A Federal Policy Update That Signals Higher Expectations for Contractors
The Technology Modernization Fund (TMF) has updated its repayment policy, prioritizing full repayment for all future awards. This change is set to influence how agencies choose projects, how vendors craft proposals, and how the federal government plans long-term IT modernization. Contractors offering technology, cybersecurity, or shared services will need to adapt quickly to stay competitive.
The TMF was created under the 2017 Modernizing Government Technology (MGT) Act during the Trump administration. Initially, it required full repayment of any funding awarded to agencies, typically within five years. That structure was temporarily relaxed in 2021 when the American Rescue Plan injected $1 billion into the fund. The Biden administration allowed more flexible repayment terms, including partial repayment tiers between 25 and 100 percent.
In response to congressional pressure and operational reviews, lawmakers like Reps. Nancy Mace and Gerry Connolly introduced the Modernizing Government Technology Reform Act of 2023. That bill called for stricter repayment policies and reinforced the TMF’s original intent. The May 2025 policy shift aligns with that push, reinforcing fiscal responsibility and long-term sustainability.
As of May 2025, agencies applying for TMF awards are expected to develop repayment plans that prioritize full repayment. This change is designed to sustain the TMF over time, allowing it to recycle capital and continue funding high-impact modernization efforts.
Partial repayment remains an option, but only if agencies can provide compelling justifications. Projects focused on cybersecurity, accessibility, or public benefit may still qualify under reduced repayment terms, but these will be exceptions, not the norm.
The change also reflects urgency, as the TMF is scheduled to sunset in December 2025 unless Congress reauthorizes it.
Despite the updated policy, the TMF continues to support agencies with:
Upfront capital to launch modernization projects
Incremental funding tied to performance milestones
Technical advisory support from the TMF Program Management Office
Oversight and reporting requirements to track success
Flexible repayment schedules, when justified by project need
Agencies will become more selective in project selection to meet these repayment expectations. Contractors will need to align with specific criteria to stand out:
Cost savings: Projects must offer measurable financial returns.
Shared services: Solutions that apply to multiple agencies will carry more weight.
Scalability: Cloud platforms, zero-trust security, and automation will attract more support.
Risk reduction: Proven products and services will be favored over untested pilots.
The TMF is still a catalyst for innovation, but now with stronger financial guardrails.
Contractors who support agencies in crafting high-return, financially justified proposals will have a distinct edge. Here’s how:
Don’t rely on buzzwords. Agencies need quantifiable results. For example:
“Our zero-trust solution helped Agency X reduce cybersecurity incidents by 40 percent and saved $1.2M annually in breach recovery costs.”
Echo the board’s priorities in your messaging:
High-impact
High-return
Enterprise-wide scalability
Modernization of legacy systems
Measurable operational improvement
Provide financial models, ROI calculators, and cost-offset analysis. For instance:
“Our cloud migration framework cut server maintenance costs by 30 percent in Year 1. The projected five-year savings exceed $4M, covering 140 percent of TMF funding.”
Because the TMF is currently operating with reduced staffing and acting leadership, proactive engagement matters. Help agencies prepare early by providing draft project scopes, budgets, and repayment logic.
Since its launch in 2018, the TMF has:
Invested $1.05 billion in modernization projects
Funded 69 projects across 34 agencies
Achieved a 90 percent success rate in milestone performance
Supported initiatives like:
NewPay: A GSA payroll modernization effort for 2.2 million federal employees
HUD’s identity and access management upgrade
StudentAid.gov’s customer platform overhaul
These projects serve as examples of what’s possible under the TMF model when clear ROI is demonstrated.
For taxpayers, the shift strengthens the TMF’s ability to recycle public dollars into modernization without requiring new appropriations. For agencies, it means better planning and higher accountability. For contractors, it demands precision, alignment, and a firm understanding of federal priorities.
Unless Congress reauthorizes the TMF by December 2025, the fund may no longer issue new awards. That makes the current window especially important for contractors who want to partner with agencies on funded modernization efforts.
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