Summary
- The Coast Guard now commands its largest funding resources in its history and is expected to prioritize digital transformation.
- The newly released Coast Guard Digital Transformation Strategy candidly admits “low digital maturity” and sets a 2028 vision built on Cloud, AI, data architecture and tactical-edge delivery.
- The Revolutionary FAR Overhaul and the FFP executive order are quietly redrawing which firms can compete and win in the Coast Guard market
Signaling a New Era for How USCG Acquires, Fields and Sustains Capabilities
For most of the last two decades, the U.S. Coast Guard has punched well above its weight on a budget a fraction of its sister services’, and the contractor base serving it has had to navigate a market shaped by that resource reality. Annual budgets were typically in the low double-digit billions with chronic underinvestment in digital and data infrastructure. Institutionalized preference for small-business partners for most of the Coast Guard’s digital and IT requirements often pushed large primes to the sidelines.
During the last eighteen months, three forces converged on the Coast Guard and have dramatically altered the way it will operate moving forward: 1) a generational funding event and good prospects for major increases in annual appropriations, 2) one of the most significant service-wide reorganizations since World War II and 3) a federal acquisition system rewrite in real time. These dynamics are actively reshaping the Coast Guard’s digital vendor landscape.
This piece is written for the three contractor segments most affected by that reshaping: the large primes whose Coast Guard portfolios have historically lagged their otherwise broader federal footprints, the small businesses for whom this market has long been a strategic priority and the commercial technology firms now explicitly invited in. Each warrants a distinct strategic approach, and the next six to twelve months will ultimately define each segment’s success.
The Three Forces
Force Design 2028 (FD2028), launched by Secretary Kristi Noem in May 2025, and described by Adm. Kevin Lunday – sworn in as the 28th Commandant in January 2026 – as the framework that will position the Service as a “more agile, capable and responsive fighting force.” This translates to real structural changes in the form of a new Navy-style Program Executive Office (PEO) approach that is now standing up at the Headquarters and Logistics Center levels, and the creation of a Rapid Response Prototype Team designed to move new capabilities from concept to operations in weeks rather than years.
RADM Jonathan Hickey, the Coast Guard’s CIO, leads the PEO most directly relevant to the technology and digital agenda, and that PEO is a meaningful departure from how the Coast Guard has historically organized its IT acquisition portfolio. The Coast Guard has also established a technology readiness directorate under Mr. Brian Campo, CG-TECH.
The second force is the FY25 reconciliation investment: $24.6 billion appropriated to USCG under the One Big Beautiful Bill Act (P.L. 119-21, signed July 4, 2025). It is the largest single funding event in the Service’s history. As of the January 2026 FD2028 Initial Update, $7.7 billion is already obligated, with the Service publicly committing to obligate 75% of the total balance by the end of FY26 and the remainder by January 2027. That compressed obligation window is the single most important fact for contractors operating in this market.
The third force is the Digital Transformation Strategy (DTX), released by RADM Chad Jacoby on May 12, 2026. The DTX Strategy is the digital and data layer of FD2028. The Service describes itself as operating at a “low digital maturity level,” heavily reliant on paper-based workflows and static PDFs. It commits to a 2028 end-state organized around four pillars: People, Process, Data, Tools. The Service also names specific technology priorities. These include a Coast Guard-managed commercial cloud, AI run against all data sets (including sensor feeds and full-motion video) and Authoritative Sources of Truth (ASOTs) and digital threads across the data architecture. Additional priorities include robotic process automation, behavioral modeling and simulation and TAK integration for tactical-edge delivery. The operational vignette featured in the strategy depicts a cloud-based USCG threat model pushing risk recommendations to a boarding officer’s TAK device in near-real-time. That is the future state, in USCG’s own words. The Coast Guard is developing a DTX Strategy implementation plan as well, that will provide additional details.
If the contractor base needed further evidence of the Service’s self-assessment, the Acquisition Superhighway RFI (published in November 2025) described the Coast Guard’s own acquisition workflows as having “minimal to no use” of advanced technology like AI. That is not language one would expect from an agency when it is comfortable with its status quo.
The New Acquisition Environment
The forces above are unfolding inside an acquisition system that itself is being rewritten. Most of the contractor base is still adjusting to the speed of that rewrite.
