Homeland Security Spending Spree

Federal IT spending keeps growing and growing, and Homeland Security has the deepest pockets

July 29, 2004

3 Min Read
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The big-spending Department of Homeland Security (DHS) is the most lucrative part of the Federal Government for vendors on the lookout for IT contracts, according to the latest research from analyst firm Input.

At a time when federal IT spending is on the rise, Homeland Security is fast emerging as Washingtons technology cash cow. Input reports that the Federal Government awarded more than $23 billion in IT-related contracts during the second quarter of 2004. This represents a 50 percent increase on the same period in 2003.

Although three of the top five spending departments in the Input report were Defense agencies, the DHS was responsible for nearly half of all major technology contracts, worth a total of $10.7 billion. This was followed by the Departments of the Army ($4.5 billion), Navy ($3.9 billion), Air Force ($1 billion), and the Department of Transportation ($900 million).

The results reflect a period of frenzied activity at the DHS. A month hardly seems to go by without officials unveiling yet another ambitious project. Last month, for example, the Department announced that a consortium led by Accenture had won the $10 billion contract for the new U.S. Visitor and Immigration Status Indication System (US Visit). Under the terms of the five-year contract, Accenture and its partners will develop a system to collect and share information, including biometric data, on foreign nationals.

Most of these new initiatives are likely to involve some pretty robust back-end IT systems. In late May, for example, the DHS signed an agreement with the European Union to collect airline passenger data and more recently unveiled its new Homeland Security Operations Center, which serves as the national nerve center for monitoring threats.Vendors are rubbing their hands -- recent contract awards from the DHS include the $337 million Homeland Secure Data Network (HSDN), $175 million for a new human resources system, and the creation of a $130 million Homeland Security Institute specifically to deal with science and technology security issues.

In a speech in Washington earlier this week, Secretary of Homeland Security Tom Ridge explained the extent of the technology challenge facing the Department. Each day, officials plough through 500 cyber security reports and review dozens of different technology proposals, he said.

Such is the Department’s growing reliance on technology that officials recently launched a vendor information Website specifically for IT products and services.

Even though the DHS has already awarded a number of mega-deals, smaller technology vendors are still optimistic that they will get a share of the action. With the DHS collating increasing volumes of data, storage is expected to be one of the busiest technology areas for the Department.

Payton Smith, analyst at Input, says that this will be critical to the new "knowledge management" systems the department is building to share information among different government agencies. "A big part of implementing effective knowledge management is having the storage hardware in place so that people can access that data effectively," he says.Barbara Nelson, CEO of storage security vendor NeoScale Systems Inc., already works with a number of government agencies and their contractors. As the DHS develops its systems and expands its operations, Nelson believes that storage vendors in particular could reap the benefits.

”One of the largest storage opportunities in terms of raw terabytes is coming from the contractors and integrators that are working with the Department of Homeland Security at the moment," she says.

However, there is also a degree of uncertainty about what the Federal IT spending outlook will be following the November elections. “You can argue that, if Congress changes substantially in terms of where it’s spending money, that could slow things down,” says Nelson.

”But I really don’t think that’s going to happen -- the signs are pretty strong."

Input estimates that DHS IT spending is likely to grow 9 percent between 2004 and 2009, compared to 6.5 percent across the rest of Government.— James Rogers, Site Editor, Next-gen Data Center Forum

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