Government’s Contract Spending Reached Record High in Fiscal 2020

The federal government spent a record $682 billion on contracts in fiscal 2020, according to an analysis released Thursday by Bloomberg Government.

Buoyed in part by the COVID-19 pandemic, the total represents by far the most money the federal government has ever spent on government contracts, and an $83 billion—or 14%—increase over then-record $599 billion in fiscal 2019 contract spending.

The federal government’s contracted expenditures on medical supplies jumped 50%, while spending on aircraft, ships, subs and combat vehicles increased 41%. Conversely, government spending decreased by more than 13% on miscellaneous and sustainment supplies as the government shuttered offices and equipment related to physical infrastructure. One of the key growth areas in government spending is technology.

Contract spending on information technology grew $6.8 billion year over year, “the single largest growth year on record” for tech, according to the analysis.

“IT is consistently among the markets with reliable growth rates each year, growing to $76.2 billion in fiscal 2020 from $57.3 billion in fiscal 2016,” the analysis states. “The market was on a growth trajectory before Covid-19 due to continued investment in IT modernization. Technology was bolstered beyond forecast amounts as agencies adopted remote work measures in fiscal 2020.”

As it has for years, Bethesda, Md.-based contractor Lockheed Martin topped Bloomberg Government’s list of top contractors, capturing about $76 billion in fiscal 2020 government contracts. Raytheon, General Dynamics, Boeing and Northrop Grumman—each capturing $14 billion or more in contracts—round out the top five.

The analysis makes clear the government capitalized on a multitude of spending mechanisms over the previous fiscal year. COVID-19-related transactions totaled $45 billion in fiscal 2020, with most attributable to vaccine research and development and medical equipment. The government dramatically increased its reliance on other transaction authority purchases—those made outside traditional Federal Acquisition Regulations—spending $18 billion.

“Since federal agencies rely on OTAs to support activities for research and development and prototype growth, the acquisition method provided a favorable solution for agencies rushing to research and develop vaccines and medical equipment quickly,” the analysis states.

The analysis suggests the government will continue spending a record amount on contracts through at least fiscal 2021. President Biden’s $1.9 trillion stimulus package signed into law in February, coupled with a fiscal 2021 spending bill totaling $1.4 trillion in discretionary spending, suggests “another year of exceptionally high federal contract spending,” the analysis concludes.