Quick answer
The United States government is the largest single buyer of goods and services on the planet. In fiscal year 2024, federal agencies alone awarded over $755 billion in contracts. Add state and local government procurement, and the total crosses $2.2 trillion every year.
That is not a typo. Two point two trillion dollars.
For context, that exceeds the entire GDP of countries like Italy or Canada. Yet most businesses either do not know this market exists or assume it is too complicated to enter.
This article breaks down the numbers. Every figure comes from verified government data sources including USAspending.gov, SAM.gov, the GAO contracting dashboard, and SBA reporting.
The Total U.S. Public Procurement Market
Here is the top-level breakdown for the current fiscal environment:
| Market Segment | Annual Spend | Share of Total |
|---|---|---|
| Federal procurement (FY2024) | $755-774 billion | 34% |
| Federal procurement (FY2025 est.) | ~$793 billion | 35% |
| State and local (SLED) procurement | ~$1.5 trillion | 66% |
| Total U.S. public procurement | ~$2.2-2.3 trillion | 100% |
As a percentage of GDP ($30.8 trillion in 2025), total public procurement represents roughly 7-8% of the national economy. That is actually below the OECD average of 12%, which means there is structural room for this market to grow.
The government procurement software market alone is valued at $1.48 billion in 2026, projected to reach $2.67 billion by 2035 at a 10.3% compound annual growth rate. The ecosystem around government contracting is expanding rapidly.
Federal Spending: Who Buys What
Top Agencies by Contracting Spend (FY2024)
The Department of Defense dominates federal procurement. No other agency comes close.
| Rank | Agency | FY2024 Spend | Share |
|---|---|---|---|
| 1 | Department of Defense (DoD) | $464.2 billion | 59.87% |
| 2 | Department of Veterans Affairs | ~$78 billion | ~10% |
| 3 | Department of Health and Human Services | ~$31 billion | ~4% |
| 4 | Department of Homeland Security | ~$28 billion | ~3.7% |
| 5 | Department of Energy | Included in "other" | ~3% |
| 6 | NASA | Included in "other" | ~2.5% |
| 7 | General Services Administration | Included in "other" | ~2% |
| 8-10 | DOJ, State, Treasury | Included in "other" | ~3% each |
| - | All other civilian agencies | ~$170 billion (combined) | ~22% |
The key takeaway: DoD accounts for nearly 60 cents of every federal contracting dollar. If you are serious about government contracting at scale, you need a defense strategy. The Navy, Air Force, and Army collectively account for over 70% of defense spending, with the Defense Logistics Agency (DLA) adding another $40 billion in spare parts, fuel, and supplies.
The Department of Veterans Affairs is the fastest-growing civilian agency for procurement, driven by healthcare modernization, facility construction, and IT transformation.
Federal Spending by Industry Sector
The government buys across every conceivable category. Here is how spending breaks down by sector:
| Industry Sector | Share of Federal Spend | Approximate Value |
|---|---|---|
| Facilities and Construction | 18% | ~$136 billion |
| Professional Services | ~15% | ~$113 billion |
| IT Services and Products | ~15% | ~$113 billion |
| Aircraft, Ships, Submarines, and Vehicles | ~12% | ~$91 billion |
| Research and Development | ~10% | ~$76 billion |
| All other categories | ~30% | ~$226 billion |
The top five categories account for more than 65% of total federal spending. Facilities and construction lead the pack, fueled by military base modernization, VA hospital construction, and federal building maintenance.
Professional services and IT are neck-and-neck, reflecting the government's ongoing digital transformation push. Cloud migration, cybersecurity, and artificial intelligence are driving sustained growth in both categories.
Number of Federal Contractors
In FY2024, exactly 108,899 companies held active federal contracts. That number breaks down as follows:
| Business Category | Companies | Contract Value | Share |
|---|---|---|---|
| Small businesses | 78,677 | $176 billion | 23.3% |
| Large businesses | 40,856 (est.) | $579 billion | 76.7% |
| Total | 108,899 | $755 billion | 100% |
The actual FY2024 result exceeded the statutory small business goal: 28.8% of eligible federal contracting dollars ($183 billion) went to small businesses, surpassing the 23% target.
