FSI: Look to long term for clearer growth picture

The federal government's IT spending will grow at a compound annual rate of 4.5 percent through fiscal 2007, as total IT investments hit $68.3 billion that year, compared to $59.8 billion in fiscal 2004, according to market research firm Federal Sources Inc.

From 2005 to 2006, government spending for IT is expected to increase at a 7.1 percent, to a proposed $66.6 billion in 2006 from $62.2 billion in 2005, FSI of McLean, Va., said.

The longer view of the federal IT budget from 2004 to 2007, however, presents a more realistic picture of government spending trends, according to FSI.

"Don't get so excited about the flash of one year," said Ray Bjorklund, FSI's chief knowledge officer, who presented the company's forecast at its annual federal outlook conference yesterday. "Recognize that growth happens over longer periods of time."

Civilian agencies have requested a total $35.1 billion in IT investments for fiscal 2006, and FSI estimates they'll reach $36.5 billion in 2007.

The Defense Department has asked for $30.1 billion for IT spending for fiscal 2006 and will request $30.4 billion in 2007.

This year, FSI also issued a combined IT budget forecast for the legislative and judicial branches and the U.S. Postal Service, which are not included in the Office of Management and Budget's reports on which the company bases its analysis. These areas are receiving $1.3 billion for IT investments in 2005 and have requested $1.4 billion in 2006. FSI expects them to receive $1.5 billion for IT spending in 2007.

About 4 percent of IT projects proposed by civilian agencies will be new for next year, while the Defense Department proposes 2 percent for new projects. FSI defines a new project as one for which no money was spent during the last two years, but has been earmarked for spending in the proposed 2006 budget. Among the top 20 civilian and defense agencies, the Veterans Affairs and Homeland Security departments show the most growth in IT budgets for fiscal 2006 at 29 percent for VA and 25 percent for DHS.

Among the largest new federal civilian IT projects in 2006 are: the Veterans Affairs Department's HealtheVet-VistA ($311 million); DHS' consolidated law enforcement system ($44 million); DHS' Homeland Security Operations Center ($38 million); the Transportation Department's FMCSA Modernization ($29 million); and DHS' National Cyber Security Division Operating Environment ($12 million).

The existing civilian agency programs with the largest one-year increases from 2005 to 2006 include: the Transportation Security Administration's electronic baggage screening program ($383 million); the Veterans Affairs Department's HealtheVet-VistA ($311 million); the Energy Department's financial management interagency project ($310 million); TSA's combined credentialing investment ($216 million); and the Justice Department's consolidated enterprise infrastructure ($154 million).

Among the largest new federal projects in defense IT are: billing subscription services ($57 million); personnel service delivery ($42 million); multi-national information sharing network ($31 million); defense information system for security ($17 million); and C2 On-the-Move Network Digital Over-the-Horizon Relay ($16 million).

The existing defense programs with the largest one-year increases from 2005 to 2006 include: tactical data links ($653 million); Joint Tactical Radio System clusters 3 and 4 ($304 million); Warfighter Information Network-Tactical ($254 million); long haul communications payment to DISA-AFCA ($235 million); and leased telecommunications/non-system specific ($149 million).

FSI based its forecast on OMB reports Exhibit 53 and IT-1 and the President's budget for fiscal year 2006. FSI did not take into account the amount of IT spending that will be contracted out.