Executive Order 14275 (“Restoring Common Sense to Federal Procurement,” April 15, 2025) launched what is now branded as the Revolutionary FAR Overhaul. The FAR is being rewritten part-by-part to strip non-statutory content; by the fall of 2025, seven Parts had already been overhauled, with the remainder rolling out on a staggered timeline. Several changes matter for technology contractors. “Best value” – a decadeslong foundational principle is removed from FAR Part 1 in favor of language emphasizing commercial preference, risk management and innovation. Contracting officer discretion is substantially expanded. The EO introduces a four-year regulatory sunset and a new framework called Strategic Acquisition Guidance (SAG) captures best practices outside the FAR text itself. Notably, the first SAG focuses on software-as-a-service acquisitions (an unambiguous signal of where the Administration is steering federal IT buying).
Executive Order on Firm-Fixed-Price Contracting (April 30, 2026) is the piece of the puzzle most contractors are still underestimating. FFP is now the federal default, as cost-reimbursement, time-and-materials and labor-hour contracts require written justification and senior-level approval above specified thresholds. For technology providers, this changes the math in several directions. Firms with the balance sheet and pricing discipline to absorb FFP risk will appreciate this change. Contractors whose margins have historically depended on cost recovery through T&M scopes are more likely to be exposed. Emerging-technology work where scope evolves and outcomes are inherently uncertain gets harder to structure under traditional FFP, which raises the strategic value of well-designed performance-based incentives, Other Transaction Agreements (OTAs) and Commercial Solutions Openings (CSOs).
The FAR Part 19 overhaul has, contrary to some early speculation, preserved the structural small-business preferences that have defined Coast Guard contracting for years. The 8(a), Women-Owned Small Business (WOSB), and HUBZone programs remain, albeit curtailed in terms of goals. Also, the Rule of Two survives. The primary change is truly more administrative in nature: streamlined compliance, broader mentor-protégé latitude and a cleaner pathway for prime/small-business teaming arrangements. For a market like the Coast Guard, where set-aside vehicles have driven a meaningful share of the IT services portfolio, this carries more weight than it might in the Coast Guard’s Department of War sister services.
These reforms layer on top of FD2028’s PEO model and the Rapid Response Prototype Team. The Coast Guard also leverages other agencies’ IDIQs to reduce strain on its contracting workforce. With a new FAR Part 16 change, the Coast Guard can establish BPAs against existing GWACs. That materially benefits agile, iterative buying. Taken together, these reforms put the Coast Guard on a trajectory to procure more like a true technology buyer.
Decoding the Buying Signals
For contractors trying to translate strategy documents into capture priorities, six buying-behavior shifts are now visible across FD2028, the DTX Strategy, and the reformed FAR environment.
First, enterprise data architecture has become a buying category in its own right. ASOTs, the digital thread and AI-readiness imply foundational data platform work that USCG hasn’t historically bought at scale.
Second, AI is no longer an add-on capability; instead it will be treated like any other evaluation criterion, as the Coast Guard wishes to “run AI against all data sets, including data from sensors and full motion video.” This is a direct mandate, and it will very likely show up in proposal evaluations whether or not such allusions are equally explicit in RFPs.
Third, expedited acquisition pathways are becoming the default rather than the exception, particularly for technology.
Fourth, the FFP-default environment is reshaping how technology firms price and propose, with consequences for emerging-AI work where outcomes are inherently difficult to specify.
Fifth, workforce and change management are co-equal with technology. The People pillar is not decorative, and DTX-aligned proposals that don’t address it leave value on the table.
Sixth, tactical-edge delivery (such as TAK integration, role-based dashboards, or near-real-time decision support) is the new technical bar for what mission risk analytics, command-and-control, and operational decision support are expected to look like.
Three Audiences, Three Very Different Conversations
The Large Primes
For the large primes, the Coast Guard is an historically challenging market. The reasons are structural (the small-business preference and consequent set-aside vehicles like COMPASS), cultural (prefers partners with Coast Guard-specific past performance) and economic (smaller average deal sizes than Dept. of War equivalents). Most prime account teams have either deprioritized or treat Coast Guard pursuits as “icing” on the broader defense sector accounts they operate.
