Federal Technology Investments Shift with the Contracting Tide

As the GovWin Federal Market Analysis team prepares analysis on contract trends, we’ve assessed high level changes in the contracting environment. Federal discretionary budgets offer one indicator of government spending on contractors as these funds may shape the sums available to procure goods and services from industry. It will come as little surprise that requests for discretionary budgets have contracted over the past five years, declining at a compound annual growth rate (CAGR) of 1.7 percent. During the same period, actual funding averaged 97 percent of requested discretionary levels and declined at a CAGR of 1.8 percent.

For the same five year period, overall contract spending (reported via the Federal Procurement Data System) dropped at 4.0 percent CAGR. The portion of these contracted funds that GovWin associates with information technology declined as well, though at a slower 1.6 percent CAGR. (Note: the GovWin category used here to assess information technology differs slightly from the one the Federal Market Analysis team typically uses in reporting and does not include select technology-related professional services.) On average, this information technology category of investments accounts for 15 percent of reported contracting during the past five years.

Looking back further offers a different view of how the environment has changed. On this longer timeline, discretionary requests have grown at 3.3 percent CAGR, while actual base budgets rose at just 1.1 percent CAGR. The pre-2010 tendency for agencies to receive more than their requested budgets, however, inflates the average percent of actual funding against requested discretionary to 107 percent. The decrease in reported contracted spending narrowly shifts into the positive, showing a modest increase with a 0.2 percent CAGR. The extended timeframe produces a similar flip with reported investments for information technology, showing an increase at 1.5 CAGR.  As a percent of total contracting spend, the portion allocated to technology continues to track at 15 percent.

As a portion of actual discretionary levels, reported contract spending averages 41 percent over the past five years and 42 percent over the last decade. Proportions for individual years suggest some reductions have been maintained, possibly as a result of efforts to decrease contract spending in select areas. Additional analysis of the contracting environment will be forthcoming as the Federal Market Analysis team works to complete its research on the subject.