A Closer Look at the State of Government Contracts in the USA as Musk Companies Awarded Over $20 billion
Published on March 8, 2025 in Strategic
Just two months ago, Elon Musk was chiding the US government on its spending habits. Speaking on social media, he said the deficit was as dangerous to America as too much personal debt can be to an individual and he warned that the country would be in “deep trouble” if action was not taken.
He has since taken a wrecking ball to federal agencies, including the dismantling of the United States Agency for International Development (USAID) without authorization from congress, an act described as “reckless and illegal” by AmericanOversight.org. However, it seems that the President’s most trusted advisor is prepared to make an exception to the economies when the funds are channelled towards his own businesses.
Interstellar spending – and another $76 million since the inauguration
Companies owned by Musk have been promised or awarded around $21 billion since 2008. The vast majority of this is through federal contracts with SpaceX, the private space company that Musk founded in 2002, through NASA and the DoD.
There is no indication that the economies advocated over recent months will be applied in this direction. In the few short weeks since President Trump’s inauguration, the government has promised an additional $76 million to businesses in the Musk empire.
Most of the money paid to or promised to SpaceX derives from contracts with NASA. One, for example, covers launch services for NASA satellites, while another is to supply cargo flights to the planned Lunar Gateway space station, which is expected to be launched in 2027. And this is just the beginning. If NASA was to exercise every option on every contract with SpaceX, the company would stand to gain over $56 billion.
Make no mistake, SpaceX is providing real services to the US government and the same applies to other Musk-owned companies such as Tesla and Starlink. When SpaceX rescued four astronauts from the International Space Station last year, it achieved what no other company could do at the time and brought them home safely.
However, it raises questions about potential conflicts of interest, especially when the individual charged with assessing whether such conflicts exist is none other than Elon Musk himself. He has already been forthright in attacking some contract holders. For example, he criticized Politico for selling subscription services to government agencies, while remaining silent on SpaceX following a similar business model.
How Government Contracts are Awarded
The United States Government is the largest buyer of goods and services in the world, so it is inevitable that it will do plenty of business with companies like SpaceX and Tesla. In 2023, it committed about $759 billion in contracts. That’s an increase of about 4.5 percent on the previous year, after adjusting for inflation. Clearly, government spending has a massive impact on the overall economy and upon the success or failure of businesses large and small across the nation.
Here, we will take a deep dive into how government contracts are awarded. We will look at some of the key trends and statistics connected with federal and state procurement. These include which states receive the most government contracts, the top industries and the mechanisms in place to ensure small businesses and those representing set aside groups receive a fair slice of the pie.
Overview of US Government Procurement Trends
Federal spending data is tracked through the Federal Procurement Data System (FPDS) and USASpending.gov. This ensures transparency in how government contracts are allocated. The largest portion of spending by far is allocated to defense contracts, which account for about 60 percent of overall government procurement. Other significant areas of spending over the past 24 months include the following:
- Healthcare procurement, such as Medicare and Medicaid contracts, research grants and medical supplies contracts.
- Infrastructure and public works – this has been driven by new and updated legislation such as the Infrastructure Investment and Jobs Act.
- Energy – with more money being channeled towards renewable energy through Clean Energy Contracts.
Top Sectors for Government Procurement
Government procurement encompasses practically every imaginable sector. However, Table 1 demonstrates the industries that receive the most dollars when it comes to government contract spending.
| Industry | Approximate annual spending per year (US$billion) | |
| 1 | Defense and aerospace | 400+ |
| 2 | Healthcare | 80+ |
| 3 | Energy and infrastructure | 50+ |
| 4 | IT and cybersecurity | 40+ |
| 5 | Manufacturing and logistics | 30+ |
Table 1.0
Top 10 US States That Receive the Most Government Contracts
Federal contracts are awarded to businesses across the USA. But some states consistently receive higher contract spending than others. This is typically due to a higher concentration of business working in key industries such as defense, technology or manufacturing. Table 2.0 shows the states receiving the most federal contract dollars in 2023.
| State | Contract spending (US$billion) | Key Industries | |
| 1 | Virginia | 60 | Defense, IT, Government Services |
| 2 | California | 50 | Aerospace, Technology, Defense |
| 3 | Texas | 45 | Energy, Defense, Healthcare |
| 4 | Maryland | 35 | Healthcare, Cybersecurity, Defense |
| 5 | Florida | 30 | Defense, Space Exploration, Transportation |
| 6 | Washington | 25 | Aerospace, Defense, Technology |
| 7 | Alabama | 20 | Defense, Aerospace, Manufacturing |
| 8 | Pennsylvania | 18 | Shipbuilding, Defense, Healthcare |
| 9 | Georgia | 17 | Defense, Infrastructure, Logistics |
| 10 | Illinois | 15 | Manufacturing, Transportation |
Table 2.0
Virginia might at first glance seem to be surprising at the top of the list. but it is, of course, home to the Pentagon and the CIA as well as major government contractors such as Booz Allen Hamilton and General Dynamics.
