Federal Spending on Information Technology for COVID-19 Response, Pt. 1

Key Takeaways

• Federal agencies have spent $1.1B on IT goods and services in response to the novel coronavirus pandemic.
• IT spending increased at 14 large federal agencies, but declined at 3.
• IT services led spending, totaling $483M as of the end of the third week in April while spending on commodity IT totaled $290M.
• Agencies turned to cloud-based services in response to the lockdown.

Although not commonly known for the ability to rapidly increase the procurement of goods and services in response to a national crisis, U.S. federal agencies are challenging their reputation for sluggishness by accelerating the purchase of information technology since the novel coronavirus outbreak began in March 2020. Acquisitions related to COVID-19 can be identified in the Federal Procurement Data System-Next Generation by the unique National Interest Action value code “COVID-19 2020” that contracting officers are adding to relief contracts. The accumulated data on those contracts can then be analyzed to identify trends in IT vs. non-IT procurement and spending. As part of its ongoing coverage of the federal government’s response to the COVID-19 public health emergency, Deltek’s GovWin Federal Market Analysis Team performed just such an analysis this week in an effort to provide the contracting community with insight into what agencies are spending on technology.

Total IT vs. Non-IT COVID-19 Response Spending

Since the outbreak of the pandemic in the U.S. federal agencies have spent a total of $1.1B on IT goods and services related to COVID-19 response. The data used to arrive at this number was downloaded on April 23, 2020, meaning that the period covered is not quite two months altogether. Parsing the data by the largest agencies, as shown in the chart below, yields some interesting observations.

First, 14 of the 17 agencies shown here increased spending on IT in order to meet the needs of their now remote workforces and to continue operating in a new environment. Three agencies, however, saw their IT spending decline from March to April, including the Social Security Administration, the Department of Energy, and the Department of Transportation.

Second, spending on IT services led growth, rising from $105M in March to $378M in April. Altogether, federal agencies spent $483M on IT services. Data analysis services related to loan recommendations at the Small Business Administration led all types of services spending, totaling more than $300M in April. More will be written on SBA below. Agency consumption of cloud services also saw a notable rise, including the purchase of $17.3M worth of Palantir Gotham licenses by the Department of Health and Human Services. Spending on other cloud services jumped as well, including $2.6M in April for ServiceNow licenses at HHS and $2.5M for Citrix Virtual Desktop capabilities at the Department of Interior.  

Third, although total agency spending on commodity IT products, including laptop computers, software, and peripherals, reached $290M in April agency spending on those goods actually declined from $153M in March to $137M the following month. This trend may not remain intact when final spending figures are released at the end of April, so the partial month data for April may be the reason for the drop. If the observed decline does not reverse reductions at Energy ($233M in March to $24M in April),  Interior ($876K to $391K), Justice ($955K to $589K), SBA ($5.2M to $1.3M), and SSA ($3.5M to $287K) account for the trend.

The Small Business Administration: A Case Study in Agility  

Finally, it is worth taking a look at how the Small Business Administration responded to the lockdown. At $393M, the SBA spent the most on IT in March and April. Data analysis services related to loan determination accounted for a $250M jump in April as funding became available for small business relief via appropriations in the CARES Act. The SBA also increased its spending on cloud-based solutions, which Deltek classifies as services not as software. These services included $7.5M for Salesforce chatbot capabilities, $753K for Amazon Web Services, $230K for Box Web Platform Services, and $30K for Adobe capabilities, the delivery of which is all cloud-based. Concerning IT products, the SBA spent a total of $6.6M in April 2020, most of which went for the purchase of laptops to enable employee telework ($4.4M) and Avaya One-X Agent licenses ($730K) to provide contact center capabilities. In other words, within 7 weeks the SBA purchased the IT hardware platforms, software capabilities, and analytical services it required for its now remotely-based workforce to both telework and process the data required for small business relief.