Interview transcript:
Terry Gerton As we’re waiting for 2026 appropriations bills, there was a lot of money appropriated, approved in the One Big Beautiful Bill Act, specifically for the Federal Aviation Administration. They got 12 and a half billion there, and now in their 2026 budgets, the House is looking at 23 billion, the Senate is looking 22 billion. That’s a lot money for that organization with a lot requirements. What is PSC looking at as you consider the FAA’s capability to actually manage all of that money?
Stephanie Kostro Well, thanks for asking, Terry. This has been an area we’ve watched closely for years. And I’ll say that because as a member of the contractor community, most of the Department of Transportation’s contracts are through FAA. FAA is an outsized element from a contract perspective of the whole department. And as we look at the massive amounts of money that are coming both from the Big Beautiful Bill, the reconciliation bill as we call it, or just through the normal budgetary process, they are, I believe, reaching what we consider a saturation point for how much money they can actually absorb and then get out the door. I’ll mention a couple of things and then we can unpack them individually if you’d like. That is to say, of the 12.5 billion that they got through the One Big Beautiful Bill Act, a massive amount of that is for telecoms infrastructure modernization, so things like radios, high-speed network connections, et cetera. And then it’s also, a big chunk is for replacing radar systems. Full replacement of beacons and non-cooperative surveillance, replacing 618 different radars, and so a lot of this as we look at it will involve contract work. The question that I have though, Terry, is in light of all of the reductions in force that we’ve seen across the government, but at FAA in particular, there has been, as some have sited, a 20% decrease in program office leadership and a 20% decrease in acquisition staff. So as we look at that, we do wonder as a contractor community, how do we pick up the phone and call? Who do we call when we’ve got questions about these massive amounts of money and the massive amount of work going through FAA?
Terry Gerton So, Stephanie, the air traffic controllers themselves were excluded from FAA’s downsizing. But as you mentioned, the program staff, the safety staff, the engineers were the group that was affected. So 20% reduction falls disproportionately on just a few areas of expertise.
Stephanie Kostro That’s exactly right. When you look at the work plan for FAA and their hiring plan, they are looking at hiring almost 9,000 new air traffic controllers through FY28, so over the course of the next few years, but they’re kind of silent on the support staff, all of the back office folks that will need to be there in order to push money out the door to get the work done. Air traffic controllers themselves are not the ones replacing the radars, it is the contractor community. And so as we look at the brain drain, as some have characterized it, from the back office staff, we do see some concern.
Terry Gerton Well, and not just people. I wonder what your take is on the industrial base. I mean, people have been talking for years that FAA needed to do all of this capital investment, but it hasn’t. And so without the demand signal, how has the industrial base maybe shifted and will they be able to respond to this massive influx of funds?
Stephanie Kostro I think as we look at FAA as part of the national security structure, and some do make that argument, and I am one of them, that says a fully functioning national airspace is part of what keeps our nation safe and secure and also keeps the economic engine running, we are seeing some flexibility within the contractor community to pivot in order to support the FAA. Radars are not just for FAA and for commercial aircraft. The radar community is looking at opportunities. We’re also looking at telecoms infrastructure modernization, where we do have elements of the industrial base that can pivot and focus on this, but they do need to see that the contracts can get out the door. And part of that is making sure that you have qualified, sufficient numbers of contractor personnel and acquisition professionals who can do that, who can help translate the requirements into solicitations and then evaluate the proposals that come across from communities.
Terry Gerton So are you in conversations with the FAA now? Do you have a sense of how they’re going to manage this procurement process?
Stephanie Kostro So we are lucky here at the Professional Services Council, we’ve got some very good relationships with folks, both at the Department of Transportation and in the FAA. I think they understand that this plan is enormous and they are looking for good ideas. We are in frequent communications with folks at DOT and FAA, and so as we move forward, we hope to continue that collaboration to make sure that the American people receive the goods and services and solutions that have been outlined in multiple bills and the budget requests, et cetera, and making sure that we can meet timelines at an efficient cost as well. So the contract community stands ready to collaborate with FAA, and I hope those conversations can continue.