The math has changed. FD2028 introduces enterprise-scale complexity to include cloud architecture, AI/ML at scale, change management across a 50,000-person force, and digital thread integration across PEOs. None of these are ones where small businesses can deliver at the same scale and with the same credibility and risk management as the large primes can. The FFP EO advantages firms with the pricing discipline and balance sheet to absorb risk that smaller competitors cannot. The PEO model, modeled on Navy structures, is far more familiar territory for primes than the legacy logistics and service centers model that has historically defined Coast Guard contracting. Upcoming full and open opportunities also favor the primes. The forecasted Data, Analytics & AI Support contract is valued at over $100 million with a Q4 FY26 award. The CGCYBER Integrated Operations Management contract is similarly valued at over $100 million on GSA Schedule. Its solicitation will be released on May 28 with a Q4 FY26 award. These are the kinds of vehicles where primes can credibly compete in ways the “smalls” cannot.
What primes need to do now is invest in Coast Guard-specific translation of capabilities before this window closes. This should include Coast Guard- or maritime security specific hires and active small-business teaming postures for the set-aside subcontracting opportunities that still drive meaningful share. Primes should demonstrate maritime mission understanding that goes beyond translating existing Dept. of War or broader-DHS quals, and a coherent story about how the firm’s enterprise tech portfolio maps to FD2028’s PEO structure and DTX’s four pillars. The primes that wait for September (the start of FY27) to make this pivot will find that the meaningful FD2028-funded efforts are already awarded.
The Small Business Incumbents
For the small businesses that have long enjoyed the Coast Guard’s structural preference, the good news is that the FAR Part 19 overhaul preserves the protections that made this market accessible in the first place. The Rule of Two remains. The 8(a), WOSB, and HUBZone programs. Mentor-protégé latitude is broader than before. The bad news, however, is two-fold. The DTX-era technical bar has risen substantially. Running an Access-based legacy tool well is no longer evidence that an incumbent should be re-awarded, and the FFP-default environment exposes business models that have historically relied on T&M margin recovery. Both pressures will be most acute at the recompete point and the recompete calendar is dense.
The strategic imperative for small business incumbents is to pressure-test every recompete against both the DTX bar and the FFP risk profile. Where they are not technically credible at the new bar, the choice is to invest, partner under the broader mentor-protégé latitude or exit. Where FFP pricing exposes the existing delivery model, bidders should reevaluate their delivery models before pursuit. Recompete proposals that read like “more of the same” may lose to ones that read reinforce the DTX vision coupled with an FFP approach highly favored by the current administration.
The New Commercial Tech Entrants
For commercial tech firms – particularly those with strong AI/ML, cloud-native, data engineering, and SaaS portfolios – the Coast Guard becomes substantially more accessible than at any point in recent memory. DTX is, functionally, a procurement invitation. The Service explicitly wants commercial Cloud, AI applied to sensor and full-motion video data, behavioral modeling and simulation and RPA. The first Strategic Acquisition Guidance focuses on SaaS. The Rapid Response Prototype Team promises capability fielding in weeks. The FAR Part 1 overhaul elevates commercial preference into the foundational language of the federal procurement system.
That said, the path in is still narrow, and most commercial firms underestimate the cultural distance. CMMC and clearance requirements don’t disappear because the FAR became more commercial-friendly. Past performance still matters in evaluation. USCG’s institutional preference for known partners persists. And the FFP-default environment cuts both ways for commercial firms: SaaS-style FFP pricing is native to the commercial market, but federal scopes on emerging-AI work require risk modeling that most commercial firms haven’t done for government customers.
The right strategic frame for commercial entrants is to choose a wedge deliberately. The path is almost always via teaming, subcontracting or strategic acquisition before priming. The Rapid Response Prototype Team, SaaS-focused SAG procurements, OTAs through DHS, the Maritime CSOP and the DHS Silicon Valley Innovation Program (SVIP) are the highest-probability entry points. The forecasted Data, Analytics & AI Support contract (more than $100 million, expected in Q4 FY26) will have AI/ML scope that commercial firms are uniquely positioned to address through prime teaming. The CG ASC Integrated Program Management and IT Services contract (8(a) OASIS+ SB, $10–20 million, June 1 solicitation, Q4 FY26 award) explicitly calls out Power Platform and RPA scope. These are natural teaming entry points for commercial firms with adjacent capability.
