According to the Bush administration’s federal budget proposal for 2005, military spending is to increase by 7% to $401.7bn, while the DHS budget will grow 10% to $40.2bn. Defense and homeland security were the only categories in the proposed budget that grew, with other areas either remaining flat or declining.

Since its formation after the September 11 terrorist attacks, the DHS has become the single largest federal department. It employs some 170,000 people, and has a 2004 budget worth a colossal $36.2bn of which $3bn is for IT services.

Although the 2005 budget proposal is facing some tough challenges before approval in the Senate (one amendment could see the Defense budget stripped of $7bn), few believe that the focus on defense and public sector spending will fall significantly any time soon, even if George Bush loses the presidential elections later this year.

Whoever is elected as the next president will still have to focus on public sector IT spend, so budgets should stay level in the near future, said Lauren Jones Shu, senior analyst at federal market research company Input.

The largest homeland security services contract has yet to be signed. Computer Sciences, Lockheed Martin, and Accenture are competing to win the prime contractor role in what will be one of the largest ever IT services contracts, worth a staggering $10bn. The 10-year US-VISIT contract is to provide biometric security services, including fingerprint-recognition scanners, digital photographs, and supporting IT services.

It also includes consolidating legacy systems from the 22 departments that now are part of the DHS, including US Citizenship and Immigration Services, Transportation, Customs and the Federal Emergency Management Agency. The three short-listed companies are all proposing bids that would involve them subcontracting work out to a number of other contractors.

An expanding community of IT services contractors has developed around demand for defense sector projects, and most are enjoying growth rates that far outstrip those of their peers in the private sector. For example, Fairfax, Virginia-based Anteon International Corp reported net revenue that rose 26.2% to $1bn for the full year ended December 31, 2003, as a result of major contract awards with the US Navy, Department of Defense, and US Army.

Meanwhile, Bethesda, Maryland-based Lockheed Martin grew sales in its Integrated Systems & Solutions and Information & Technology Services divisions by 13% to $3.4bn and by 2% to $3.2bn respectively over the year. Sales increases were primarily attributed to a higher volume of intelligence, defense and information assurance activities, over both the quarter and the year.

But long-term growth in the US defense sector spending is not guaranteed, as public opinion is slowly turning against the government’s focus on heavy defense investment.

This article is based on material originally published by ComputerWire