GSA Contracts Recession Proof?

Agencies are expected to spend more on cloud, digital services

If current trends continue, the federal government could spend more than $93 billion on IT in fiscal 2020, according to projections from Bloomberg Government analysts. In the wake of analysts calling for a recession this is interesting news.

The administration’s 2020 budget proposal isn’t expected until at least March 11—another government shutdown could push that out further—but the federal IT budget has grown about 5 percent annually in recent years.

“Based on historical spending trends, we’re looking at between $93 and $94 billion in an IT budget, about half of which will go to civilian agencies and the other half will go to the Pentagon,” Bloomberg Government Federal Market Analyst Chris Cornillie said Tuesday during a webcast.

Cornillie noted a spike in IT contract spending from fiscal 2017 to 2018, jumping from about $59 billion to $64.7 billion. Bloomberg analysts expect that trend to continue based on ongoing programs and initiatives, bringing the projected 2020 contract spend upward of $68 billion.

Cornillie also offered projections on three major IT areas: artificial intelligence, cloud and digital services.

The latest push to incorporate AI technology in government—the White House’s American AI Initiative launched Monday—does not include any funding, but Bloomberg analysts have found an increase in spending among civilian and defense agencies. This information is invaluable for Vendors interested in getting on schedule.

Agencies spent $592 million on AI and machine learning technologies in fiscal 2018, including the first $100 million AI contract, awarded by U.S. Special Operations Command. Spending could increase in 2019 by more than 40 percent to $850 million, according to projections, with defense agencies outspending their civilian counterparts by about $50 million.

While AI is one of the biggest buzzwords in tech, cloud will remain the top IT spending category in the coming year, according to Bloomberg analysts. Spending on cloud services has grown by 18 percent in civilian agencies and 28 percent in the Defense Department, bringing the total spend to $4.1 billion in fiscal 2018. Based on current trends, analysts expect cloud spending to top $5 billion before the end of 2019.

A good portion of that spend will come from defense agencies, including initial outlays on major contracts like the $10 billion Joint Enterprise Defense Infrastructure and Defense Enterprise Office Solutions contracts, which are both on track to be awarded this year.

“Although the Pentagon is a relative latecomer to cloud computing, spending on cloud at the Pentagon is increasing dramatically,” Cornillie said.

Spending on digital services—things like citizen-facing apps and web portals—has also been on the rise, gaining 5 percent to 10 percent annually in recent years. Agencies spent $4.3 billion on these services last year and are on track to spend $4.6 billion in fiscal 2019.

Bloomberg analysts also noted this will be spurred by the December passage of the 21st Century Integrated Digital Experience Act, or 21stt Century IDEA, which requires agencies to improve digital services within the next two years. Spending for the Government is affected by recession luckily for all Government Contractors or those slick enough to get onto a GSA Schedule.

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