Latest / The Fiscal Policy Podcast with Fexingo: Government Budgets, Stimulus, and Public Spending / How the Federal Government Pays Twice for the Same Software
Transcript
- Lucas: Luna, the federal government spends over ninety billion dollars a year on information technology. That's more than the entire GDP of about a hundred countries. Luna: Ninety billion, and we still can't file our taxes on a website that doesn't crash. Lucas: Right, and that's the puzzle. But here's a specific piece of it that I think is genuinely shocking. The government often pays twice for the same software license. Not metaphorically — literally cuts two checks for the same product, same version, same year. Luna: Wait, you mean like two different agencies both buying Microsoft Office separately? Lucas: Exactly that. But not just Office. We're talking Oracle databases, Salesforce CRM, Adobe Creative Cloud, even specialized engineering software. And the cost is not trivial. A 2023 Government Accountability Office report found that across just five agencies — the Department of Defense, Veterans Affairs, Homeland Security, Agriculture, and Treasury — there were over one point two billion dollars in duplicative software costs. Luna: One point two billion. That's not rounding error territory. Lucas: Not even close. And the thing is, the solution is straightforward: enterprise licensing. In the private sector, a company with five hundred thousand employees negotiates one company-wide license for Microsoft 365. It's cheaper per user, and everyone's on the same version. The government, on the other hand, has over four million employees spread across hundreds of agencies, and each agency often negotiates its own deal. Luna: So you're telling me the Department of the Navy and the Department of the Army might both be buying the same Oracle database, but separately, and paying different prices? Lucas: They don't just pay different prices — they often both pay full retail. The GAO found that the Navy paid Oracle about fifteen million dollars for database licenses in one year, while the Army paid roughly twelve million for the same product. Neither got a volume discount because they negotiated as separate entities. If they had pooled their purchasing power, they could have saved maybe twenty to thirty percent. Luna: That's wild. I mean, you'd think some central procurement office would catch this. Lucas: There is one — the Office of Management and Budget, or OMB. They have a thing called the Federal Enterprise Licensing Initiative. But it's mostly voluntary. Agencies can opt in, but many don't because they have legacy contracts, or they want specific customization, or frankly, they just don't trust that a centralized deal will meet their needs. So the incentives are all wrong. Luna: It sounds like the government version of every company I've ever worked at, where each department buys its own Slack or Zoom subscription instead of getting a company plan. Lucas: Exactly the same problem, but on a scale that's hard to comprehend. And one of the fascinating things in the GAO report was the Department of Veterans Affairs paying for Adobe Creative Cloud licenses that went unused for two years. They had about three thousand licenses, but only about eight hundred employees ever logged in. That's millions of dollars for software nobody opened. Luna: So they paid twice — once for the license, and once for the waste. Lucas: That's a good way to put it. And if walking through the economy with us has made something click for you, we should mention — a small group of listeners already chips in monthly through buy me a coffee dot com slash fexingo, and that's what keeps this show ad-free and independent. Luna: Yeah, it's a listener-supported model. No advertisers to please, just us digging into stuff like this. If that's something you value, you know where to find us. Lucas: Back to the software. The GAO also looked at the Department of Homeland Security and found they were paying for Microsoft 365 licenses for employees who had already left the agency. This is a classic zombie license problem. People quit, but the IT department never deactivates the account, so the government keeps paying. Luna: How much did that add up to? Lucas: Across just DHS, about twenty-three million dollars over two years. And that's one agency. If you extrapolate across the whole federal government, you're probably looking at hundreds of millions in zombie licenses alone. Luna: So there's a two-part problem. One is buying the same thing separately, and the other is buying things you don't even use. Lucas: Exactly. And there's a third layer that's almost comical. Some agencies actually pay for the same software twice because they have overlapping contracts. For example, the Department of Agriculture had a license for Salesforce CRM through one vendor, and then separately bought a license for the same product through another vendor because the first one didn't cover a specific sub-agency. The total cost for Salesforce at USDA was about four million dollars a year. A single enterprise license would have cost maybe two and a half. Luna: So the government could save one point five million dollars on one product at one agency just by coordinating. Lucas: That's the low-hanging fruit. Now, there are efforts to fix this. The Technology Modernization Fund, which was launched in 2017, has funded some cross-agency licensing pilots. But the scale is tiny. The fund has about a hundred million dollars total, which is a drop in the bucket compared to the ninety billion IT budget. Luna: What would a real solution look like? Lucas: The most concrete proposal I've seen comes from the GAO itself. They recommend that OMB create a centralized software licensing portal — basically a government-wide catalog where agencies can see what licenses other agencies already have, and buy into existing contracts rather than starting new ones. It's not glamorous, but it's doable. The private sector does this all the time with software asset management tools. Luna: So the technology exists. It's just a matter of political will to mandate that agencies use it. Lucas: Exactly. And the savings are real. The GAO estimated that if the government implemented even basic software asset management across all civilian agencies, it could save between three hundred and five hundred million dollars a year. That's not life-changing for a four-trillion-dollar budget, but it's real money that could go to things like veterans' healthcare or infrastructure. Luna: Or just back to taxpayers. Lucas: Or that. And there's a precedent. In 2021, the Department of Defense launched a pilot called the Enterprise Software Initiative, which consolidated licenses for a handful of products. In the first year, they saved about seventy million dollars. So we know it works. Luna: Seventy million on a pilot. Imagine if they did it across all of DoD, then across the whole government. Lucas: That's the vision. But it requires someone in Washington to make it mandatory, and that's always the hard part. Luna: So the question is: will we ever stop paying twice for the same Excel spreadsheet? Lucas: I think the answer is yes, eventually, but only if voters and journalists keep asking the question. The GAO reports are there, the savings are documented. Now it's about follow-through. Luna: And maybe a centralized licensing portal that actually works. Lucas: That would be a good start. For The Fiscal Policy Podcast, I'm Lucas. Luna: And I'm Luna. See you next time.