When people think about government spending, they usually imagine big-ticket items: social programs, highways, and military funding for planes and tanks. But as with wider society, very few of the government’s functions could take place without relying on a quieter, less visible expense: software.
From the Department of Veterans Affairs managing health records, to the IRS processing returns, to the State Department issuing passports, software powers nearly every function of the federal government. And buying it, known as government software procurement, is a big and important business.
Much of the software the government buys is the same or similar to what’s used by private companies. The largest software vendors to the government include Microsoft, Adobe, Oracle, Salesforce, and ServiceNow. Overall, the federal government spends around $20 billion per year on software, making it the largest software customer anywhere in the world.
Right now, each federal agency negotiates its own software contracts as if they have little or no relation to other parts of the federal governments. That means dozens of different contracts for the same product, each with different prices and terms. But the current system causes a few significant issues:
- Lack of Data: No one in government can answer simple questions like: How many software licenses do we own? What software do we actually use? What did we pay per license? While the vendors selling the software know these answers, the government does not.
- Incumbent Advantage: Agencies default to the same vendors over and over, often because individual government departments don’t have the time or incentive to ensure they’re not wasting money on software. Procurements labeled as “competitive” are often written in ways that guarantee the incumbent wins.
- Price Disparities: The cost of Microsoft Office 365, for example, can vary by $200 per license between agencies. That would be like two neighbors paying wildly different monthly bills for the same internet package. Yet, we allow such uneven pricing throughout the federal government.
These flaws aren’t just bureaucratic details. They cost real money. Michael Garland’s new report released by NetChoice, Defeating Vendor Lock-in and Gaining Buying Power, finds that the government could save at least $3 billion every year by restoring genuine competition over government software contracts. That’s money that could reduce the deficit or be redirected to vital public services.
Garland’s solution in the report is not complicated: treat software buying like the strategic enterprise function it is. The report recommends creating a centralized authority — the SAVE initiative (Software Accountability, Value, and Efficiency) to:
- Build a unified database of licenses, usage, and pricing.
- Employ dedicated supplier managers for top vendors.
- Standardize contracts and demand interoperability.
- Restore authentic competition to drive down prices.
How the government buys software touches every aspect of how our government works, but it remains an underreported issue. The way Washington buys software today is fragmented, opaque and biased toward incumbents. With reforms, it could be competitive, efficient, and accountable.
Getting software procurement right isn’t just about technology and contracts, it’s about good government.