Article
Navigating the perfect storm: A&D manufacturing trends and strategies
Aug. 25, 2025 · Authored by Cameron A. Reid, Tan Le
The aerospace and defense sector (A&D) manufacturing stands at a juncture in 2025, facing what industry leaders describe as a ‘perfect storm’ of challenges including the new administration, shifting budgets priorities, compliance pressures and policy flux. In a recent webinar, Baker Tilly’s Cameron Reid, Director, and Tan Le, Principal, along with Deltek’s Padma Raghunathan, Product Marketing Manager, shed light on how the A&D manufacturing sector is standing at crossroads in recent times along with the tips and solutions on how to navigate this period by investing strategically in digital transformation as well as building resilient supply chains.
Deltek Clarity Study 2025
Now in its 16th year, Deltek Clarity is the industry’s most comprehensive benchmarking study — providing government contractors with data-driven insights into market confidence, challenges and opportunities shaping the year ahead. One of the ways to gauge contractor confidence is through the Government Contractor Confidence Index or GCCI. It serves as a pulse check, measuring the overall confidence that government contractors can grow their public sector revenue over the next 12 months.
According to the study, which surveyed nearly 900 government contractors across different sizes, the GCCI dropped to 138.0 from last year’s 142.8. This marks the lowest level in six years. The decline is a notable shift reflecting growing caution as contractors are approaching the year with concerns about policy uncertainty, rising costs, talent gaps and mounting compliance pressures.
Key trends reshaping the A&D manufacturing industry
Rising operational costs
According to the study, a full third of manufacturers cite increasing operational costs as their top challenge. These pressures note beyond simple inflation to include material volatility, wage increases and tariff impacts. For A&D firms operating in a fixed-price, compliance-bound environment, even minor cost overruns can jeopardize entire contracts. The data reveals telling statistics about how manufacturers are responding:
