Blockchain spending by federal agencies will see a steep decline in 2020 as projects struggle to move past the proof-of-concept stage.
New projections by Bloomberg Government shows that blockchain spending is on course to go up only slightly or even decline this year. Contract obligations will take a hit despite experiencing a steady growth in the last two years. According to the projections, federal blockchain spending in 2020 will reach somewhere in the range of $7.1 million to $15.1 million.
In fiscal 2018, agencies obligated $13.3 million on blockchain-related contracts, more than double the obligations in fiscal 2017. But that spending didn’t take off as expected which might be understandable considering that this the period when the world was starting to take note of blockchain.
In a July 2019 paper, the World Economic Forum and Accenture noted that transition from proof-of-concept to production requires stakeholder buy-in and can be a real challenge for organizations implementing blockchain. Federal agencies are seemingly reluctant to advance beyond proof of concept to the actual production phase. As a result, most of the projects are still in pilot stages and therefore have low values.
Homeland Security Blockchain Initiatives
The Homeland Security Department, for instance, has eight blockchain projects currently running through its Silicon Valley Innovation Program. However, the majority of these projects are currently in Phase 1, the proof-of-concept stage. There are five phases for each project, with the first four phases receiving up to $200, 000 each in investment. If Phase 5 is required, additional funding may be available.
Besides the Silicon Valley Innovation Program, the department launched seven additional initiatives, according to a report by the Data Foundation. Of those programs, two are multimillion-dollar contracts, but none of their contract obligations have surpassed $10 million.
Other Federal Blockchain Projects
Other agencies deploying blockchain in government operations include the Food and Drug Administration’s (FDA), the Health and Human Services Department, the Treasury Department, among others.
The Treasury Department’s Bureau of Fiscal Service has obligated $1.2 million to Deloitte Touche Tohmatsu Ltd. for a pilot project for tracking its mobile devices. The pilot aims to enable the agency to gain a better understanding of blockchain’s potential in tracking a physical asset. Meanwhile, the General Services Administration has awarded a contract of $5.3 million to United Solutions LLC to pilot a blockchain project aimed at automating its proposal review process.
Another project underway is the Health and Human Services Department’s Accelerate program, which has been awarded to Excelous LLC. The program, which is worth $170, 000, aims to use blockchain to optimize the acquisition of products and services.
The Food and Drug Administration also awarded a $150,000 contract to the University of Southern California. This also includes a $6.5 million task order to Booz Allen Hamilton Holding Corp. for its Portable Interactive Devices (RAPID) blockchain, real-time biosurveillance, and data sharing blockchain project.
Last year, the market intelligence firm IDC said it anticipated federal agencies would spend more than $123 million on blockchain in 2022. As these projects progress and more open solicitations are awarded, it is highly likely that investments will increase in the next two years. Moreover, a growing number of agencies are moving from exploring blockchain use cases into implementation.
Nevertheless, the conditions in government agencies must enable the use of the technology, and the market growth will also depend on whether the current pilot projects achieve success.
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