Military IT Spending Surpasses All Other Federal Agencies

The armed services awarded more IT-related prime contracts last year than all other federal government agencies combined. As a group, the Defense Department along with the Army, Navy, and Air Force awarded IT-related prime contracts valued at $83.1 billion, or more than 70% of all contracts issued by federal agencies, according to an analysis issued Wednesday by the government IT market-intelligence firm Input.

Spurred by Defense Department needs, the value of all government prime contracts rocketed by 190% in calendar year 2003 over the $60 billion issued in 2002, Input's analysis says. The dominance of Defense Department agencies in awarding contracts underscores the impact increased defense spending is having on the federal IT-services market, Input manager Brian Terrill says. "For the first time in a long time," he says, "we are seeing growth in defense IT spending outpace growth in civilian IT spending."

The Army alone awarded contracts valued at $38.9 billion, exceeding by 216% the amount awarded by the next closest department--$18 billion by the Navy. The Defense Department awarded contracts valued at $17.7 billion and the Air Force issued work worth $8.5 billion. NASA led civilian agencies, issuing $5.5 billion in contracts last year. By far the biggest deal saw eight vendors sharing a $23 billion Army Communications and Electronics Command (CECOM) contract to provide support services to agencies across the government to facilitate its rapid response program.

Among the top three service categories government agencies awarded contracts for were professional services, $41.3 billion; maintenance support services, $26.4 billion; and outsourcing, $15.5 billion.

Three armed services branches were among the top five among agencies awarding professional services contracts: the Navy at $13.1 billion, the Army at $11 billion, and the Air Force at $4.4 billion. Transportation led among civilian departments at $4.7 billion, with Health and Human Services rounding out the top five at $3.1 billion. Each of these departments had at least one professional services contracted valued at $1 billion or more. The Army and Navy each awarded an $8 billion professional-services contract. Input defined professional services as project management, quality assurance, planning and analysis, software development, education and training, engineering/scientific, consulting and design, operations support, and modeling/simulation.

The Army CECOM rapid-response program, at $23 billion, represented 88% of the $26.4 billion the entire federal government awarded in maintenance support service contracts last year. Input points out that without the CECOM contract, maintenance-support services would have fallen to sixth place in total awarded dollars. Outsourcing, research and development, systems integration, and network and telecommunications all would have had higher awarded contracts than maintenance support without the Army contract.

The Defense Department led other government agencies with $6.9 billion in outsourcing contracts, with NASA placing second, issuing $3.5 billion in outsourcing contracts. Completing the top five: Air Force, $2.5 billion; Energy, $1.2 billion; and the Army, $600 million. The biggest outsourcing contract awarded last year was by the Defense Department for managed-care support services at $6.5 billion. The space agency's space mission communications and data-services contract came in second, at $3 billion.