Spike in Federal COVID-19 Spending Flattens as Total Nears $3B

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A separate analysis shows some IT modernization efforts booming while others are put on hold during the pandemic.

Federal agencies had a slow start ramping up spending on goods and services related to the COVID-19 pandemic. However, after a spike in early April, total spending appears to be leveling off, according to data compiled by analysts at The Pulse of GovCon.

From February 1 to April 13, agencies had spent at least $2.9 billion on things like cleaning supplies, telework products and ventilators, as well as research and development related to medical supplies, IT and crisis response.

The Pulse has been tracking COVID-19 spending since the end of March, at which time agencies had only labeled $300 million of reported spending with the associated National Interest Action code “COVID-19-2020” or other related tags. A week later, as of April 3, that number had jumped to $2.6 billion.

Per the latest breakdown, the single biggest area of spending was on crisis-related research and development at more than $656 million.

Data pulled from the Federal Procurement Data System on spending tagged specifically for the COVID-19 response shows the next biggest spending area was on personal protective equipment, or PPE, for which agencies shelled out close to $481 million as of April 13.

Agencies also spent significant amounts on construction and pandemic-related equipment and facilities upgrades. Spending in that area totaled nearly $302 million, the third largest segment.

Other major spending areas include teleworking products and services at $288 million; lab services and technology at $282 million; and miscellaneous medical supplies and equipment at $207 million.

The breakdown also includes more than $181 million in spending that wasn’t specifically tagged as COVID-19-related. But Pulse analysts said that spending is likely part of the coronavirus response.

“Most of those untagged items are nuanced lab or medical equipment,” according to Pulse co-founder Amber Hart.

The Health and Human Services Department continues to be the top spender, obligating nearly $1.6 billion from February 1 through April 13. The Veterans Affairs Department is second with $630 million in tagged spending; the Homeland Security Department is third with $451 million; and the Small Business Administration comes in at fourth with $101 million.

In total, 20 agencies have spent more than $1 million on pandemic response.

Agencies have been spending most of their funding through governmentwide acquisition contracts, or GWACs, according to The Pulse’s numbers. The top three contract vehicles for COVID-19 response have been NASA’s SEWP V, with $90 million in obligations; and two vehicles administered by the National Institutes for Health IT Acquisition and Assessment Center, or NITAAC, CIO-Commodities and Solutions contract, at $33 million, and CIO-SP3 Small Business contract with $19 million.

Janssen Pharmaceuticals continues its reign as the top vendor, posting $605 million in pandemic-related orders as of April 13. 3M Company, which manufactures respirator masks, is second with $176 million sold to the federal government. Honeywell International rounds out the top three with $149 million.

A report issued Wednesday by IDC Government Insights noted some technology modernization goals, like remote work capabilities and stronger cybersecurity, have been bolstered by the pandemic response while other areas are neglected.

"The global COVID-19 pandemic has forced U.S. government digital transformation, which will have profound and lasting impacts," said Ruthbea Yesner, vice president of IDC Government Insights. "In the near term, government organizations will accelerate processes and workflows that can be agile, flexible and remote to respond to the crisis.”

At the same time, other areas are now suffering, such as enterprise resource planning and technologies for the public transportation sector. In the report, IDC offered a list of expected digital transformation winners and losers:

Winners

  • Telework and remote working tools: Unified communications and collaboration tools, PCs, tablets, Voice over IP especially for federal workers and private contractors; network upgrades, software licenses or cloud services, and additional cybersecurity. The current Senate bill includes funding for telework.
  • Public communication platforms and customer relationship management automation tools: Chatbots, self-services forms and mass communication tools.
  • Cybersecurity: Especially for mobile and edge devices, and network security as the workforce becomes increasingly mobile.
  • Cloud Services: Especially if some form of cloud offerings are currently in place, easy ramp up or expansion of services can occur.
  • New infrastructure: Including 5G, industrial internet, artificial intelligence, data center, and so forth as funded through the federal stimulus package. 5G may find real deployments in pop-up services such as testing tents, hospitals and other services.
  • AI and Analytics: The U.S. is attuned to the John Hopkins COVID-19 dashboard. The aggregation of real-time data for decision-making will be proven as essential for insights at scale.

Losers

  • Enterprise resource planning and larger back-end upgrades: Existing ERP upgrade work may slow or stall, but larger projects not currently funded and planned for the July 2021 budget may be cut or reduced given the economic impact of closed businesses.
  • IT services and systems implementations: Many will be delayed or stalled due to a reduction in budget for larger, complex projects, such as ERP upgrades.
  • Innovative software or pilot investments in which ROI is unclear: Essential software will be prioritized.
  • Software licenses: Cloud services offer alternative scalable and usage-based agility—especially in those services tested or offered for free during the pandemic.
  • Software upgrades to services hardest hit by government shutdown: For example, state and local services, smart parking, permitting and licensing upgrades and inspections. Depending on how local businesses fare, there may be an uptick in new permits and permits if older businesses fail and are replaced.
  • Transportation technologies: Public transit revenues are taking a big hit from the crisis.

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