Federal Artificial Intelligence Spending Trends, FY 2022-2024

Each year, the team reviews contract spending from the previous three fiscal years across various technologies, including artificial intelligence (AI). The goal is to identify trends and patterns in expenditures to assist in understanding the market and predicting future spending.

Due to changes in the federal environment under the second Trump administration, e.g. agency reorganizations, workforce reductions and certain contract terminations contracts, relying too heavily on the data is challenging until these changes stabilize. Regardless, it is still important to observe key movements in spending to grasp AI’s role at federal agencies.

Total Federal AI Spending, FY 2022-2024

Sources: Deltek, FPDS

Deltek identified a $5.6B AI market from FY 2022 to 2024. While overall spending increased in the three-year period, the peak in FY 2023 is driven by additional task orders under certain contracts, particularly DOD’s Technology Synchronization of Business Operation Services and the JAIC Warfighter Decision Support programs.

Defense spending represented 72% of all obligations and totaled $4.0B in the three-year period.  Spending among Civilian agencies grew at a faster rate of 20% from FY 2022-2024 (compared to Defense’s 1% increase) and totaled $1.6B in the three-year period.

During this period, there was a notable rise in small business awards for AI. Small businesses accounted for 35% of total obligations and increased 34% over three years, from $554M in FY 2022 to $740M in FY 2024.

When reported, agencies relied on the Alliant 2 vehicle the most with $3.5B in the three-year period, followed by IAC MAC with $1.0B, and the GSA Multiple Award Schedule program with $231M.

Federal AI Spending by Top Departments, FY 2022-2024

Sources: Deltek, FPDS

The top ten federal departments in the chart above represented over 96% of all AI obligations from FY 2022 to 2024, revealing that an AI maturity gap remains among federal agencies.

Barring Defense Agencies and NASA, departments in this chart all had an increased percentage of AI investments from FY 2022 to 2024 led by Treasury with 194%, followed by DHS with a 136%,  and VA with an 81% increase in AI obligations. Several agencies outside of the top ten also experienced AI spending growth, including USDA (+$8.2M), EPA (+$1.6M), and OPM (+$1.6M).

Funding organizations such as the Executive Office of the President, Federal Communications Commission, and the U.S. Agency for Global Media reported AI spending for the first time in FY 2023, while agencies such as SBA and HUD did not have any identifiable reported AI spending in the three-year period.

Thoughts on Federal AI

Despite the changes listed in relation to the new administration, AI appears well poised to expand among federal agencies. In fact, some of the changes are propelling agencies to increase AI implementation. Agencies such as DISA, SSA and GSA are turning to AI and automation to assist with workforce reductions and agency reorganizations.  

Other factors will play into the future spending of AI as well.

The Trump administration has repeatedly called for the elimination of barriers to federal AI innovation, likely attracting small businesses and new entrants to the market.

Members of the administration have also expressed support for private sector investment to fuel U.S. AI adoption, and public-private partnerships to play a larger role in AI R&D funding.  In a running list of new U.S.-based investments, the Trump administration is already touting some investments surrounding AI.

Additionally, the White House issued a pair of memorandums on agency use and procurement of AI, emphasizing deregulation, cost efficiencies and buying American-made solutions. Moreover, the administration is planning to publish an AI Action Plan this summer, which will shape policy on federal AI implementation.

In summary, contractors should remain informed of the administration's AI objectives and policies, recognizing that there will be a rise in efficient AI adoption and investment within agencies.