PSC’s Vision Forecast sees tight budgets, high uncertainty through the next decade

For the past six decades, the Professional Services Council’s Vision Forecast has been a bellwether for trends in the market and its predictions for 2026 come in an environment unlike anything it has seen before.

The trade association held a sneak peak of the findings ahead of the opening of its annual Vision conference this morning (Monday).

In a Nov. 24 briefing with reporters, PSC identified five major forces that are disrupting and reshaping the market:

• Data disruption. For example, many of the agency IT forecasts and dashboards have been dark since March.
• DOGE's impact. The organization may have wound down much of its operations, but its impact will be felt for a long time.
• Government-wide Software-as-a-Service agreements. These are proliferating and the General Services Administration is leading here with its OneGov strategy.
• Artificial intelligence. These technologies are accelerating, but with few guardrails.
• Culture clashes. Diversity, equity and inclusion programs are ending. More political appointees are entering chief information officer positions and speed is being emphasized over process in acquisitions.

PSC conducts research for the Vision forecast through the PSC Foundation. The forecast is based on analysis of procurement and budget data, plus several not-for-attribution interviews and roundtable discussions with hundreds of government and industry officials. PSC volunteers do the bulk of the interviews, analysis and data gathering.

Factors such as DOGE, the reduction in the federal workforce and the possibility of more budget rescissions increase the difficulty of making a decisive forecast.

“Many of our discussion participants conveyed to us that this is one of the most complex budgeting environments they've seen in years,” said Mike Reilly, a Vision volunteer that managed the macro-economic and topline overview of the forecast.

PSC's Vision forecast expects steady but modest growth overall, while Reilly added that uncertainty will remain high.

The defense budget for fiscal year 2026 has a spike from the reconciliation bill, but any growth beyond 2026 will be modest.

“Rising operations and maintenance costs will continue to squeeze modernization, meaning R&D and procurement, which drive long-term capabilities, will remain under pressure,” Reilly said.

Things are bleaker on the civilian side of the equation, where the Office and Management and Budget remains focused on cuts. Reilly said Congress' reliance on continuing resolutions to fund the government acts as a backstop against deeper cuts.

“However, cuts will continue to fall disproportionally on civil agencies until elections change the balance of power,” Reilly said.

In building the forecast, the Vision team looked a near-term and long-term scenarios. The near-term is that the legislative logjam will continue through the next presidential election. Continuing resolutions will play a significant role in keeping the government funded.

Defense budgets will grow about 2% per year through fiscal 2028. But civilian agencies will see budget cuts as well as funding cuts from impoundment and rescissions.

The most likely scenario for the 2029-to-2035 period is what PSC called “debt dealing.”

Defense spending is expected to grow 2% annually through 2035, and civilian spending will recover somewhat with 1% annual growth to begin in fiscal 2029.

“What this means in practical terms is that the fiscal environment for the next decade will be tight competitive, highly dependent on supplemental funding, reconciliation and prone to crisis driven appropriations,” he said.

Reilly added that one of the Vision volunteers he spoke with quipped, “In this environment, it’s best to keep your customers close and your congressional supporters and lobbyists closer."