# Federal Agencies Manage Rising AI Costs

As U.S. federal agencies move AI beyond discounted pilots, falling per-token prices may not reduce total spending: broader adoption, AI agents, and consumption-based pricing can increase usage and overall costs. McKinsey recommends assigning clear ownership of AI expenditures, tracking costs by program and use case, applying real-time controls, and connecting spending to mission outcomes. The signals identify no specific solicitation, contract value, or award, but the trend has direct implications for agency budgeting and acquisition planning.

- Agencies and contractors should account for total projected usage—not just unit prices—when developing AI budgets and evaluating consumption-based pricing.
- McKinsey’s recommendations point to a need for program- and use-case-level cost visibility, spending controls, and links between AI expenditures and mission outcomes.
- Contractors offering AI services may need to support usage tracking and cost controls so agencies can manage spending as deployments expand.

**Jurisdictions:** federal
**Industries:** Information Technology
**Topics:** Artificial Intelligence
**Published:** October 13, 2026

### Government Entities
- U.S. federal government

### Key Quotes
> The cloud journey started very similarly, where almost all assumed initially that migrating will lead to saved costs,
> — Gayatri Shenai, Senior Partner at McKinsey

### Sources
- [
        The first wave of government AI adoption came with pilot projects and discounted pricing. The next phase could bring a very different budget reality - Federal News Network](https://federalnewsnetwork.com/podcast/federal-drive-with-terry-gerton-podcast/the-first-wave-of-government-ai-adoption-came-with-pilot-projects-and-discounted-pricing-the-next-phase-could-bring-a-very-different-budget-reality) - Federal News Network
- [
        A new phase of government AI adoption could bring a very different budget reality - Federal News Network](https://federalnewsnetwork.com/artificial-intelligence/2026/10/a-new-phase-of-government-ai-adoption-could-bring-a-very-different-budget-reality) - Federal News Network