Federal Spending on Cloud Computing will explode thanks to the DOGE

Senator Rand Paul appeared on Laura Ingraham’s evening show a few days ago to discuss working with the misleadingly named “Department of Government Efficiency (DOGE).” Far from being an official government department, the DOGE resembles more of a task force. It will play an entirely advisory role in the next Trump administration, working with small committees in both chambers of Congress to identify waste, fraud, and abuse that can be eliminated to reduce federal spending. Thus far, much of the media coverage has focused on targets that could be “quick hits” for reduction. These include ending federal telework to compel thousands of reluctant on-site workers in the DC area to quit, dispersing department and agency headquarters around the country, and shuttering millions of square feet in unused real estate managed by the General Services Administration.

These are the “big rocks” of the DOGE agenda, so to speak, but the DOGE is also likely to spur serious growth in outsourcing. Sen. Paul brought up the fact that there are rules and laws concerning the federal workforce which make it difficult for any administration to summarily fire or otherwise remove existing employees. Paul’s suggested solution to this conundrum is outsourcing. Contracting out work currently performed by federal employees would remove the need for feds to do those tasks.

Here the DOGE will run up against the notion of “Inherently Governmental Functions (IGF),” which are, according to the Defense Acquisition University (DAU), work “that is so closely related to the public interest as to mandate performance by Federal Government employees.” IGF, continues the DAU, “limits contractors to the performance of common commercial services (custodial, aircraft maintenance, refuse removal, groundskeeping, etc.) and other services related to gathering information on its behalf for the purpose of advising, offering opinions, providing recommendations and/or presenting ideas.”

I would argue that as far as information technology (IT) is concerned, the line between IGF and non-IGF work has become fundamentally blurred. For example, think of the contractors providing the Department of Defense with cloud-based infrastructure as part of the Joint Warfighting Cloud Capability (JWCC). Many of the tasks currently handled by commercial cloud service providers would have been performed in federal data centers had cloud-based outsourcing not taken over the world in the last few years.

I suspect therefore that contrary to seeing hard times for many in the federal IT space we are about to see IT work outsourced on a scale unlike anything we have experienced to date. Remember, the first Trump administration introduced the government to Cloud Smart in FY 2019. That policy spurred a jump of $2.0B in identifiable cloud spending from FY 2019 to FY 2020.

Just imagine how big a leap federal cloud spending will take if agencies are not just advised to outsource IT functions, but are actively pushed in that direction. Cloud providers of all types are well positioned to reap the outsourcing harvest that the DOGE will encourage. Of course, accelerating the shift to cloud-based services could have knock on effects, such as driving the increased use of fixed price contracts and, heaven forbid, perhaps even a resurgence in the use of Lowest Price Technically Acceptable (LPTA) award procedures, but those are subjects I’ll discuss in next week’s post.