Federal Spending by Agency: Where Tax Dollars Go
Published March 28, 2026 · USASpending.gov data
The federal government spends over $6 trillion annually, distributed across dozens of agencies with vastly different missions. Defense accounts for the largest share of discretionary spending, while mandatory programs like Social Security and Medicare dominate total outlays. Here is where the money goes.
Top Federal Agencies by Contract Obligations
| Agency | Contract Obligations | Top Contractor |
|---|---|---|
| Department of Defense | $326.1B | Lockheed Martin Corporation |
| Department of Veterans Affairs | $54.9B | Optum Public Sector Solutions, Inc. |
| Department of Energy | $28.2B | Lockheed Martin Corporation |
| General Services Administration | $25.6B | Booz Allen Hamilton Inc. |
| Department of Health and Human Services | $24.2B | Mckesson Corporation |
| National Aeronautics and Space Administration | $17.6B | The Boeing Company |
| Department of Homeland Security | $15.3B | Huntington Ingalls Incorporated |
| Department of State | $11.3B | General Dynamics Information Technology, Inc. |
| Department of the Treasury | $6.7B | Booz Allen Hamilton Inc. |
| Department of Justice | $5.0B | Mckesson Corporation |
| Department of Agriculture | $5.0B | Carahsoft Technology Corp. |
| Department of Transportation | $4.9B | Leidos, Inc. |
| Agency for International Development | $4.7B | Chemonics International, Inc. |
| Department of the Interior | $3.1B | Hensel Phelps Construction Co. |
| Department of Education | $2.8B | Accenture Federal Services LLC |
Defense Dominates Contract Spending
The Department of Defense accounts for roughly 60% of all federal contract obligations. This includes weapons systems, military construction, IT systems, logistics, and professional services. For detailed defense contractor analysis, see our defense spending breakdown.
The Civilian Agencies
Outside defense, the largest contracting agencies are the Department of Energy (nuclear weapons complex and national labs), HHS (Medicare administration and IT), Veterans Affairs (healthcare and benefits systems), and NASA (space exploration and research). These four civilian agencies combined account for roughly 20% of total contract obligations.
The IT Modernization Wave
Federal IT spending has surged across virtually every agency as the government modernizes legacy systems. The Technology Modernization Fund, cloud migration mandates, and cybersecurity requirements have driven billions in new IT contracts to companies like Leidos, SAIC, Booz Allen Hamilton, and Accenture Federal Services.
For the companies receiving this spending, see our biggest government contractors ranking.
Frequently Asked Questions
Which federal agency spends the most money?
The Department of Health and Human Services (HHS) has the largest total outlays due to Medicare and Medicaid. However, the Department of Defense (DoD) is the largest in terms of discretionary spending and contract obligations, spending roughly $800 billion annually on defense operations and procurement.
How much does the federal government spend per year?
Total federal spending exceeds $6 trillion annually. This includes mandatory spending (Social Security, Medicare, Medicaid), discretionary spending (defense, education, transportation), and interest on the national debt.
What is the difference between obligations and outlays?
Obligations are legally binding commitments to spend money (e.g., signing a contract). Outlays are actual payments made. A contract obligated in FY2025 may result in outlays spread across multiple fiscal years as work is completed and invoices are paid.
About This Data
All data from USASpending.gov. Contract obligations reflect committed spending, not actual outlays. See our methodology.
Follow Federal Spending Analysis
Get more federal-spending guides by email. No spam, unsubscribe anytime.