Federal government spending trends: Five years in five charts

January 10, 2018 Daniel Snyder

This analysis was first available to Bloomberg Government subscribers

Contract spending by the federal government has changed significantly over the past five fiscal years. Here are five important spending trends identified by Bloomberg Government.

Federal contract spending broke the half-trillion dollar barrier in fiscal 2017, its highest level since fiscal 2012, when the federal government spent $522 billion on unclassified contracts.

The trend suggests that efforts to slow federal discretionary spending with the Budget Control Act that began imposing annual spending caps in 2013 may be softening. Spending could stay well beyond the $500 billion mark. Between fiscal 2008 and 2012 — prior to the effects of BCA — totals averaged about $541 billion.

Federal spending has surged on governmentwide acquisition contracts, which agencies use to buy information technology, to nearly $13 billion in fiscal 2017. This is probably a result of two factors: agencies buying more IT to modernize legacy systems and governmentwide efforts to consolidate the number of contracts managed by the federal government.

Federal spending on small businesses has risen in lockstep with overall contract spending, meaning that the share of federal dollars won by small businesses has remained relatively flat. From fiscal years 2013 through 2017, small business spending accounted for about 20 percent to 22 percent of the market.

Spending on simplified acquisitions, or purchases by the government that fall below a certain threshold for commonly acquired goods and services, has inched-up each year since fiscal 2013. This is probably because agencies can avoid some procurement regulations by using simplified acquisitions. BGOV expects simplified acquisitions purchases to continue rising as a result of threshold adjustments for inflation.

Spending on fixed-price contracts, which incentivize contractors to maximize profit by lowering costs, increased by $30 billion (about 10 percent) from $296 billion in fiscal 2013 to $326 billion in fiscal 2017. The increase in fixed-price contracts is almost certainly because it limits the government risk of runaway costs. As a share of total contract obligations, spending on fixed-price contracts remained about the same — from 62 percent to 64 percent of all obligations.

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