Government pacing toward increased IT contract spending despite DOGE cuts

"With only three weeks remaining until the close of the federal government's fiscal year, federal agencies are pacing toward spending nearly $50 billion on IT contracts in Q4 alone - a record amount for any quarter - according to John Slye, senior advisory research Analyst at Deltek. Slye authored a July blog post suggesting that, based on a "conservative outlook" of the top 20 agencies spending 90% of what they did in FY 2024 for the remainder of FY 2025, "they will have nearly $49B to spend in Q4 alone.""

"If agencies reach or exceed that estimate, Slye told Nextgov/FCW the federal government would continue the recent trend of year-over-year growth in contracted IT spending. "I would guess we'll probably push $130 billion for the entire year, even with all the adjustments and tweaks," he said. In FY 2024, all agencies spent $126 billion on IT contracts - up from $120 billion in FY 2023."

"Should those numbers hold, the government would eclipse last year's total IT spend despite dramatic actions taken by DOGE, which boasts $206 billion in estimated savings from cut contracts on its Wall of Receipts and crusade against consultancies, though its actual savings have been disputed. "We are just not seeing a dramatic downshift in spending," Slye said. A few drivers could push more IT contract spending to Q4, including the passage of multiple continuing resolutions in the lead-up to the final, full-year CR in March, already at the end of the government's second quarter."

Federal agencies are pacing toward nearly $50 billion in IT contract spending in Q4 of fiscal 2025, a quarterly record. A conservative model of the top 20 agencies projecting 90% of FY 2024 spending for the remainder of FY 2025 yields an estimate of about $49 billion in Q4 and implies total federal IT contracting could reach roughly $130 billion for the year. FY 2024 IT contract spending totaled $126 billion, up from $120 billion in FY 2023. Reported cost-cutting initiatives including DOGE's claimed savings have not produced a clear downshift in contract spending. Continuing resolutions and recent legislation may concentrate additional spending in Q4.

Read at Nextgov.com