Despite a change in presidential administrations and a host of new initiatives under President Donald Trump, including the cost-cutting Department of Government Efficiency, the federal government appears to be on track to spend a record amount on IT contracts in fiscal 2025.
With only three weeks remaining until the close of the federal government’s fiscal year, federal agencies are pacing toward spending nearly $50 billion on IT contracts in Q4 alone — a record amount for any quarter — according to John Slye, senior advisory research Analyst at Deltek.
Slye authored a July blog post suggesting that, based on a “conservative outlook” of the top 20 agencies spending 90% of what they did in FY 2024 for the remainder of FY 2025, “they will have nearly $49B to spend in Q4 alone.”
If agencies reach or exceed that estimate, Slye told Nextgov/FCW the federal government would continue the recent trend of year-over-year growth in contracted IT spending.
“I would guess we’ll probably push $130 billion for the entire year, even with all the adjustments and tweaks,” he said. In FY 2024, all agencies spent $126 billion on IT contracts — up from $120 billion in FY 2023.
Should those numbers hold, the government would eclipse last year’s total IT spend despite dramatic actions taken by DOGE, which boasts $206 billion in estimated savings from cut contracts on its Wall of Receipts and crusade against consultancies, though its actual savings have been disputed.
“We are just not seeing a dramatic downshift in spending,” Slye said.
A few drivers could push more IT contract spending to Q4, including the passage of multiple continuing resolutions in the lead-up to the final, full-year CR in March, already at the end of the government’s second quarter. Agencies generally wait on big spending items or punt them altogether until they actually have an approved budget.
In addition, Congress passed the Big, Beautiful Bill Act in early July — at the beginning of Q4 — injecting billions more in appropriations largely to the Homeland Security Department and other law enforcement agencies. While it’s unclear how much of that money will go to IT contracts, some argue contracting officers and acquisition officials may have challenges trying to spend it.
“With the Big, Beautiful Bill Act, they’re going to have an absorptive capacity issue,” said Stephanie Kostro, president of the Professional Services Council, a trade association that represents more than 400 companies that serve federal agencies. “They’re getting saturated with funding at [Customs and Border Protection] and [Immigration and Customs Enforcement], so we’re encouraging our contractors to work with their customers to highlight what is in the realm of the possible.”
Kostro’s assessment of available federal spending data through FY 2025 Q3 for civilian agencies and FY 2025 Q2 for the Defense Department — which has a lag of 90 days in the Federal Data Procurement System — isn’t as rosy as Slye’s, especially regarding civilian agencies. After FY 2025 Q2, both defense and civilian spending were up 4% from FY 2024, largely due to IT services, as contracts for IT products cratered by 11%.
“But when you start to unpack it and look at what happened in the civilian agencies versus defense agencies, the picture is very different,” she said. “For obligations for civilian agencies, what we have seen year over year is an 11% decrease in contract spending from FY 2024 to FY 2025. If you look at the first three quarters, there is a decrement of 7% in services and 37% in products.”
Kostro also pointed to high vacancy rates for contracting officers across major federal agencies as another factor that could slow spending.
Some agencies, she said, are approaching vacancy rates of 40% for acquisition officials. Contracting officers were not immune from actions taken by DOGE, which included large-scale federal workforce reductions totaling more than 148,000 personnel. In normal years, Q4 is a hellaciously busy time for contracting officers. This year, fewer contracting officers in government will be trying to dole out as much obligated money as ever.
“If you look at an agency, the worst-case scenario now is they have a 40% vacancy rate,” Kostro said, noting remaining contracting officers are doing 40% more work at year’s end. “The work has to get done, right? And just because the seat next to you is empty doesn’t mean the work is.”
The skinny on FY 2026
The Trump administration’s 2026 budget outline indicates a 13% increase in defense spending and a 23% reduction in civilian non-discretionary spending.
According to GovTribe, DOD seeks $13.4 billion for autonomy and AI systems; $200 million for general AI and automation technology and more than $16 billion in cybersecurity. DOD also seeks $150 million for modernization of its legacy systems.
But Congress is still racing against the clock to pass a full FY26 budget by Sept. 30, and most draft budget bills have yet to make it out of committee. According to Politico, the White House asked Congress to punt on the upcoming government shutdown deadline until Jan. 31. That move is likely to hold back most significant IT spending in the interim.
The third option — missing the deadline and shutting down the government until lawmakers can come to an agreement — would have even greater impacts on agencies’ IT spend.
