Federal AI Market Continues Expansion

Federal agencies are now beyond the hype of AI and practicing responsible AI and implementation of the technology, according to moderator Luke McCormack at a recent forum. Several federal IT leaders at the event agreed and stated that agencies are now looking to prioritize AI and distinguish its use between being viable and meeting mission and customer needs, versus what might seem attractive only at the surface. Overall, public and private sector leaders foresee AI at the center of decision-making, communications and operations and hence, agencies are increasing investments in AI and ML solutions.

Federal AI spending trends reveal much of the same story. Deltek’s preliminary analysis of contract obligations from FY 2020 to 2022 found that federal agencies spent $2.3B in AI goods and services, a $341M increase within the three-year period. AI spending under most agencies increased from FY 2020-2022. In fact, all top ten agencies in federal AI obligations saw double-digit percentage increases in spending in the allotted time frame. Though companies that historically led spending in AI remained at the top, FY 2020 to 2022 patterns reveal that small business awards incrementally increased year-over-year. Moreover, obligations identified as autonomous-related, machine learning, augmented reality, virtual reality, and deep learning all saw continued growth from FY 2020-2022.

Sources: FPDS, Deltek

Additional observations:

• The defense sector led AI spending totals from FY 2020-2022: Defense Agencies ($721M), Air Force ($488M), Navy ($216) and Army ($209M)
• Obligations identified as research and development represented 72%, or $1.7B, of total spending from FY 2020 to 2022
• Marine Corps spending in AI jumped from $873K in FY 2020 to nearly $15M in FY 2022, prompted by increased spending for the R&D of Marine Corps Systems Command Program Manager Intelligence Systems
• NASA led spending in the civilian sector with $233M from FY 2020-2022, driven by obligations for:
  • Cislunar Autonomous Positioning System Technology Operations and Navigations Experiment (CAPSTONE) launch service at Kennedy Space Center
  • Creation and maintenance of chatbots and virtual assistants at the NASA Shared Services Center
• VA invested over 200%, or $15M, more from FY 2020-2022 on AI products and services. Increased spending was spurred by obligations for machine learning, virtual reality and automation at the Technology Acquisition Center
• AI obligations awarded to small businesses grew 76% from FY 2020 to 2022, from $239M in FY 2020 to $421M in FY 2022

While the federal AI spending market looks promising, government leaders continue to grapple with implementing policies and guidance around the risk posed by the technology. The safe and effective use of AI will be key among federal agencies. “The [AI] demand signal will continue to go up but will go even further with a trust signal,” stated Jerry Ma of the USPTO at the forum.

Stay tuned. Deltek’s upcoming report, Federal Artificial Intelligence Landscape, 2023, set for publish this summer, will provide further analysis on the policies, challenges and spending patterns shaping the federal AI marketplace.