Report: Government Wasted More Than $300B by Not Using Commercial Tech

Over the last 25 years, the federal government has “likely wasted” $345 billion—more than $2,000 per every American household—by not embracing commercially available information technology products, according to a report from the Alliance for Digital Innovation.

The report by ADI, a recently established association of commercial companies including Amazon Web Services, Splunk and others, tracks federal IT spending since Congress passed the Federal Acquisition Streamlining Act of 1994. The law directed feds to purchase commercially available hardware and software products over developing their own.  

ADI notes that it’s impossible to precisely calculate the loss of wasteful IT spending because the government does not track the performance of its IT investments. The “conservative” $345 billion estimate is based on an analytic that Sen. William Cohen, R-Maine, used in a 1994 investigative report. The measure calculates the government’s IT spending as a percentage of total U.S. discretionary funding.

The report also said between 2010 and 2016, the Government Accountability Office has written “no less than 800 reports” on the need to improve IT spending efficiency. Yet while the failure rate of government-built IT solutions is high—between 2003 and 2013 more than $9 billion in custom IT projects had to be canceled because they didn’t work—a recent estimate of government spending suggests between 2018 and 2023, new commercial software will only account for 11% of more than $600 billion in IT expenditures.

“Specifically, the government should never incur the cost, time and risk to build a custom IT system—reinventing the wheel, when a proven commercial product is already available that meets or exceeds requirements at the same or lower cost,” the report said.

ADI also said between 2010 and 2017, at least $440 billion was spent on operations and maintenance, or O&M, to hold together the government’s legacy IT, “the vast majority” of which was custom built. And the O&M spending trend is only getting worse. While the government spent 68% of its IT budget on O&M in 2010, it was spending 77% by 2017.

Some of the oldest systems held together through O&M spending include the Internal Revenue Service’s 56-year-old authoritative individual taxpayer accounts, Veterans Affairs Department’s 53-year-old timekeeping and attendance system and Social Security 31-year-old retirement eligibility system. All three systems run on the COBOL language.

The report also added that approximately 77% of the government’s annual IT budget is currently spent on maintaining the outdated code.

“When the vast majority of the government’s IT budget is used to prop up old junk systems, there’s little money left for economical and efficient innovation,” the report said. “Every citizen and legislator should be alarmed at the wasteful, profligate spending endemic to federal IT.”