Breaking down the 2014 IT budget request

Deltek analysis charts the winners and losers in the president's numbers.

dollar signs

President Obama's budget request for information technology for fiscal year 2014 could range as high as $110 billion, when Congress, the federal judiciary, and small agencies that do not break out their IT spending to the Office of Management and Budget are taken into account, according to Deltek analysis presented at a May 30 industry event.

The IT spending requested in the president's budget, released in April, must go through Congress, so it is useful mostly as a guide to the administration's priorities. About half the spending request is concentrated on fewer than 300 of more than 7,600 programs listed in the exhibit 53 documents that agencies file with OMB to document IT spending requests.

For vendors, the news was a little grim, with Deltek offering a preliminary forecast of a decline of more than $18 billion in contractor-addressable IT spending requests for 2014 ($106.4 billion) as compared to 2012 ($124.6 billion). Defense agencies are seeing some of the starkest declines, with the Army projected to fall from $20.6 billion to $10.9 billion, in part due to savings linked to more efficient maintenance and cloud adoption. At the same time, however, the Army is ramping up the percentage of its overall IT spending devoted to new development.

One possible growth area for contractors is the integrated electronic health records program at Veterans Affairs. Despite some well-publicized setbacks, including a break with the Department of Defense over the use of the VA's VistA system, the VA still plans to increase spending on the modernization of health records from $134 million in 2013 to $252 million in 2014.

Overall, agencies are planning for a slight uptick on spending in operations and maintenance of existing programs, a matching decline in spending on new programs. The growth in O&M spending will likely lead to contractors facing "fierce competition" as companies vie for recompeted contracts, according to Deniece Peterson, director of federal industry analysis at Deltek. Federal chief information officer Steven VanRoekel, in his IT budget presentations in April, said he wanted to see the spending tilt away from O&M and toward new programs.

The breakdown of spending on cloud computing confirms that government prefers private cloud solutions to public, community or hybrid clouds, with private cloud funding pegged at about $1.7 billion across the government, compared to $118 million for public cloud, $314 million for community cloud, and $77 million for hybrid.

On the big-picture side, according to Kevin Plexico, vice president of federal information solutions at Deltek, fiscal year 2013 will likely represent the low water mark in terms of overall federal spending. Even if the sequester policy is kept in place under a continuing resolution or new budget for fiscal year 2014, the budget caps increase 1 percent to 2 percent annually through 2021 under the Budget Control Act. Even within the constrained budget environment, cybersecurity, healthcare and healthcare IT will continue to be among growth areas.

NEXT STORY: Navy NGEN contract delayed again

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