The Party’s Over

Tech spending squeezed out by war, continuing resolution, deficits.

It's been a lean year for spending on anything related to information technology. A months-long continuing resolution, deep budget deficits, and costly military conflicts in Iraq and Afghanistan have caused the slowdown.

Now add another hurdle: the Democratic takeover of Congress. Democrats have launched investigations and oversight hearings into contracts and program management, and in response, skittish federal IT managers are cutting back on spending, industry experts say.

Inspectors general and auditors at the Government Accountability Office have become more adamant, demanding that IT managers show returns on investment for the technologies they purchase and prove that the way they are buying IT provides the best value. "That's really what the industry is going to have to watch out for," says Ray Bjorklund, senior vice president of Federal Sources Inc., a technology research firm in McLean, Va. "There is going to be a lot more oversight because of the difference in political control" of Congress versus the White House.

But the investigations are not just politics as usual. The public is frustrated about poor government performance, Bjorklund says. Virtual Case File, a failed $170 million FBI network that was supposed to allow the bureau to share information about investigations, is a classic case in point.

Lawmakers are especially wary of SBInet, the Homeland Security Department's high-tech border security program, which missed its first deadline because of technical glitches. Democrats are trying to restructure the Coast Guard's $24 billion Deepwater fleet modernization project by preventing the service from putting contractors in charge.

IT spending growth has slowed to a level unmatched at nearly any other time. Only twice in the last 20 years-fiscal 1994 and 2007-has federal IT spending failed to grow at least as much as the rate of inflation. In fiscal 1994, it dipped slightly from the fiscal 2003 spending level of $25 billion. The 2007 IT budget came in at $65 billion, 2 percent below the enacted 2006 IT budget, according to a report from INPUT, a Reston, Va.-based market research firm. The fiscal 2008 budget request of $66.4 billion represents only a 2.3 percent increase over fiscal 2007, slightly below the rate of inflation.

"2007 was largely a wash," says John Slye, a senior analyst at IN-PUT. "We're looking at restoring in 2008 what was requested in 2007. Basically, agencies lost a year with the [continuing resolution]. That's affected their planning and their ability to ad-vance major initiatives."

For the next five years (from fiscal 2007 through fiscal 2012), most of the growth in the IT budget is expected in defense, intelligence, homeland security and health program areas, INPUT predicts. Defense and Homeland Security IT programs account for about 70 percent of the total fiscal 2008 IT budget request.

Spending on the war on terror shows no signs of letting up, so IT spending may continue to be tight for the foreseeable future. "I still think," Slye says, "we're seeing the war effort sucking away funds that might have normally gone to IT initiatives."

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