FY 2017 Cloud Contracting Trends in the Federal Civilian Market Sector

Deltek GovWin produces an annual report on the federal cloud computing market. This report, which appears at the end of October, is based on a database of contracts that the Federal Market Analysis team verifies are either pure cloud (i.e., “aaS”) services or professional service and engineering efforts related to cloud computing. We update the database annually in two phases. Phase one entails adding new contract numbers and their awarded ceiling values for the fiscal year that has just passed. Phase two involves identifying the number of dollars spent on the identified contracts. Phase one basically gives us an idea of the size of the market based on the value of the contracts awarded, what we call Total Contract Value (TCV). Phase two then confirms what was spent against that TCV.

FMA recently completed its phase one update of the civilian sector of the cloud market database. The defense sector remains to be done and phase two won’t be completed until October of this year, but here at least are some of the numbers for civilian agency cloud TCV for fiscal 2017.

Total Civilian Cloud Market by TCV

The data for awarded contract value by civilian agencies shows a strong jump in fiscal 2017. After several years of award totals holding steady between $2.7B and $1.8B annually, fiscal 2017 saw the total TCV rise to an awarded value of $3.2B.

What drove the leap? In part it reflects a broadening of Deltek’s research methodology as more cloud solutions are identified. This said, we believe the change in presidential administration and ongoing pressure from Congress are more important factors spurring growth. The Trump administration places a high emphasis on using the private sector to provide information technology capabilities to federal agencies. Outsourcing will become the norm if this White House has its way. Congress has also put tremendous pressure on federal agencies to use commercial cloud services, pressure that appears to be flowing into actual contract awards. Lastly, civilian agencies are under tremendous fiscal pressure from proposed budget cuts. Turning to cloud services simply makes sense for them from a cost-benefit perspective.

Top Civilian Agencies by TCV

Moving now to the “by agency” perspective, we find the following ten agencies at the top.

Veterans Affairs awarded cloud contracts worth nearly $1B in fiscal 2017. The highest value award at the VA went to Four Point Technology, which nabbed a $490M contract to provide enterprise access to Amazon Web Services. Commerce’s TCV is made up almost entirely by a single award to A&T Systems for the U.S. Census Bureau’s Phase 2.0 Cloud Migration. The ceiling value of that award came in at $500M. Rounding out the top 3 agencies, at USDA, Accenture Federal captured a $501M award for USDA Enterprise-Scale FedRAMP Certified Cloud Hosting Services. The important thing to remember here is that with the federal cloud market still being relatively small a single award of high value can move the statistics dramatically.

Concluding Thoughts

The contract award numbers for the federal civilian market show that fiscal 2017 appears to have been a turning point. Cloud awards look set to accelerate sharply from this year onward, particularly if proposed cuts to civilian agency budgets go into effect. In this sense the civilian market is being shaped by forces that are almost precisely the opposite of those shaping the defense side of the house. The Department of Defense is being lavished with funding, while civilian agencies are being throttled. Both trends, however, are in their own way pushing the federal government toward ever greater use of commercial cloud services. Watch this space for another post on DOD at some point in the next couple of weeks.