Technology Modernization Fund: Small Savings Achieved So Far, but Substantial Future Savings Expected

Executive Summary

Affected segments pending source review. The GAO review of the Technology Modernization Fund (TMF) shows the program invested about $1.03 billion in 68 unclassified projects (fiscal years 2018–2025) and that 24 projects expect total savings of about $1.06 billion. Realized savings to date are small (about $13.5 million across 11 projects), largely because roughly $1.04 billion of expected savings (about 98.3 percent of the total expected) are scheduled for fiscal year 2027 or later. At the same time, 37 projects do not expect cost savings and instead aim to deliver other value such as security risk mitigation.

For contractors this means near-term revenue may be driven more by modernization and security-focused work than by immediately realized cost-savings performance, while a larger wave of cost-savings–oriented opportunities is scheduled farther out (FY2027+). Agencies used competitive procedures for the majority of related procurements (154 of 177 contract actions, 87 percent, accounting for about $713.1 million, or 96 percent, of TMF funding awarded), but documented authorized exceptions in the 23 non‑competitive instances. GAO also compared realized versus expected savings using OMB’s 10 percent variance threshold — a reminder that proposals to TMF-funded projects should include reliable, defensible savings estimates in line with OMB guidance.

Impact Matrix

Affected segments pending source review

• Risk Level: High
• Opportunity: Continued and potentially substantial future demand for IT modernization work tied to TMF projects (many projects expect savings in fiscal year 2027 or later) and ongoing demand for projects intended primarily to mitigate security risks. Specific opportunities TBD pending solicitation language.
• Timeline: As of June 2025, most projects remain active; many projects with expected savings anticipate achieving them in fiscal year 2027 or later.
• Action Required:
• Ensure cost-estimating capabilities and documentation align with OMB guidance and are defensible against a 10 percent variance threshold.
• Prepare for primarily competitive procurements (historically 87% of TMF contract actions were competed) and maintain capabilities to document authorized exceptions where sole-source or other exceptions are used.
• Position technical offerings toward both modernization (longer-term savings realizations) and non‑savings value (security/risk mitigation), since many projects prioritize security over immediate cost reductions.
• Monitor TMF project status updates (active/completed/cancelled) to time capture efforts; note seven TMF projects were cancelled prior to June 2025.
• Competitive Edge: Develop verifiable savings models and migration-cost scenarios that transparently show risk, assumptions, and contingency; emphasize security risk reduction value where cost savings are not the primary metric; and prepare highly competitive, well-documented bids given the program’s historically high rate of competitive awards.

Cross-Segment Implications

• The large share of TMF projects that do not target cost savings (37 projects) and the substantial deferred savings (projects expecting savings in FY2027+) mean contractors may need to balance pursuits between near‑term security/mitigation work and later rounds focused on cost-reduction implementation. Bidders that can credibly cover both—security and lifecycle cost modeling—may capture more work across the TMF portfolio.
• Because most procurements have been competed and agencies documented exceptions when they awarded non‑competitively, capture strategies should prioritize competitive differentiation while also maintaining the readiness to justify sole-source or exception-based awards when applicable.
• Variability between expected and realized savings (several completed projects missed targets, with causes like removed functionality and higher migration costs) indicates that contractors who include realistic migration plans, phased functionality approaches, and conservative savings forecasts may reduce disputes and strengthen performance records for future TMF-related solicitations.