Federal IT Managers Predict Flat IT Budget

Published: July 10, 2013

Forecasts and Spending

Federal IT managers appear more optimistic about future IT budgets over the next three years, than industry business development managers. Deltek interviewed 50 federal IT managers and surveyed 65 business development managers from the IT contracting community as part of its annual federal IT forecast research effort.

According to Deltek’s research, federal government demand for vendor-furnished information technology products and services will decline from $112 billion in FY 2013 to $102 billion in FY 2018.  74% of government respondents stated that they believed federal IT budgets would remain flat over the next three years, while only 49% of industry respondents thought budgets would stay flat.  34% said they would decrease.  

Most (56%) federal IT managers stated that they are dealing with budget pressures by maintaining the same list of priorities, but re-scoping them.  Industry respondents (55%) stated that their federal clients are re-scoping, but many clients are also eliminating projects (51%).  Only 14% of government respondents cited project elimination as a tactic that they were using.

Shared services and strategic sourcing are projected to have the biggest impact of all acquisition and contracting initiatives on agency IT plans and their ability to achieve them, according to federal respondents.  However, small business preferences and fixed-price vs. cost-plus contracting are likely to have the most impact on contractors’ businesses, according to industry respondents.

Industry respondents seem more optimistic about the impact of budget cuts on federal “hot button” technology areas, such as cloud computing, information security, data center consolidation, and big data.  Industry respondents, on average, rated (3.2 rating) budget cuts as having some impact in these areas, but government respondents, on average, rated (2.4 rating) the impact as more severe, making it less likely for them to meet their goals in these areas.  Deltek asked respondents to rate the impact of budget cuts in each technology area on a scale from 1-5, 1 being severe impact causing them not to meet any goals, 5 being no impact allowing them to meet all goals.

Federal contractors are combating these challenges by attempting to expand their federal client base, entering new vertical markets, and creating new products and services for existing vertical markets.  Deltek predicts the federal information technology market will contract over the next few years, but at the same time offer contractors pockets of opportunity as agencies look to use IT as an enabler to lower costs and increase efficiencies.