Latest Update: Now that we have entered Fiscal Year 2018, take a look at our FY18 Forecast series for some of the other major contracts expected from Federal agencies.

Update: With President Trump’s signature on December 12th, the MGT Act was officially codified as a part of the FY18 NDAA. 

Update: The MGT Act was passed in the Senate as an amendment to the FY18 NDAA, like other issues with contracting impact which have been passed in the NDAA in years prior. This paves the way for more Federal funding set aside specifically for IT modernization efforts. 

Update: After passing in the House for a second time, the MGT Act has been attached to the NDAA for FY18 as an amendment, which was seen as the best way to “fast-track” the legislation through the Senate.  

Analyzing indicators such as the Top NAICS codes in Federal procurement and the growth of GSA’s IT Schedule 70, EZGovOpps has long predicted that IT Modernization will continue to grow as a major procurement sector in the Federal marketplace. Now, with the second iteration of the Modernizing Government Technology Act passing in the House of Representatives last week, and President Trump releasing a more detailed plan for the FY18 budget (after his earlier-released “Budget Blueprint” which we analyzed here and here), EZGovOpps has a more solidified picture of future spending on IT in government.

The Modernizing Government Technology Act (MGT Act), something which first was passed in the House in 2016 but failed to move further, is a plan championed by Representative Will Hurd of Texas. The goal of the bill is to create a centralized Federal fund solely for IT modernization projects, as well as separate funds for 24 executive agencies which can pool funding for future modernization efforts. While the first version of the bill did not pass through the Senate, this second iteration similarly passed the House and is now awaiting Senate approval, with language added that caps the central modernization funding to $250 million for each of the first 2 years of the program. Although the central fund is limited for the first two years, Rep. Hurd believes that the more important component is the creation of separate working funds for each executive agency.

With the MGT Act making its way through Congress, President Trump released the more detailed proposal for the FY18 budget. While the funding raises and cuts are in-line with the proposals from his original “budget blueprint,” the proposal includes a much more detailed picture of the IT initiatives that the President was expected to take. The Technology Modernization Fund is intended to act in a similar manner to the central funds of the MGT Act, as a $228 million account run by the GSA and directed by a Federal Chief Information Officer-lead board of experts. The proposal explicitly states that this program would run parallel to a fully-approved MGT Act. The fund would focus on regularly refreshing outdated networks and systems.

Overall, IT funding for the Federal government is proposed by President Trump to be a massive $95.7 billion for FY18. This represents a $5 billion increase from the overall IT budget in FY16. Importantly, the proposal notes that up to FY18, Federal spending on legacy system upkeep has risen to 70.3% of agency IT spending, which places further emphasis on the need to accelerate IT modernization efforts across Federal agencies. Another important statistic to note: of the $95.7 billion proposed for Government-wide spending, $42.5 billion of it is allotted solely for the Department of Defense.

DOD spending can be expected for new programs such as ACCENT, NGEN-R, SBEAS, and ePS. Other Federal IT funding, ranging from $6.8 billion for the Department of Homeland Security (DHS) to $100 million for the Small Business Administration (SBA), is expected to support modernization efforts such as the $50 billion Enterprise Infrastructure Solutions (EIS) contracts and Government-wide Acquisition Contracts that continue to modernize and branch into new services such as cloud computing and Health IT. Overall, IT modernization is continuing to grow both in funding and importance for Federal agencies. Much like the MGT Act, the President’s FY18 proposal is subject to Congressional approval, but growing support for modernization efforts across the Federal government should leave his IT plans relatively intact.

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Published May 25, 2017