The next twelve months are a relationship-building and capability-positioning window, not a bid-and-win cycle. Commercial firms that treat it otherwise will spend a lot of capture dollars losing.
The Specific Procurement Window
Five procurements over the next two quarters will define meaningful Coast Guard contractor share in the near-to mid-term.
| Procurement | Value | Set-Aside / Vehicle | Est. Award Timing | DTX Alignment |
| Data, Analytics & AI Support | $100M+ | TBD | Q4 FY26 | DTX flagship (Data + Tools) |
| CGCYBER Integrated Ops Management | $100M+ | GSA MAS | Q4 FY26 | Cyber-mission convergence |
| MSRAM Recompete | $20-50M | Full & Open BPA | Q3 FY26 | Maritime risk ASOT candidate |
| ALC ISD Professional Services | $100M+ | SDVOSB / VETS 2 | Q4 FY26 | Enterprise IT recompete |
| CG ASC IPM/IT Services | $10-20M | 8(a) / OASIS+ SB | Q4 FY26 | RPA + Power Platform |
Different opportunities will favor different bidder archetypes. But every firm serious about Coast Guard share should know where it does and doesn’t have a credible play, and where teaming is the answer. The fact that four of five of the above opportunities are scheduled to reach an award decision by Q4 FY26 is itself a signal; DHS leadership is operating under genuine obligation pressure, and the procurement cadence reflects it.
Implications
For primes, the imperative should be to refine the Coast Guard account strategy before the current fiscal year concludes, and to invest the capture resources required to compete credibly against incumbents and well-positioned small businesses on the meaningful Full & Open vehicles. Primes should get to know the PEO structure under RADM Hickey and the rest of FD2028’s PEO leadership and build the small-business teaming postures that translate into set-aside subcontracting. Lastly, they should develop FFP pricing muscle for emerging-tech scopes and build a Coast Guard-specific narrative rather than recycling DHS or DOW pedigree.
For small business incumbents, the imperative is to pressure-test every recompete against both the DTX bar and the FFP risk profile. Where the firm is not technically credible at the new bar, decide whether to invest, partner up under the broader mentor-protégé framework or exit. Where FFP pricing exposes the existing delivery model, redesign before bidding rather than after the award. Use the next twelve months to harden the AI/ML, cloud-native, and data architecture stories before the recompete bell rings.
For commercial tech entrants, the imperative is to choose a wedge deliberately and use the next twelve months for relationship-building and capability-positioning rather than for premature priming. Decide now whether the path forward is acquiring a USCG – credible partner or building one organically – both paths work, but the timeline does not accommodate indecision.
Recommended Next Steps
The Coast Guard market is historically one of the harder federal markets to read. The convergence of Force Design 2028, the DTX Strategy, the historic reconciliation investment, the Revolutionary FAR Overhaul, and the firm-fixed-price executive order makes the direction of the market clearer than ever. It makes the competitive landscape considerably more complex. The strategic question for most contractors is not “what is the Coast Guard buying?” They’ve done a clear job of answering that. The strategic question is “where do we actually fit in this new picture, and what specific moves will establish our competitive advantage in the next six to twelve months?”
That question is harder to answer well from inside a single capture team or a single account plan. It requires cross-segment competitive insights – namely, understanding what the primes are doing, where the incumbent small businesses are exposed, which commercial entrants are credibly closing the cultural distance and a working understanding of how FAR reform, FFP-default, the DTX and the FD2028 PEO model interact in practice rather than in theory.
Our firm works across all three of these contractor archetypes in the Coast Guard market and adjacent DHS and Department of War markets. We have spent the last several years tracking the convergence of FD2028, the reconciliation buildup and the federal acquisition reforms that are reshaping how this work gets bought and delivered.
This analysis reflects the cross-segment perspective we bring to capture strategy, win theme development, teaming and partnership advisory and market entry support. If the questions in this piece resonate, please reach out to The Chertoff Group leadership team for a discussion.
Cameron Fegers, CIP is a senior director in the Chertoff Group’s Federal Strategy business. He helps companies accelerate Federal market growth.
