Latest / The Fiscal Policy Podcast with Fexingo: Government Budgets, Stimulus, and Public Spending / How the US Government Spends 7 Billion a Year on Unused Software Licenses
Transcript
- Lucas: The federal government spends roughly seven billion dollars a year on software licenses — and a huge chunk of those licenses are never actually used by anyone. Luna: Seven billion is a big number. How do we even know how much is wasted? Lucas: The Government Accountability Office — the GAO — put out a report last year, 2025, looking at 24 major federal agencies. They found that nearly 40 percent of software seats were either inactive or grossly underutilized. That's millions of licenses for things like Microsoft Office, Adobe, specialized data tools — just sitting there. Luna: So what's driving this? Is it just sloppy management, or is there a structural reason? Lucas: A bit of both, but the structural part is really interesting. Most agencies buy software the way you'd buy office supplies — each department or even each division negotiates its own contracts. So you get the Department of Agriculture buying a thousand Adobe licenses for one branch while another branch buys another thousand from a different vendor. No one knows what's already available. Luna: Right, because there's no central inventory. So the same tool gets bought twice, and nobody checks if people are actually using what they have. Lucas: Exactly. And there's another behavioral factor: the 'use it or lose it' problem with budget allocations. If a division doesn't spend its full software budget by the end of the fiscal year, they risk getting less money next year. So managers buy extra licenses in September just to burn through the funds. Luna: That's the classic federal budgeting trap. Spend it or lose it — even if spending it means buying things you don't need. Lucas: Right. And that's not just a software phenomenon; it happens across procurement. But with software, the waste is especially visible because you can actually measure usage. The GAO found that at the Department of Veterans Affairs, less than half of their software licenses were actively used. At the Department of Agriculture, it was even lower in some categories. Luna: So what would a fix look like? Could the government save billions just by better managing licenses? Lucas: The GAO recommended a few things. First, create a government-wide software license inventory — a single database that tracks what every agency owns and uses. Second, adopt enterprise licensing agreements so the whole government negotiates as one buyer. That alone could cut costs by 20 to 30 percent. Luna: And that's just from better procurement. Add in reclaiming unused licenses, and the savings could be substantial. Lucas: The estimate I've seen from good-government groups is that optimizing license usage across federal agencies could save two to three billion dollars a year. That's not pocket change — that's funding for thousands of new government IT specialists or a significant infrastructure project. Luna: But why hasn't this been done already? It seems like a no-brainer. Lucas: Part of it is that agencies are resistant to centralized control. They want to keep their own procurement authority. Also, implementing a government-wide license management system requires upfront investment — maybe a few hundred million — and that's a hard sell when the savings are spread across many budgets and don't show up as a single line item. Luna: So the savings are real but diffuse, while the costs are concentrated and visible. That makes it politically tough. Lucas: Exactly. It's a classic collective action problem inside government. But there are some signs of progress. The Office of Management and Budget has been pushing for more shared services, and a few agencies are piloting centralized software asset management tools. If those pilots show clear savings, it could build momentum. Luna: It's interesting — this is one of those topics where a relatively small policy change could have a huge impact, without any new laws or big ideological battles. Lucas: Yeah, it's almost boring in a way. But boring can save billions. And it ties into a broader point about government efficiency that we've touched on in past episodes — the idea that a lot of waste isn't about fraud or laziness; it's about misaligned incentives and outdated processes. Luna: And speaking of small changes that add up — listener support is what keeps this show going. If you've gotten something out of hearing about how the budget works, a couple of dollars a month genuinely makes a difference. You can find us at buy me a coffee dot com slash fexingo. Lucas: Yeah, we keep the show ad-free, and that's only possible because of listeners who chip in. No pressure, but if it's been useful, that's the place. Luna: So back to software waste — one other angle I want to touch on is the security risk. Unused licenses often mean unpatched software that's still installed on government computers. Lucas: That's a really good point. The GAO report flagged that too. When agencies have software they're not using but haven't uninstalled, those programs don't get updated. They become vulnerabilities. So the waste isn't just financial — it's also a cybersecurity issue. Luna: So you could argue that cleaning up license management would improve both the budget and national security. Lucas: Absolutely. It's one of those rare policy fixes that's almost all upside. The challenge is just getting agencies to cooperate and invest in the systems to make it happen. But with the GAO shining a light on the numbers, maybe we'll see some movement in the next few years. Luna: Let's hope so. Seven billion dollars is a lot of money to leave on the table. Lucas: It really is. And unlike some government inefficiencies, this one has a pretty clear solution. We'll be watching to see if Congress or OMB pushes for a centralized license management mandate.