Wired for War
Defense and Homeland Security technology spending puts squeeze on other agencies.
The big spending days in the government technology market might be over . . . sort of. The wars in Iraq and Afghanistan helped fuel the government's demand for information technology in fiscal 2003. And in fiscal 2004, Defense Department spending ruled again-the Pentagon controlled four of the government's top five IT budgets. In all, federal agencies spent $70.4 billion on IT last fiscal year.
But with the administration looking to squeeze every bit of mileage from every IT dollar, and a push on to consolidate business operations, agencies will be stingier with their money than in previous years.
One analysis, by market research firm INPUT of Reston, Va., says federal spending-which usually is higher than budgeted-will hit $92 billion in fiscal 2010. With fiscal 2005 spending pegged by INPUT to reach $71 billion, that's a 29 percent gain in five years-which could be considered a meager increase, since the budget alone for IT jumped 40 percent from 2000 to 2003.
What's behind the tightening? The federal deficit, for starters, which means less money to go around for discretionary budgets. And there's a war on. The Defense and Homeland Security departments have consumed most IT dollars for the past two years. If a project isn't slated for the global war on terror or a national security activity, then chances are it will be cut back.
For fiscal 2005, the president proposed an IT budget of $65.2 billion. The National Science Foundation and departments of Homeland Security, Justice and Veterans Affairs proposed IT spending increases of more than 20 percent. But, the departments of Labor and Housing and Urban Development, NASA, the General Services Administration and the Social Security Administration all saw their budgets reduced.
Apart from the war effort, the Bush administration's lines-of-business initiatives are likely to force agencies to consolidate spending. So-called centers of excellence will be set up at a few agencies to handle financial and personnel management and other daily business tasks for the entire government. The administration hopes agencies then will spend less on business technology, since most of them will outsource administrative tasks to the centers.
Speaking of outside help, agencies' use of government- wide IT contracts is still strong. New contracts for IT goods and services are slated to be awarded in 2006, most notably GSA's multibillion-dollar program, Alliant, and the gargantuan NetWorx contract for telecommunications services.
One of the best measures of IT spending is GSA's Schedule 70 contract, a perennial favorite for technology buyers. In fiscal 2004, spending peaked at $16.8 billion, up from $14.8 billion the previous year-a respectable increase, given the schedule's recent track record.
GSA hasn't closed the books on fiscal 2005, but based on the results of the first two quarters, the agency appears on track to meet or beat last year's numbers.