Small Business Set-Aside Programs
The federal government runs several programs designed to direct contracts toward specific categories of small businesses. Each has a statutory goal expressed as a percentage of total prime contract dollars:
| Program | Code | Government Goal | Eligibility |
|---|---|---|---|
| Total Small Business | SBA | 23% of prime contracts | Any small business meeting NAICS size standards |
| 8(a) Business Development | 8A / 8AN | 5% of prime contracts | SBA-certified socially and economically disadvantaged |
| Women-Owned Small Business (WOSB) | WOSB | 5% of prime contracts | SBA-certified women-owned |
| Service-Disabled Veteran-Owned (SDVOSB) | SDVOSB | 3% of prime contracts | Service-disabled veteran-owned |
| HUBZone | HZC | 3% of prime contracts | Firms in Historically Underutilized Business Zones |
What These Numbers Mean in Dollars
Applying the goals to FY2024's $755 billion in federal contracting:
- 23% small business goal = $176 billion (actual result: $183 billion at 28.8%)
- 5% 8(a) goal = ~$38 billion
- 5% WOSB goal = ~$38 billion
- 3% SDVOSB goal = ~$23 billion
- 3% HUBZone goal = ~$23 billion
These are not theoretical numbers. Federal agencies are held accountable for meeting these goals through SBA scorecards. Agencies that consistently miss their targets face pressure from Congress and the SBA. This creates real, structural demand for small business contractors.
If your firm qualifies for multiple set-aside categories, the competitive advantage compounds. An 8(a) HUBZone WOSB, for example, is eligible for set-asides across several programs, dramatically reducing the number of competitors on any given solicitation.
The SLED Market: The Other $1.5 Trillion
While federal contracting gets most of the attention, state, local, and education (SLED) procurement is nearly twice as large.
| SLED Entity Type | Count | Estimated Annual Spend |
|---|---|---|
| 50 state governments | 50 | ~$500 billion |
| County governments | 3,031 | ~$200 billion |
| Cities and towns | 19,502 | ~$300 billion |
| School districts (K-12) | 12,546 | ~$70-80 billion |
| Special districts | 39,555 | ~$300 billion |
| Higher education | ~4,000+ | ~$100 billion |
| Total | 90,837+ entities | ~$1.5 trillion |
The SLED market is massive but fragmented. There are over 90,000 local government entities in the United States. Each one has its own procurement rules, thresholds, and portals. Only an estimated 8,500 to 14,500 of these entities have any form of electronic procurement portal. That means 85-90% of local government purchasing happens through manual, offline processes.
Cooperative purchasing is growing rapidly as a way to manage this fragmentation. The cooperative purchasing market was valued at $65 billion in 2025 and is projected to reach $100 billion by 2027. Organizations like OMNIA Partners (90,000+ member agencies), Sourcewell (50,000+ agencies), and TIPS/TAPS enable government buyers to piggyback on competitively awarded master contracts.
What This Means for Contractors
The Federal Opportunity
Federal contracting is large, transparent, and well-documented. Every solicitation over $25,000 must be posted on SAM.gov. Every award is tracked in USAspending.gov. The rules are complex but consistent under the FAR.
For small businesses, the set-aside programs create protected competitive spaces. An 8(a) set-aside with three eligible bidders is a fundamentally different competitive environment than an unrestricted solicitation with thirty.
The SLED Opportunity
SLED contracting offers lower barriers to entry, shorter procurement cycles, and significantly less competition. Many state and local solicitations receive fewer than five proposals. The challenge is finding them across 90,000+ entities.
This is where platforms like Bidovate add value. Bidovate aggregates procurement opportunities from federal, state, and local government sources, allowing contractors to search across jurisdictions from a single platform. Instead of monitoring fifty state portals individually, you get a unified view of the market.
The Combined Strategy
The most successful government contractors work both markets. They pursue federal contracts for scale and SLED contracts for volume and diversification. A company that wins a $50 million DoD IDIQ and simultaneously holds twenty $500,000 state contracts has a more resilient revenue base than one that depends on a single large federal award.
Frequently Asked Questions
How big is the U.S. government contracting market?
Total U.S. public procurement exceeds $2.2 trillion annually. This includes approximately $755-793 billion in federal contracting and $1.5 trillion in state and local government procurement across 90,000+ entities.
Which federal agency spends the most on contracts?
The Department of Defense (DoD) is the largest buyer, spending $464.2 billion in FY2024, which represents nearly 60% of all federal contracting. The Department of Veterans Affairs is the second-largest at approximately $78 billion.
What percentage of federal contracts go to small businesses?
The statutory goal is 23% of prime contract dollars. In FY2024, the government exceeded this target, awarding 28.8% ($183 billion) to small businesses across 78,677 companies.
What are the main small business set-aside categories?
The five main categories are Total Small Business (23% goal), 8(a) Business Development (5%), Women-Owned Small Business (5%), Service-Disabled Veteran-Owned Small Business (3%), and HUBZone (3%). Each has specific SBA certification requirements.
How do I start finding government contracts?
Register on SAM.gov for federal opportunities and identify your NAICS codes. For state and local contracts, use an aggregation platform like Bidovate that consolidates opportunities from multiple portals. Bidovate's Mevin AI can match your company profile to relevant solicitations across federal and SLED markets, saving you hours of manual searching.
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