Fed IT budgets flatline through 2015

Federal information technology spending by civilian and defense agencies will remain relatively flat through 2015, according to an annual survey by the TechAmerica Foundation.

Spending in constant dollars will edge up slightly from $77.8 billion in fiscal 2010 to $81.6 billion in fiscal 2015, or a growth rate of 1 percent. In terms of current dollars, that equals a growth rate of 3.1 percent, reaching $90.7 billion in 2015, the TechAmerica Federal IT Budget Forecast FY 2010-2015 reports.

“Federal IT spending over the next few years, we think, will be driven by two primary forces: the pressure to cut budgets without losing efficiency and the pressure to implement new technologies,” said Madaline Andre, co-chair of TechAmerica’s IT Budget Committee, at a news conference Oct. 20.

“The broader target is to attain $40 billion in savings from a total federal contracting budget of about $500 billion a year,” Andre said.

The current IT budget assumptions will be affected by some inhibitors and drivers, she said.

On the one hand, the Office of Management and Budget’s directive to improve acquisition practices and contracting activities will pressure agencies to rein in IT spending.

On the other hand, she added, agencies will be compelled to spend to improve services to citizens, increase the scale and scope of those services and make critical investments especially in cybersecurity and Web 2.0 technologies.

“After examining these inhibitors and drivers, we concluded that despite the downward IT pressures, IT needs across the government will result in conservative, slow IT grow in 2010 through 2015,” she said.

“What we’re saying with this forecast is that even with declining or flat discretionary spending, the government will continue to spend on technology,” Andre said.

“The IT budget will grow because we believe technology is a facilitator in the delivery of ever-increasing government services and because it is a long-term investment in decreasing the cost of delivering those services,” she said.

Andre said the civilian agency IT market is the main growth engine in the overall survey with a 3.4 percent growth rate in current dollars.

“Adjusting for inflation, the civil IT market will grow at about 1.5 percent by 2015,” she said. “However, to put this in perspective, the growth rate for the 2005-2010 period is expected to be at around 8.3 percent.”

Among the numerous civilian agencies, Justice, Health and Human Services, and the Treasury departments will experience the biggest percentage growth in IT spending by 2015, the survey predicts.

Andre said the top five agencies – Commerce, Homeland Security, Heath and Human Services, Veterans Affairs and Treasury – account for more than half the civilian IT budget and about one-third of the total IT budget in 2010.

“By 2015, we expect this composition will remain about the same,” she said.

The percentage of civilian agency spending on development, modernization and enhancement, or DME, will rise slightly through the forecast period to support government modernization efforts, she added.

Major IT spending areas will include cybersecurity, IT consolidation, infrastructure modernization, cloud computing, Web 2.0 and other social-networking tools, as well as mobile technology and information-sharing.

The TechAmerica survey also forecasts continued slow growth for the Defense IT market, increasing from $33.4 billion in 2010 to $38.2 billion in 2015 in current dollars for a five-year IT growth rate 2.7 percent.

However, in terms of constant dollars, the report forecasts continued flat growth, with the $33.4 billion in IT spending in 2010 inching up to $33.8 billion in 2015, or a 0.2 percent increase.

“We anticipate that increased spending on the domestic agenda as well as smaller military deployments in the future will constrain the Defense IT budget,” Andre said.

Planned deep budget cuts for some programs in 2010 will be partially offset by increased spending in areas such as cybersecurity, logistics, intelligence and health care technology.

“The bottom line is that the growth rate for Defense IT will continue to be slow although we are forecasting a slight uptick over the previous five-year period to account for new technologies to fight insurgencies and for troop support,” she added.