Federal Artificial Intelligence (AI) Market, 2024-2028

Over the past year, the federal artificial intelligence (AI) policy and use case environment expanded to foster AI innovation in a safe and responsible manner within agencies.  The AI executive order from the White House last October introduced numerous guidelines and considerations for managing, using, acquiring, and securing AI technologies. The emergence of generative AI has also intensified the U.S. push for federal AI research and application. As policy continues to evolve, many federal agencies are pursuing AI and related technologies to enhance mission, streamline business operations, and improve citizen services.

Despite these and other drivers to expand AI in the federal space, agencies are encountering obstacles in scaling AI due to insufficient supporting infrastructure, the complexity of AI systems, ethical design and use considerations, and a shortage of technical expertise. With the ongoing evolution of the federal AI landscape, agencies are allocating more funds to AI solutions as a component of broader programs and initiatives, using Best-in-Class contracts such as Alliant II, GSA MAS, and SEWP V for AI acquisitions. Unique acquisition strategies and accelerated authorizations, including Other Transaction Authorities and fast-tracked FedRAMP approvals for generative AI, are expected to drive an increase in federal AI investment.

Deltek forecasts federal spending on AI and AI-related technologies will increase from $2.1B in FY 2024, to $3.1B in FY 2028, an increase of 8.3% in the next five years.

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.

Critical Insight for Vendors

Deltek's Federal Artificial Intelligence (AI) Market, 2024-2028 report analyzes the spending trends, drivers, and inhibitors shaping federal AI acquisitions.

The report provides:

• Assessment of the policies, potential legislation and strategies impacting federal AI acquisitions.
• Understanding of the technologies intersecting and helping shape federal AI implementation.
• Analysis of historical spending patterns.
• Addressable contractor-addressable market forecasts across the federal sector and top agencies for the next five years.
• Insight to agency initiatives and priorities.
• Recommendations to help contractors evaluate the impact of trends on their businesses.

Deltek's Federal Artificial Intelligence (AI) Market, 2024-2028 report is delivered in PowerPoint® format, including a PowerPoint® Executive Briefing, and an Excel® data workbook.