Steady AI Growth in the Federal Space

Artificial intelligence (AI) is poised to transform a variety of public sector arenas such as national security, health, transportation and research. Yet federal agencies remain hesitant in large-scale adoption of AI due to risk in bias, overcoming culture change, and ensuring the input of quality data. In fact, the majority of AI federal spending remains largely rooted in research and development among a handful of departments. Despite these obstacles, agencies are taking small, iterative steps to implement AI. Historical contract spending numbers reveal that agencies are generally applying AI to administrative, back-office and contracting functions to reduce repetitive and manual tasks and pave the way for “high-value” work. Moreover, the number of agencies reporting AI contract obligations continues to expand, reflecting a steady acceptance of the technology in the federal space.

Observations from the data:

• Total federal AI contract spend increased 68% from FY 2019 to 2021.
• Defense sector AI spending outpaces that of Civilian. Defense spent $1.3B total and increased 75% over the three-year period vs. Civilian total of $531M and an increase of 54% in the same time frame.
• Research and development (R&D) represent the bulk of federal AI spending and totaled $1.8B from FY 2019-2021.
• Top five agencies by total AI spend from FY 2019 to 2021 include: DOD ($681M), Air Force ($349M), NASA ($229M), Navy ($137M) and Army ($108M). The top five agencies collectively represent 83% of federal spend in the three-year period.
• COVID-19 related AI spending totaled $48M from FY 2020-2021.
• AI small business obligations grew 113% from $171M in FY 2019 to $365M in FY 2021.

Top AI task orders by spend from FY 2019 to 2021:

• A pair of 2019 task order worth $51M and $41M at DOD’s Missile Defense Agency for the autonomous acquisition and precision tracking of a BMDS defense capability to counter evolving threats.  
• A $44M effort in 2020 at DOD’s Washington Headquarters Service for Palantir to perform testing on an end-to-end approach to AI for Defense use cases.
• A $39M task order in 2021 at DOD’s Office of the Secretary of Defense for an R&D effort to design and develop novel approaches to AI algorithms.
• A $32M task order at DOD’s Office of the Secretary of Defense for the R&D of a prototypical state-of-the-art AI hardware and software solution.

Growth in federal AI spending is expected as related policies, executive orders and agency-level AI strategies expand throughout the government. Legislation such as the National AI Initiative Act and the NSCAI’s final report have already influenced agency budgets and objectives in AI and will continue to do so. Expected frameworks such as the implementation of the National AI Research Resource will bolster access and advancements in the technology. Moreover, NIST’s AI Risk Management Framework, expected in the Winter 2022-2023 time frame, will help provide agencies a headpiece in responsible AI.   

For additional insight into AI use and expansion in the federal market, refer to Deltek's Federal Artificial Intelligence Landscape, 2023 report.