Most of what determines whether a government contractor survives at scale never appears in a press release. It sits in the back office, in how the company prices its work, accounts for its costs, and documents both well enough to withstand an audit years later.
For Margarita Howard, the founder and chief executive of HX5, that machinery is the foundation everything else depends on, and she has resourced it that way from the start.
The field that machinery governs access to is narrowing. The number of small businesses serving as federal prime contractors fell from 121,181 in 2009 to 60,951 in fiscal 2024 (the most recent year tracked), even as small businesses received a record $183.5 billion in federal contracting dollars that year. Record sums are reaching fewer small-business primes, and the firms still standing tend to be the ones that have mastered the administrative side of the work.
HX5 is a defense and aerospace services contractor that supports the Department of Defense and NASA in research and development, engineering, information technology, and mission operations. It has employed over 1,000 people across more than 34 states and approximately 90 government locations. Running work at that spread means pricing accurately and accounting cleanly on dozens of contracts at once, each carrying its own rules. Understanding how Howard built the company is a case study in how cost, pricing, and compliance need to work together in modern government contracting.
Where Contracts Are Won Before the Work Begins
When defense firms are surveyed about what most stands between them and government work, acquisition paperwork tops the list. In one industry poll, 56% named it their single biggest obstacle. A federal proposal is, in large part, a cost document. The technical approach of course matters, but the government also needs to see that a contractor can price the work credibly and back every number with records.
Howard learned early that this capability had to be built before it was needed, and she paid for it ahead of the contracts it would win.
“Developing winning proposals that accurately show the company’s capabilities, solution approach, and value proposition in a compelling and compliant manner requires solid technical and cost expertise combined with effective proposal writing skills,” Howard says. “Small startup companies oftentimes will not have that skill set or ability. We invested heavily early on in a professional proposal team that consisted of very experienced proposal managers and writers who had years of experience working with subject matter experts.”
Cost analysts and pricing specialists are expensive to keep on staff before they are billable; carrying them anyway is what lets a smaller firm submit a proposal a contracting officer can trust.
The same discipline runs through the accounting system underneath the contracts. When HX5 was still small, Howard bought an accounting platform built specifically for government service work, one that federal auditors already recognized and that could survive the billing reviews attached to nearly every contract.
“Working for the government, you’re always going to be audited,” she says. “From working in the industry, we knew the importance of impeccable recordkeeping. All our records, everything we say we do, must always be supported with appropriate documentation and recorded accurately, because as a government contractor, all of our records are open to the government’s inspection and audits at any time.”
Discipline as a Competitive Asset
The corporate side of HX5 exists largely to carry this load so the technical staff in the field do not have to. Howard describes a clear division of labor between the people delivering the mission work and the people keeping the books that make it auditable.
“Our employees out in the field are working on a specific project, while at the corporate office we are supporting all aspects of it, contract compliance, financial reporting requirements, audits,” she says. “Our internal analytic tools provide real-time insights into our performance, enabling us to spot inefficiencies and optimize much faster.”
Cash discipline is the other half of the picture, because the timing of federal awards and payments is rarely predictable. “The government procurement processes are often lengthy and can certainly change, which can lead to delays in contract awards and payments,” Howard says. “We learned this very early on and had to quickly develop realistic timelines and budget projections and establish contingency plans to manage cash flow.”
A contractor that prices precisely but can’t absorb a six-month award slip is exposed in a different way; HX5’s answer has been conservative projections and reserves rather than risky optimism.
A Threshold That Keeps Moving
The rules that govern how all this gets documented are themselves in motion. One of the clearest examples is the threshold for certified cost or pricing data under the law long known as the Truth in Negotiations Act, now the Truthful Cost or Pricing Data Act, or TINA. On negotiated, non-competitive contracts above a set dollar value, a contractor must submit certified data so the government can judge whether a price is fair when competition is not there to settle it. That dollar value is changing twice in under a year.
After holding at $2 million since 2018, the threshold rose to $2.5 million on Oct. 1, 2025, as part of a routine inflation adjustment. The FY2026 National Defense Authorization Act, signed in December 2025, then raised it to $10 million for prime contracts and subcontracts entered into after June 30, 2026. The same law also moved the dollar thresholds that trigger Cost Accounting Standards coverage.
For a contractor, the practical effect is mostly added bookkeeping: which threshold applies depends on a contract’s award date and clause language, so a firm operating many contracts at once has to track several thresholds in parallel and confirm which one governs each negotiation.
A higher threshold narrows the set of actions that demand certified data, but it does not loosen the underlying requirement to estimate and document costs accurately. The certification is paperwork on top of the estimate; the estimate still has to be right. A company with disciplined cost accounting adapts to a threshold change by updating a checklist. A company without it can find that a rule it tracked loosely now applies to a contract it misjudged.
Why the Back Office Is the Front Line
Howard has consistently treated this kind of administrative depth as the precondition for everything HX5 does in the field, not a drag on it. The company’s reach across more than 20 states and roughly 70 government locations, and its mix of prime and subcontract roles, are only sustainable because the pricing, accounting, and compliance functions underneath them are built to scale and built to be audited.
The acquisition rules will keep shifting. Thresholds will rise again, clause language will be rewritten, and new reporting expectations will arrive on their own timelines. What does not change is that a federal contractor is paid against documented, certifiable costs, and that the firms able to grow are the ones that treated that obligation as core work from the start. For HX5, the unglamorous machinery of cost and compliance is where the competitive position is actually held.