Survey: Human capital is a key barrier to government AI adoption

A vast majority of federal leaders say artificial intelligence is central to helping them improve efficiency in their agencies' operations, with a recent survey finding those leaders had a myriad of beneficial use cases and barriers to reaching implementation. 

Documented in a new Ernst & Young survey that was exclusively shared first with Nextgov/FCW, the responses depict a vast majority of federal decisionmakers as enthusiastic about incorporating AI into various agency operations, with 88% saying AI is a “critical tool” to drive broader modernization.

“Federal [decisionmakers] overwhelmingly view AI as a powerful and needed tool to drive modernization and efficiency efforts,” the report reads. “However, the AI adoption curve is shallow, as half of all AI initiatives are still in pilot or planning stages, and many agencies have yet to identify specific use cases for the technology.”

Hindrances to expediting AI implementation vary. The report describes the most commonly listed barriers to adoption as systemic to federal agencies, with budget constraints, dated tech infrastructure and a lack of skilled workers as major blockages. 

Workforce shortages were identified as one of the most critical bottlenecks agencies face, with 44% of surveyed agency leaders reporting gaps in skilled labor as a barrier for their department’s modernization efforts. Challenges like slow procurement processes, escalating cybersecurity threats, regulatory requirements and inadequate data storage all registered as other predominant issues. 

“Workforce skill gaps are among the top barriers despite a near-universal focus on upskilling, as leaders are trying to close the gap between the skills agencies have and the deep expertise they need to move federal agencies along in their transformation journeys,” the report reads. “One potential approach is to collaborate with other federal agencies to advance progress on modernization initiatives.”

In response to the personnel shortages, 95% of federal decisionmakers said that they are focused on upskilling current employees and staff to help foster a tech-fluent and modernization-focused culture. 

A more granular look at survey respondents’ feedback suggests that, in addition to workforce concerns, the lack of a structured approach to modernization itself is a hurdle to broad AI adoption. 

Respondents said that, at the federal level, modernization culture isn’t uniform, with 45% of federal leaders saying updating legacy software and hardware is an “incremental, application-level enhancement” process, where any changes to software applications specifically occur through new features, bug fixes or performance optimizations. 

Another 41% saw that, in contrast, their agencies are taking more of a sweeping, foundational-overhaul approach to updating tech systems, even if it takes longer to reap benefits from new systems. 

Notably, 96% of federal leaders want their agencies to focus on streamlining and refining internal processes before implementing new technologies into operations, with priority placed on making cybersecurity and resilience enhancements and updating legacy IT systems. 

Agencies are also looking to technology modernization as a vehicle for overall efficiency. A majority of federal decisionmakers — 44% — want to enhance cybersecurity infrastructure for improved efficiency, while 43% said that investing in AI, machine learning and automation are key to improved efficiency. And 43% said that implementing new data systems would also support expedited workflows in federal agencies.

“Efficiency is federal agencies’ north star for FY26, as virtually every agency is undertaking efficiency initiatives; investment in technology and cybersecurity and upskilling employees accordingly are among the top priorities,” the survey reads.

Federal leaders said they are turning toward increased innovation, improved regulatory compliance, enhanced data accuracy and quality, and increased employee productivity to drive impact.

Barriers to achieving improved efficiency mirror barriers to modernization. Respondents reported budget constraints as the chief issue, along with a lack of data quality and outdated infrastructure.

A lack of skilled workers also plague efficiency efforts, with 31% of respondents saying tech-focused personnel are needed to leverage new technologies for efficiency.

In an effort to drive a more tech-centric federal workforce, the Trump administration launched a new U.S. Tech Force program in 2025 to recruit temporary workers from leading technology companies to serve in the government for two-year periods.