Budget negotiations stall past fiscal deadlines. Contract modifications arrive with hours’ notice. Launch schedules shift based on geopolitical events contractors cannot predict or control. For Margarita Howard and her firm HX5, these disruptions define government contracting more than any strategic plan.
“Every year, we run into, ‘Is the budget going to be approved? Are they going to have budget cuts?'” Howard said. “We always prepare for the month of September, what changes may come about, or they’re going to let us know at the last minute of something that they need, or that we may see some cuts in the following year that we need to prepare for.”
HX5 provides research and development, engineering, and mission operations support to the Department of Defense and NASA across over 70 government locations in more than 20 states. The company employs more than 1,000 people.
The programs HX5 handles sometimes face funding interruptions that can halt operations that support overseas deployments or 24/7 mission control centers. The company faces two fundamental challenges that shape daily operations: government budget volatility requiring financial reserves most small contractors lack, talent scarcity in fields where defense competes against often better-paying commercial firms.
Financial Reserves as Operational Requirement
September brings predictable anxiety because continuing resolutions create funding gaps between fiscal years. Federal employees face furloughs when appropriations lapse. Contract personnel supporting critical operations often cannot stop work: overseas missions continue, launch schedules proceed, operations centers require staffing regardless of Congressional paralysis.
HX5 sometimes works “at risk” during budget delays, self-funding operations while waiting for approvals and eventual reimbursement. “We know that with the work that we do, we will get reimbursed,” Howard said.
But the practice demands cash positions sufficient to cover weeks or months of payroll, overhead, and vendor payments without government reimbursements. Most small contractors cannot maintain these reserves. Larger defense firms can absorb delays through diverse contract portfolios and credit lines. HX5 operates between these extremes, large enough to carry short-term costs but small enough that extended delays have the potential to create financial pressure.
“Being prepared for possible budget cuts and knowing our financials are always in order is of critical importance,” Howard said.
The fiscal discipline extends beyond emergency reserves. Government auditors can examine contractor books without warning. Howard describes maintaining “impeccable recordkeeping” because documentation failures can trigger contract violations or payment disputes.
The Purple Unicorn Constraint
Howard uses the phrase “purple unicorns” to describe the professionals HX5 needs: individuals combining rare technical expertise, active security clearances, and relevant government experience. Each requirement independently reduces the available candidate pool. Together, they create scarcity that determines hiring timelines, compensation structures, and operational flexibility.
Security clearances require background investigations examining financial history, foreign contacts, criminal records, and personal conduct. Processing can take months or even stretch years for clearances. Candidates can’t start work during investigations. Meanwhile, commercial technology firms offering immediate employment can hire talent that defense contractors must wait months to onboard.
“Our focus is professional support services in research and development and in specialty areas, primarily the STEM fields of science, technology, engineering, and math,” Howard said. “So, across the DoD and NASA, those are the specialties that make up our primary workforce. They have to have advanced education.”
The Semiconductor Industry Association projects the United States will face a deficit of approximately 1.4 million technicians, computer scientists, and engineers by 2030. Defense contractors compete for this limited talent against commercial firms that typically can offer higher compensation, faster hiring processes, and more flexible work arrangements.
Government-specific experience creates the third constraint. “We prefer to hire experienced individuals, so we look for people that have worked with, or supported, NASA or the Department of Defense, as this experience is always very helpful,” Howard said. Commercial engineers might excel at rapid prototyping but struggle with defense acquisition processes requiring extensive documentation and formal reviews. Financial analysts from corporate environments must learn Federal Acquisition Regulation cost accounting standards. Project managers accustomed to commercial timelines adapt to government decision cycles measured in quarters rather than weeks.
HX5 addresses scarcity partly through veteran hiring. Roughly 30% of the workforce are veterans who often possess active clearances, relevant technical training, and familiarity with government operations. The company participates in the Hiring Our Heroes Corporate Fellowship Program, hosting transitioning service members through 12-week placements before they complete military separation.
The careful vetting produces retention that defies industry patterns. “Some of them have been with us for 10 years or more,” Howard said. “We have people that have been with us over 15 years now.”