New Report: AI Increases in the Federal Marketplace

It is no secret that artificial intelligence (AI) has the potential to revolutionize operations at federal agencies. Specific AI use cases include cybersecurity, transportation, warfighter support, business support, healthcare, and acquisitions. Nonetheless, how to implement AI to achieve these transformations remains a challenge among public sector organizations. Likewise, the evolution of generative AI models such as ChatGPT poses both benefits and challenges to the federal government.  

Policymakers are facing pressure to keep up with AI technologies and put in place legislation that strikes the balance of allowing the expansion of AI technologies and maintaining U.S. global leadership in technology, with providing the oversight needed to mitigate the risks associated with AI. Though NIST released its Risk Management Framework earlier this year, the measure is a voluntary guidance for agencies. Federal leaders are expected to release policy in the forthcoming months on agency development, use and procurement of AI systems.

Moreover, agencies must contend with gaps in IT infrastructure and invest in areas of network services, cloud, data and cybersecurity in order to implement AI technologies.

Despite these hurdles, federal agencies increased spending in AI in the last three full fiscal years. Completed analysis of reported contract obligations from FY 2020 to 2022 revealed a $7.7B AI federal market in the three-year period, with a 36% increase in that time frame.

The above factors and more that shape the federal government’s procurement of AI good and services is examined in detail in Deltek’s recent report, Federal Artificial Intelligence Landscape, 2024.  

Additional key findings from the report include:

• Research and Development. AI spending remains rooted in research and development (R&D). R&D represented 60% of total AI prime obligations from FY 2020-2022.
• Agency AI Use. Agencies are procuring AI capabilities not only for mission needs, but also to support the procurement process itself.
• AI Challenges. Data quality, transparency, explainability, ethics, bias, security and effective oversight remain top challenges in federal AI adoption.
• Procurement Methods. Unique contracting mechanisms, such as Other Transaction Agreements, have allowed for increased federal spending on AI, yet have thus far, only served as a minor entrance for small businesses into the market. Some small businesses have found success via SBIR/STTR awards.

For more information on the budget, policies, technologies, and more driving the AI federal market and to maximize opportunities in the evolving space, refer to Deltek’s Federal Artificial Intelligence Landscape, 2024 report.