Recent federal budget cuts enacted to optimize the federal workforce have had a widespread impact on design professionals and construction firms. These reductions have resulted in the elimination of many government programs, mass layoffs, and the cancellation of large-scale government contracts. Faced with dwindling opportunities for revenue and lagging confidence in the economic market, design professionals are searching for new solutions.

Scope of the Federal Budget Cuts

One of the most significant government programs to be cancelled is the Building Resilient Infrastructure and Communities (BRIC) program. Originally created by the Federal Emergency Management Agency (FEMA), this program was established to support local response to emergencies such as flooding or wildfires. With this cut, all applications from 2020 to 2023 have been cancelled, and unused grant funds are being reclaimed. BRIC had allocated approximately $1 billion, with $133 million already distributed to approximately 450 applicants. These projects represented a critical source of funding for many construction and design firms charged with addressing flood mitigation and water intrusion, creating a fire-resistant infrastructure, and responding to property damage and housing needs following natural disasters. Billions of dollars in federal grants instantly disappeared, leaving construction and design firms that relied on these funds without their primary source of income and forcing them to quickly pivot to maintain financial viability.

The construction industry sustained another deep cut when the Department of Defense recently eliminated more than $580 million in defense contracts and programs. As a result, design professionals and contractors involved in erecting military housing, base installations, and infrastructural improvements are in limbo, either placed on hold or without funding amid ongoing projects. At the state and local level, many communities also have been forced to pause infrastructure improvements and other public works projects due to lack of funding, causing delays and increasing risk exposure to design and construction teams charged with completing those projects on time and under budget.

Repercussions in the Private Sector

The private sector is likely to experience the effects of deep cuts as well. With a reduction in federal spending, public-private design projects are being put on hold and firms are seeing a sharp drop in requests for proposals (RFPs). The American Institute of Architects (AIA) reports that design firms are now instituting their own staffing reductions and placing capital investment plans on hold. In addition, the AIA recently reported a decline in the Architecture Billings Index (ABI), indicating decreasing revenue in the field. In February 2025, the ABI fell to 45.5, well below the standard score of 50 that signifies growth within the industry. As a result, the AIA is reporting that design firms are tightening their belts with hiring freezes, staff reductions, and pauses in internal investment projects.

For example, Booz Allen Hamilton, which derives 98 percent of its $11 billion annual revenue from U.S. government contracts, has been forced to address the mandated budget reductions and announced that it has identified more than $1 billion in potential savings and is considering workforce adjustments to align with shifting client needs. Similarly, Deloitte recently announced plans to reduce its U.S. consulting workforce due to increased pressure from the federal government to lower project costs. The firm described the layoffs as “modest personnel actions” necessary to align with changing client demands.

Opportunities in Business Development

The shifting economic landscape may present unique opportunities, however, for construction and design firms if they are able to quickly pivot in the face of adversity. Some firms are reassessing and diversifying their portfolios to avoid relying on limited revenue streams. Shifting focus and staff to industries and projects less reliant on federal funding is one path forward. These areas include commercial real estate, health care, and technology. In particular, design professionals with experience in sustainable design for buildings, digital modeling, and health care architecture may find increased flexibility as the focus shifts toward efficient and cost-effective business development. For those not able to pivot away from federal contracts, flexible contracts may be preferred, such as indefinite delivery/indefinite quantity, or “as needed” contracts.

Potential solutions may include participating in or relying on professional networks, such as state and local AIA chapters, design symposiums, and construction conferences that may provide opportunities for firms to share resources, circulate new funding opportunities, and collaborate on larger-scale proposals. By participating in cooperative networks, firms can form strategic partnerships and cross-market their services to new clients. These organizations also are an effective means of coordinating advocacy efforts to advance the industry’s goals on a policy level in response to government action.

Lastly, construction and design firms are encouraged to audit their internal operations and project lists to avoid unnecessary risk exposure during this period of financial uncertainty and delayed projects. This entails reassessing operational costs, investing in project management initiatives to encourage efficiency, and mobilizing staff to serve multiple roles with the caveat to be mindful of staying within the parameters of the scope of services. In doing so, these entities can improve their margins without sacrificing the integrity of their services.

Summary

While it is clear that the recent federal budget cuts have had a profound impact on design professionals and construction projects nationwide, there is a path forward. Firms now have the opportunity to adapt and diversify to weather the storm and even carve out new business opportunities. While the current climate presents undeniable challenges, design and construction professionals who adopt effective strategies to streamline their operations and expand their reach within the market will position themselves to emerge stronger in a shifting landscape.