Report by By Kathrin Frauscher and Kaye Sklar: “Public sector organizations are accelerating their investments in AI technology, and spending big: In the UK, government contracts for AI projects hit £573 million by August 2025, exceeding all of 2024. In the United States, federal agencies committed $5.6 billion to AI between 2022 and 2024. But it’s not just what they buy, it’s how they buy it that will have a huge impact on outcomes.
1. Off-the-shelf AI is winning over custom builds.
Organizations aren’t rushing to buy complex, custom-built AI systems. Instead, right now they are purchasing off-the-shelf licenses for lower-risk efficiency-driven use cases, such as AI-powered writing assistants, data analysis tools, or automated document management systems. Public sector organizations can often use these tools through their existing cloud or productivity platforms.
2. Centralized buying is on the rise.
We see a clear shift toward enterprise-wide AI procurement. Central IT or digital transformation agencies now negotiate contracts for all government departments. The United States, among others, has moved to this model. While central purchasing can promote efficiency and interoperability, this also means that decision-making power is concentrated in fewer hands.
3. AI is sneaking in through side doors.
Not all AI used by the public sector goes through procurement. Government agencies often access AI through free pilots, grants, features built into existing tools, or academic partnerships. This “shadow AI” can help teams move fast, but it means less opportunity for accountability and oversight.
Together, these trends create a growing gap between AI procurement and AI adoption…(More)”.
