Contractor Addressable Forecast Available in Deltek’s New AI Report

Artificial intelligence (AI) remains a “hot button” topic across federal technology leaders. AI’s federal applications have expanded into the medical, transportation, energy and defense sectors, among others, to help meet agency missions, optimize business processes, and enhance citizen services. In the last year, the federal AI policy environment has evolved to foster AI innovation across agencies. Specifically, the AI executive order from the White House last October help set in motion the policy framework and considerations for acquiring and securing AI technologies. Contractors can expect Congressional legislative actions, including several provisions in the forthcoming FY 2025 NDAA, to further shape federal AI governance.

Nonetheless, challenges in workforce expertise, complexity of AI systems, and AI bias and error risks continue to disrupt agencies’ ability to scale AI. Agencies must continue forming AI strategies, installing AI leadership within their organizations, and invest in supporting infrastructure and data  to keep up with the technology’s demands.

Forecasting the Federal AI Market

Due to increased spending and better reporting, Deltek is providing a contractor-addressable AI market forecast for the first time. The forecast serves as a baseline for the federal AI market, grounded on current and anticipated market conditions.

Deltek forecasts federal spending on AI and AI-related goods and services will increase 47%, from $2.1B in FY 2024 to $3.1B in FY 2028.

Factors driving the increase in federal AI adoption include the expectation that agencies will continue to modernize and instill the infrastructure needed to support and secure AI. Moreover, the global explosion of generative AI (GenAI) is adding a sense of urgency for implementation, as well as caution, as agencies consider GenAI to support and streamline business operations.  Avenues to solidify and ease the acquisition of AI such as other transaction agreements, accelerated compliance approvals, and targeted funding for AI will also contribute to the rise in market over the next five years.

Source: Deltek

Key Findings

• AI Policy Progression. The release of the White House AI executive order last October set in motion a federal governance framework by requiring supplementary OMB guidance, agency initiatives and commissioned reports for safe and responsible AI adoption.
• Established AI Governance. The installment of Chief Artificial Intelligence Officers at major departments provides additional focus on AI governance, use cases, compliance, and funding at agencies, allowing innovation of the technology to expand across the federal space.
• Implementation Obstacles. Agencies continue to face challenges in scaling AI due to insufficient support infrastructure, complexity, lack of transparency of AI systems, and inadequate technical expertise.
• GenAI Influence. The emergence of generative AI (GenAI) is driving additional considerations and guidelines, as well as a renewed sense urgency for AI among national security and intelligence agencies.
• AI Under a New Administration. Both primary presidential candidates show commitment to federal AI innovation and heavy reliance on private industry, however, differences appear in the level of future AI regulation as well as focal points of AI application.
• Future AI Procurement. Unique spending mechanisms and avenues – such as other transaction agreements (OTAs), accelerated FedRAMP approvals for AI, and the TMF call for AI project proposals – will impact future increases in federal AI procurements.
• AI Spending Trends. Federal AI spending increased 38% from FY 2021-2023 and totaled $4.8B, with growth in AI obligations related to intelligence systems, robots and computer vision over the three-year period.

Deltek’s Federal Artificial Intelligence (AI) Market, 2024-2028 provides insight into the policies, research and development, and technologies that are helping to shape the federal AI market. The report also provides the budgetary and legislative backgrounds on AI public sector acquisitions, detailed historical AI spending patterns, and agency AI strategies, priorities, and key initiatives to aid contractors in developing strategies to prepare for the growing AI federal market.