How the Federal Government IT Budget is Spent

Picture of Andrea Lebron By Andrea Lebron


Federal Government IT BudgetThe federal government's IT budget is one of the largest in the world. This year more than $45 billion will be shared between twenty-five federal agencies - not including the Department of Defense or “classified spending”. But, how is the federal government IT budget spent? And could it be spent any better?

In 2010, the then U.S. Chief Information Officer - Vivek Kundra - unveiled an ambitious 25-point plan (PDF) to reform federal IT. Having identified that federal IT projects often ran over budget, finished behind schedule or failed to deliver the promised functionality, he aimed to deliver more value to the American taxpayer by amalgamating existing data centers and adopting a “Cloud First” policy.

Unfortunately the policy was unsuccessful. Due to cultural resistance, a lack of knowledge and events such as the major data breach at the Office of Personnel Management, adoption of the Cloud First policy was limited. As of August 2018, government agencies still operate more than 9,000 data centers and only half of agencies covered by the Federal Cloud Computing Strategy had moved email to the cloud.

Cloud First Policy Changes to Cloud Smart Strategy

Consequently, in September 2018, the federal government changed its strategy from “Cloud First” to “Cloud Smart”.  The new strategy “focuses on equipping agencies with the tools needed to make informative technology decisions in accordance with their mission needs” with particular detail paid to data security, the procurement of cloud services, and retraining employees to fill skills gaps.

Under the new initiative, federal agencies are required to identify high-risk legacy IT systems and prepare these systems for migration to the cloud. A special Technology Modernization Fund has been created to support agencies, which initially consists of $210 million in grants, with further funding available for more complex government-wide IT modernization efforts.

How the Federal IT Budget is Spent between Departments

Although it has been estimated that spending on cloud services by all federal agencies increased from $1.3 billion in 2010 to $5.6 billion in 2018, this represents a small fraction of the total federal IT budget. The primary cause for so little investment in the cloud is that the bulk of each department's budget (average 80%) is allocated towards keeping existing systems running, while only an average of 20% is allocated towards development, modernization, and enhancement (source).

By comparison, according to Deloitte, the allocation of budgets in private industry is 57% towards existing business operations, 26% towards development, modernization, and enhancements, and 16% towards business innovation - a category for which the federal IT budget is yet to stretch. One of the possible reasons why there is no money left for innovation in the federal IT budget is because more than 10% of the budget is allocated towards administrative services.


Budget ($M)

% of Total


Budget ($M)

% of Total

Homeland Security






Health & Human Services









General Services



Veterans Affairs



U.S. Army Corps






Environmental Protection






Housing & Development






Nuclear Regulations






International Development






Personnel Management






Archives & Records



Social Security



Science Foundation






Small Businesses






Excludes Department of Defense and classified spending


Could the Federal IT Budget be Better Spent?

Could the Federal IT Budget be Better Spent?Federal agencies have struggled with appropriately planning and budgeting for continuous modernization of their legacy IT systems, upgrading their underlying infrastructure, and investing in high quality, lower cost service delivery technology. Furthermore, the transition to cloud services and shared data centers remains slow, and the lack of proactive cloud adoption since 2010 has resulted in federal agencies accumulating a backlog of technology maintenance work.

With the new Cloud Smart Strategy, the situation is likely to improve, but slowly. As federal agencies train employees to be conversant with cloud computing, the rate of adoption should accelerate - particular if agencies are quick to adopt automation to reduce the amount of money being spent on administrative services. Once the necessary skills has been learned, and the appropriate systems put in place, Kundra's vision of delivering more value to the American taxpayer may eventually be realized.

Progressing Towards A Smarter, Safer Future

To continue towards a more economical and efficient future, some local governments have decided to take technological matters into their own hands by moving to a "Smart City, Safe City" model. In a previous blog, we defined a "Smart City" as "...a metropolitan area that invests funds and human capital in modern communication as part of infrastructure, fuel sustainable development, and data-driven use of resources to promote a high quality of life for citizens. A "Safe City" takes it a step further by harnessing data and technology to keep residents safe. A major trend being touted in a Safe City is the more frequent use of mobile devices as safety tools. 

Some local governments leverage critical communication solutions that provide 9-1-1 centers and first responders powerful capabilities for handling, dispatching, and responding to emergency calls more efficiently and effectively by integrating with services such as the Smart911 Safety Profile. Other integrations include a personal safety app, mass notification system, and digital facility data access to provide a complete safety solution for individuals and for schools, businesses, and hospitals.

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Written by Andrea Lebron

Andrea is Rave's Director of Digital Marketing, a master brainstormer and avid coffee drinker. Andrea joined Rave in August 2017, after 10 years of proposal and corporate marketing at an environmental engineering firm. You'll find her working with her amazing team in writing and producing blogs like this one, improving your journey to and through our website, and serving you up the best email content. When she's not in front of a keyboard, she's chasing after her three daughters or indulging in her husband's latest recipe. Andrea has a Bachelor's degree in Marketing/Management from Northeastern University and an MBA from Curry College.


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