Deltek Expects Slight Growth in AI Spending at Commerce Through FY 2028

Deltek expects an average 19% annual growth in the Department of Commerce's Artificial Intelligence investments over the next five years based on historical activity. This includes $65M for FY 2025.

With a 25% ratio of small business (SB) AI-related awards between FY 2021 and 2023 and zero reported spending under the Small Business Innovation Research (SBIR) or Small Business Technology Transfer (STTR) programs, vendors may see increased research and development (R&D) opportunities during this time.

This article provides an analysis of the agency’s AI spending trends over the past three fiscal years and a glimpse into market factors driving anticipated growth through FY 2028.

Between FY 2021 and 2023, Commerce awarded $62M in AI-related contracts but experienced a steady 29% decline during that period. Deltek believes the decline was due partially to the realignment of program priorities and ongoing budget reductions. Nevertheless, the agency continued its vital role in developing national guidance for AI use and adopting the technology for other agency-wide missions.

To do this, Commerce leveraged small business capabilities, yet the $12M in reported spending represented only 25% of prime contract awards and included no SBIR or STTR contracts. Among the socio-economic distribution, HUBZone firms received the most at $3.1M, representing nearly 26% of SB contracts. The agency awarded only 4% to Service-Disabled Veteran-Owned Small Businesses (SDVOSB) and none to Women-Owned Small Businesses (WOSB).

Among the 55 vendors winning contracts during this time, Accenture received nearly 73% ($45M) of total AI obligations. This included U.S. Patent and Trademark Office (USPTO) task orders for improving patent searches, which helped make that office the largest investor. USPTO’s nearly $50M in spending represents 80% of total agency AI obligations from FY 2021-2023. Continued NIST efforts came in second place at $10.2M and included the development of AI-related guidelines and standards. 

 

 

 

 

 

 

 

 

 

 

 

Five-year Outlook and Market Drivers

Looking ahead, Deltek expects steady growth in Contractor Addressable AI investments at an average of nearly 19% per year. For FY 2025, Commerce requested $65M for AI missions.

 

 

 

 

 

 

 

 

 

 

 

Notable projects and market drivers include:

• NIST requests $48M for AI support in FY 2025. Projects include continued support for the U. S. AI Safety Institute to operationalize the AI Risk Management Framework and to continue development of standards, guidelines, tools for AI use and methodologies for identifying, evaluating and mitigating AI-associated risks. Additional NIST guidance on AI-ready data is forthcoming to support the President’s memo on Advancing Governance, Innovation, and Risk Management for Agency Use of Artificial Intelligence.
• Other NIST AI missions are embedded within agency-wide programs and initiatives, including Advanced Communications, Networks and Scientific Data Systems; Advanced Manufacturing and Material Measurements; and the Advancing Artificial Intelligence Research Standards and Testing to Meet National Needs program.
• While NOAA projects a flat $68.6M budget through FY 2029, modernization and weather/climate-related missions and research and development (R&D) activities will leverage AI technologies. Continued underutilization of small businesses may drive SBIR/STTR awards for NOAA’s AI-related R &D missions, thereby increasing opportunities for small businesses already embedded in the AI market and small emerging firms seeking entrance.
• The International Trade Administration (ITA) plans to complete AI integration and maturing data skills and data literacy by 2030 in compliance with the Federal Data Strategy Action Plan. However, for FY 2025, ITA may reduce mission support products and services to support advanced technology improvements in user engagement including artificial intelligence.
• Increasing Census Bureau (CB) activity for the FY 2030 Census will require continued support as the bureau continues AI integration and implementation into the Enterprise Dissemination Services (EDS), Commerce Enterprise Dissemination Services and Consumer Innovation (CEDSCI) and Data Ingest and Collection for the Enterprise (DICE) programs. In FY 2025, CB enters the critical Design and Integration Phase for the 2026 survey data migration.
• The newly established Chief Artificial Intelligence Officer (CAIO) requires ongoing administrative and technical staff support with leadership in AI tools, technologies, policies, and emerging capabilities in the next five years. The FY 2025 budget requests $546K for the CAIO, AI Program Lead, Technical Evaluation Analyst and Data Scientist positions. Additional training programs may be necessary to ensure staffing competency.
• The Creating Helpful Incentives to Produce Semiconductors and Science Act (CHIPS) continues driving increased funding and agency activity. AI usage increased the demand for semiconductor design and manufacturing, training requirements and additional staffing. 
• The National Telecommunications and Information Administration (NTIA) planned AI and Emerging Technologies Policy Lab is developing capabilities to meet the emerging technology policy challenges through AI expertise in social science, engineering, computer science, data science, law, economics and business. This includes NTIA’s proposed AI Accountability Policy and AI Accountability Chain.

Contractors can expect a trickle-down effect in the acquisition landscape during the next five years as the government becomes firmly established as a world leader in the AI market. Networking with the highest vendor recipients offers potential mentor protégé and subcontracting opportunities. SDVOSB and WOSB firms could see more proactive approaches to increase their participation. Finally, as previously mentioned, increased R&D work under the SBIR/STTR programs indicates potential for growth.

For a more in-depth look into the AI landscape, check out Deltek’s Federal Artificial Intelligence (AI) Market, 2024-2028 report.