IT Spending By Government Predicted To Increase 50% Next Year

(MoneyWatch)  One of the things about Government spending is that every now and then a year will see a significant spike based on how many and what contracts come up for renewal. Many of the support contracts whether they be services or Information Technology (IT) related tend to be five years long. This means that every five years or so a large number come up for renewal or re-bid. 2010 is one of those years for IT support contracts.

Most of the large Departments whether they be one of the military services or a non-defense related one like Health and Human Services or Homeland Security have omnibus IT contracts. These provide a way for all parts of the organization to buy help desk support, communications and network services and hard ware through one central contract. These tend to be large awards to multiple companies but many do not necessarily execute all of the work awarded or placed on the contract.

In 2010 according to a recent report by research firm INPUT as InformationWeek writes the expected value of contracts like this will be over $180 billion. This is an increase of fifty percent over 2009's values. Much of this is being driven by the re-competition for several agencies IT contracts as well as new focus on such work.

Considering that the total Federal budget in 2010 will be over two trillion dollars this means that almost ten percent will be spent on these contracts. Despite a focus on trying to move some of this work back into using the civil service rather then contractors, insourcing, much of this work will end up being done by contractors for a variety of reasons. The large Federal IT companies like CSC, SAIC and now Hewlett Packard due to their purchase of EDS will see opportunities while many smaller companies will as well.

IT has always tended to be an area where small, minority or disadvantage companies may enter the market. Part of this is due to the type of product being purchased which is often services or software typical of these companies. The values of the contracts are also easy to separate into smaller amounts as they can buy discrete pieces from the companies. This aids the larger contractors as well as it allows them to meet the Federal small business and disadvantaged goals.

If things are done right then the increase in spending this Fiscal Year will flow down to many of these companies and perhaps also cause more to be started. This could be a job creating stimulus that seems to be also going to happen when the Electronic Health Records (EHR) gets started. Of course if these are existing contracts awarded to new contractors then there will be little net gain of jobs beyond the new spending as the company previously holding it will have to lay people off although an increase of fifty percent or so will certainly add positions and work.