Terry Gerton I’m speaking with Stephanie Kostro. She’s the president of the Professional Services Council. Well, Stephanie, let’s shift gears a little bit. In other news, the president published his AI strategy a couple of weeks ago. I know we’ve talked a little about that before as it has an impact on the service contracting community. What’s PSC’s take on the strategy and what are you seeing?
Stephanie Kostro Terry, this is also a great area. Artificial intelligence, depending on who you talk to, you get a definition of what it is, you get a different viewpoint, a different perspective on it. What was really helpful is there at the end of July, the president released several executive orders that outlined what he has in mind for the artificial intelligence community. And several of these executive orders tasked different departments with pushing things out regarding data centers. If you live in Northern Virginia, you’ve driven past them. I think Northern Virginia has the highest concentration of data centers here in the processing in communities in Northern Virginia. They do talk a little bit about diversity, equity, inclusion, and making sure that we have unbiased artificial intelligence. And then we talk a bit about the export of the American artificial intelligence technology staff, which is really about using, with the Department of Commerce’s help, pushing out American technology on the global market. PSC, we are professional services, but we have a very expansive definition of what that means, and so we have lots of technology companies that belong to PSC. We really prefer to think of ourselves as professional services and solutions. And the artificial intelligence space is getting very, very active. In addition to the strategy, we’ve been working with the National Science Foundation. They tie it back to the White House Office of Science and Technology Policy. But with the national Science Foundation, we are talking with them about their AI roadmap, and we are happy to talk about procurement, application and use of AI, explainability and assurance of the AI model, et cetera. These are very, very exciting topics for us.
Terry Gerton Well, certainly one of the topics that gets a lot of conversation is the application of AI to simplify procurement. So where are you seeing that play out?
Stephanie Kostro So we’ve actually been seeing AI used in the solicitation development and evaluation process on the government side for a while and certainly companies have been using AI in order to generate parts of their proposals. It always needs a human set of eyes to look at it to make sure it makes sense and it doesn’t over-promise or potentially under-deliver on some of the proposals. Where we are really having some of these strong conversations with the federal agencies is on the application of AI in order to do the work required by a contract. And I’ll give you an example. You might have somebody, let’s say a technology worker needs 80 hours, two work weeks to do a particular project. But if you entered in a query into AI, they can generate something in two minutes and not 80 hours. Now, this is more efficient, absolutely. A human set of eyes do need to look at the result of the AI inquiry. However, how do you price that as a contractor? Normally you could say, ‘Oh, that worker made $15 an hour, they were going to work for 80 hours, this is what it’s going to cost for that worker to do the work.’ When you can do something in two minutes using AI, how do price that as a contractor, and these are the conversations that we need to have a healthy dialogue with the government about.
Terry Gerton Is that part of GSA’s inquiry back to major consultant contractors to revisit their pricing models?
Stephanie Kostro That has been part of that conversation, whether there was an AI overlay. I’m not entirely sure because some of the consulting work that GSA was looking at was not technically consulting, it was butts in seats, or as our community likes to say, brains in seats in support of agencies. But I do think it’s a fair question. There’s a lot going on in this space. I don’t think anybody, as I said earlier, has a common definition of AI and how to use it. We are working specifically with GSA on this conversation of how do we think about AI in this space, in the proposal process, but also in the achievement of work under contract.
Terry Gerton Well, this is obviously gonna play out over the next several months and years, so we’ll see what happens. But Stephanie, just one more question, what else are you watching in these dog days of summer?
Stephanie Kostro I wish they were dog days of summer, there’s been a lot going on. Seeing executive orders on AI drop frequently in the end of July meant that we didn’t quite get the recess that some other entities here in DC get. But I would say we are watching the markup for the National Defense Authorization Act, both the Senate committee and the House committee have it passed out. We understand we’re going to be seeing it on the House floor sometime in the coming weeks, so we’ll track amendments. We’re also watching what’s happening on the border security side. PSC is hosting an event in the Rayburn House Office Building here in mid-September, where we’re going to showcase some of our member companies capabilities, but we were also planning a trip out to the border with companies and Customs and Border Protection, just to see what’s out there and to see what more the contractor community can do to support operations along the border. And so we are watching a lot of different things, Terry, the list goes on and on.
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