California is less surprising. As well as all the tech firms, most notably Google, major aerospace companies such as Lockheed Martin and Northrop Grumman are based here.
Texas is home to some of America’s largest military bases, including Fort Cavazos and Fort Bliss, so many defense contracts are signed here. It is also the hub of the US energy sector, featuring such distribution giants as Dallas-based Oncor Electric Delivery.
Maryland is another state that readers might not initially expect to see in the top five. The presence of the NSA Headquarters in Fort Meade goes some way towards explaining it.
As well as NASA, there are major military bases in Florida, which combine to drive space and defense contracts.
A Look at the Buyers
There are 438 US Government agencies and sub-agencies. Some have larger budgets than others. This information is set forth in the US Congressional Budget Office’s website. The biggest spenders of 2023 are shown in Table 3.0
| Agency | Contract spending (US$billion) | |
| 1 | Department of Defense (DoD) | 400 |
| 2 | Department of Energy (DOE) | 30 |
| 3 | Department of Health and Human Services (HHS) | 25 |
| 4 | Department of Veterans Affairs (VA) | 20 |
| 5 | National Aeronautics and Space Administration (NASA) | 19 |
| 6 | Department of Homeland Security (DHS) | 17 |
| 7 | General Services Administration (GSA) | 15 |
| 8 | Department of State (DOS | 12 |
| 9 | Department of Transportation (DOT) | 10 |
| 10 | Department of Justice (DOJ) | 9 |
Table 3.0
As we have already established, the DoD is by far the largest spender. It has awarded, for example, signed the two largest government contracts, which are with Lockheed Martin and Boeing and are worth $48 billion and $28 billion respectively.
Government Contracts are Open to All
Despite the eye-watering examples above, the US government does not exclusively do business with global multinationals. On the contrary, the federal government has set a goal to allocate 23 percent of its contract dollars to small businesses each year. In 2022, this equated to $154 billion in federal contracts that was awarded to small businesses.
To further drive diversity, the government offers set aside contracts that are explicitly aimed at and awarded to specific business groups. These include the following:
- The 8(a) Business Development Program helps minority-owned businesses to gain federal contracts.
- The Women-Owned Small Business (WOSB) Program encourages female entrepreneurs in government contracting.
- The Service-Disabled Veteran-Owned Small Business (SDVOSB) Program – Supports veterans in the procurement process.
Winning and Losing Government Contracts
Government contracts can be extremely lucrative and could even represent the difference between success and disaster in the current economic environment. Little surprise, then, that winning government contracts is so competitive. The cycles vary according to the agency, industry and type of contract. However, we can extract the following general trends:
- Average RFP response time for most federal contracts is 20-30 days, although for complex projects, this can escalate to 90 days or more.
- Success rates are around 20 percent for large contractors. For small businesses, this drops to less than 10 percent, typically due to a combination of competition and compliance obstacles.
- Vendors who use a strategic bidding approach see a success rate closer to 35 percent.
On the other side of the coin, fraud and inefficiencies are the biggest roadblocks in government procurement, as the following examples illustrate:
- The Sentinel intercontinental ballistic missile program was initially estimated at $62.3 billion in February 2015. Projections rose to more than $90 billion in less than a year, and by 2020, estimates were again revised to $96 billion. The latest reports suggest the real cost could be closer to $160 billion.
- About 25 percent of federal contracts bypass standard bidding processes.
- In 2022, enforcement of the False Claims Act led to $2.2 billion in settlements related to fraudulent government contracts.
Looking to the Future
Digital transformation is reshaping the entire procurement sector, and government contracting is no different. AI and automation are likely to play an ever-larger role in both contract analysis and fraud detection, while blockchain will increase both transparency and security.
This in itself represents a growing opportunity, with the global GovTech market projected to reach $1.3 trillion in 2025.
Sources
https://www.gao.gov/blog/snapshot-government-wide-contracting-fy-2023-interactive-dashboard
https://www.congress.gov/bill/117th-congress/house-bill/3684
https://libraryguides.fullerton.edu/c.php?g=189838&p=5350761
https://www.cbo.gov/data/budget-economic-data
https://www.gao.gov/federal-contracting
https://gsa.federalschedules.com/resources/naics-code-government-spending-report
https://business.defense.gov/Socioeconomic-Programs/SDVOSB
https://www.armscontrol.org/act/2024-03/news/sentinel-icbm-exceeds-projected-cost-37-percent
https://www.nytimes.com/2024/10/20/us/politics/elon-musk-federal-agencies-contracts.html