The scrutiny of federal software spending: Adapt or lose the contract

Federal buying season is fast approaching as August and September represent the peak of buying decisions.

Amid recent mandates and government policies aimed at increasing efficiency within the federal workforce, many government agencies need to rethink their purchasing decisions. 

Software companies should expect the following from federal agencies about to open their wallets:

• A critique of their processes and review of results
• A full-court press for exact product roadmaps
• Reports on how they plan to grow their solution within the constraints of the federal government

 If you’re a software vendor selling into federal agencies, you must prove yours is the best solution in the public sector or risk losing contracts and damaging your reputation.

The Problem: Outdated Software and Missed Results 

A costly issue that plagues federal agencies and their software vendors alike is timing. Before the renewed push towards modernization and efficiency, many vendor and software contracts were bogged down by lengthy approval processes, such as FedRAMP.

These stamps of approvals and authorizations to operate (ATO) within government agencies were notoriously expensive, requiring extensive work to reach the implementation stage. By the time the government approved the software, it was typically outdated. As federal agencies were forced to work with outdated technology, much of the approved software went unused.

Even still, as those solutions collected dust, the vendors still maintained their contracts, collecting yearly subscription fees and ultimately wasting taxpayer dollars. A 2023 report from the Office of Inspector General found that NASA, for example, spent $35 million on “wasteful” software licensing and fees. 

As technology evolved and software sat unutilized, many contractors did not deliver on results promised when their contracts were originally secured. Even though waived deliverables should have the power to diminish an organization’s reputation within the federal government, agency leaders have granted contract extensions or adjusted deliverables to assist vendors in meeting their promised results — even when more time and money need to be spent. 

For too long, there has been a lack of accountability regarding contractors within the federal government, many of them leveraging their longstanding relationships as a security blanket. For instance, a federal contract with MyTravel that went into effect in 2018 was terminated by the Department of Defense (DOD) after determining the need for the software lessened due to decreased travel due to COVID-19 and the consequent increase of virtual meetings, with seemingly no repercussions on the millions of wasted taxpayer dollars. 

The creation of DOGE enforced more scrutiny over federal budgets and deliverables. Federal workers responsible for securing contracts are looking more closely at their purchasing decisions to ensure the software in use best supports the needs of their agencies. 

The Lesson for Vendors: Adapt or Lose the Contract  

The sentiment in Washington and within government agencies today is this: if commitments are not delivered upon, contracts will be cancelled. Recent executive orders and the creation of new agencies such as DOGE are swiftly taking shape and decision-makers are changing their actions to embrace a more efficient, budget-friendly workforce. 

Technology vendors must also change their mindsets and adapt their processes so they are meeting deliverables quickly and within approved budgets. If they do not, they will lose contracts and risk reputational damage within the public sector.

As demonstrated through recent executive orders, today’s government leaders do not value standard government operating practices; they value taxpayer dollars. Every action made by contracts must be in support of optimizing taxpayer dollars that deliver results. 

What can software vendors do?

To secure and maintain contracts, every vendor must optimize its systems through improved, updated and scalable technology. By doing so, contractors will enable federal agencies to move faster and deliver quality data that drives results, regardless of if they have existing contracts or not.

Vendors should be prepared to showcase how their solutions capitalize on the latest advancements in technology. As the government prepares to introduce automation and artificial intelligence (AI) into the federal workforce, new software contracts must be able to support these integrations through innovative solutions that allow federal workers to leverage data and make better informed decisions. 

Recent activities within the General Services Administration (GSA) are speeding up the procurement of software contracts. By making ATOs, like FedRAMP, more efficient, the GSA is aiming to get the latest, most innovative technology in the hands of the federal workforce.

Software vendors should be prepared to present and deliver quality software that can easily integrate into existing technology. With rumors of continuous ATO circulating within the federal government, vendors should ensure their software is scalable so it can be updated as new innovations and technological advancements are created. 

To best support vendors and create a more efficient federal workforce, the government must be extremely specific in its requests for vendors. Between specific asks and innovative solutions, government contractors and government agencies can work together to create a more efficient workforce that delivers results for taxpayers.

This federal buying season, software vendors should expect to face high risks and high rewards.

Matt Garst is a senior vice president at Mendix Americas.