, systems, equipment, and operational services—over advisory-heavy engagements.

Small Business Pressure Points

All major small business socioeconomic categories saw reduced obligations in FY 2025 compared to FY 2024. While DHS remains committed to small business participation structurally, near-term execution reflects tightening budgets and greater scrutiny of set-aside decisions.

Small businesses that succeed in FY 2026 will need strong alignment with DHS mission priorities, proven past performance, and positioning on the right contract vehicles.

Vehicles Matter More Than Ever

The cancellation of DHS-specific vehicles such as FirstSource III and PACTS III marks a major inflection point. Work once routed through DHS-owned vehicles is shifting to GSA-operated contracts like MAS, OASIS+, Alliant, and SEWP.

For contractors, access to these vehicles is no longer optional—it is foundational.

The Bottom Line

DHS contracting in FY 2026 remains robust, but it is more centralized, more cost-conscious, and more selective. Contractors who adapt to consolidated buying channels and focus on mission-essential delivery will remain competitive. Those relying on legacy vehicles or loosely scoped services may struggle.