A single memorandum drew a line through the defense contracting industry in 2025, and which side of it a company fell on mattered more than almost anything else that year. Margarita Howard’s company, HX5, sits on the side that came through largely unaffected.

The May 2025 memo from the Department of Defense required deputy secretary approval for any new advisory and assistance services contract above one million dollars, part of a push to reduce dependence on outside management consultants and shift functions back to government employees. Contracts involving IT oversight, administrative process redesign, and general management consulting fell under the new scrutiny. Contracts embedded in weapon system programs, major acquisition support, and sustainment operations were explicitly carved out.

A Distinction With Consequences

HX5 has never been an advisory shop. The company, founded by Margarita Howard in 2004, employs roughly 1,000 people across more than 20 states at about 70 government locations, doing technical services work for the Department of Defense and NASA that requires clearances and long term program familiarity. That kind of embedded technical role sits squarely in the category the memo excluded.

The memo also laid out criteria departments must weigh before using contractors at all: whether the work is inherently governmental, whether internal staff are available, whether hiring or training could close the gap, and whether consolidating requirements would help. None of those questions target the type of work HX5 does.

A Founder’s Long View

Howard has described the company’s approach to compliance and positioning as building ahead of a requirement rather than reacting to it once it arrives, a pattern that shaped everything from HX5’s early financial controls to its later cybersecurity certifications.

The contract market still carries uncertainty, from terminations for convenience to shifting task orders. But the review process the 2025 memo set in motion was built to target a specific category of work, and Margarita Howard’s technical services business was never in it.