IT spending to remain flat for next two fiscal years

Technology association predicts presidential transition and rising deficits will prevent agencies from receiving money for new IT programs.

A change in the presidential administration and a record deficit brought on by the government's bailout of the financial industry will keep federal spending on information technology flat in fiscal 2009 and 2010, according to an industry association.

Comment on this article in The Forum.The new administration will take at least two fiscal years to put in place its leadership and develop a strategy, said Payton Smith, a strategic business intelligence associate at Booz Allen Hamilton. "2009 is a planning year," he said. "Once we get a new administration, IT won't be the first thing they think about. ... It will be at least two years out. We don't see a lot happening until 2011."

Growing entitlement spending, coupled with the bailout package Congress passed this month to rescue banks, will reduce discretionary spending, which is where Congress provides agencies their IT funding, Smith said.

The dour outlook for federal IT spending will continue a two-year slump in spending, which had risen above the inflation rate in the 1990s and the years immediately after the 2001 terrorist attacks. Smith and other representatives from federal contractors offered their assessment of the outlook for IT spending at the Government Electronics and Information Technology Association's 2008 Vision conference on Thursday in Washington. They emphasized that, regardless of who was president, it would take months to determine its priorities and plan for IT investments. During that time, agencies likely would continue working on existing projects but avoid starting new programs until the next administration's IT plans were set.

"Fiscal year 2009 is really sort of a period of hold," agreed Meredith Luttner Groff, an associate in the strategic business intelligence group at Booz Allen Hamilton. "Our takeaway thought is that this year is a great time to think about the years ahead, though we will see some growth in civilian IT spending."

The association predicts IT spending in civilian agencies will increase at an annual rate of 4.1 percent from fiscal 2009 to 2014. Most of that growth will be concentrated at a few agencies, including the Health and Human Services, Homeland Security, Treasury, and Veterans Affairs departments.

Speakers predicted DHS would receive the largest increase in IT spending in fiscal 2010, not including grants to state and local organizations, said Larry Reagan, head of government solutions for Price Systems, which makes project cost control tools. Protecting the nation's critical infrastructure and developing the National Cybersecurity Center will drive IT spending at the department, he said. Reagan also expected DHS to spend money on scanning technologies that can detect nuclear materials and harmful biological agents. "There's a continued need for consolidation and modernization across the organization," he said.

Defense IT spending is expected to remain flat between fiscal 2009 and 2014, largely because supplemental funding for the Iraq war, which has funded Defense Department technology programs, is expected to decline. Industry representatives said funding for current Defense IT programs should continue, but they said newprograms most likely will come under greater scrutiny because of a heightened concern on in Congress over procurement abuse, which would result in less money for new projects in the next two years.

Smith said cybersecurity would remain the top priority in IT budgets, although spending on security varies greatly form agency to agency, from 2 percent to 26 percent. "Cybersecurity and information assurance are obviously not going away," he said. "They are the mainstays of every program and the costs should be built in to program budgets."

The speakers said agencies probably will spend a smaller percentage of their IT budgets on new projects and direct more funding to maintaining existing systems. New system development accounts for 30 percent of federal IT spending, but that portion is expected to decrease in the next two years, Groff and Smith said.