The Government's Legacy IT Problem: COBOL, Floppies, and the $18 Million AI Fix
When you think of federal technology, what comes to mind? Secure servers? Cutting-edge AI? Maybe even a sleek digital dashboard? Not so fast. In reality, some of the systems keeping the federal government running are old enough to rent a car — or run for office. We're talking COBOL code, 8-inch floppy disks, and multi-decade tech debt that would make any IT director cry into their coffee.
Welcome to the digital graveyard — where modernization is hard, progress is uneven, and the stakes are sky-high.
Meet the Main Characters: COBOL and the Machines That Time Forgot
Let’s start with COBOL. If you’ve never heard of it, congratulations — you weren’t born before the moon landing. COBOL (Common Business-Oriented Language) is a programming language from the 1950s that somehow still powers major federal operations. Think Social Security, Medicare, retirement claims, and customs systems at the border.
But COBOL is just the tip of the aging iceberg. Legacy systems across government agencies include mainframe computers, outdated relational databases, and custom applications that haven't been touched in decades. In some cases, these systems depend on hardware components that are no longer manufactured and rely on a shrinking pool of professionals who still understand them.
OPM's $18.3 Million Journey Out of the COBOL Woods
The Office of Personnel Management (OPM), which handles federal retirement claims, is in the middle of a two-year project to ditch 40-year-old COBOL code. Armed with $18.3 million from the Technology Modernization Fund (TMF), OPM is using AI to rewrite its software — think Python, JavaScript, and other languages your average college grad actually knows.
Why the urgency? In April 2023, there was a backlog of 23,000 retirement claims, with some taking nearly three months to process. Paper files, manual calculations, and a literal inability to retire the retirement system all added up to a crisis. The AI approach hopes to reduce costs, improve service, and maybe — just maybe — let the 20th century finally go.
CBP’s 3.9 Million-Line Makeover
Meanwhile, at Customs and Border Protection (CBP), another COBOL beast is getting a facelift. Their Automated Commercial System, first launched 30 years ago, is being transformed into a cloud-based environment. The goal? Boost efficiency, reduce costs, and finally retire a system that GAO labeled as high-risk years ago.
This effort started in 2020 with a $15 million TMF award and has been chipping away ever since. With 3.9 million lines of COBOL code to modernize, this is less of a facelift and more of a full-blown cyber-surgery.
The Plot Twist: AI Joins the Government
One unexpected twist? Artificial intelligence is starting to play a key role in modernization. In OPM’s project, AI isn't just doing the grunt work of rewriting code. It’s actually helping reduce reliance on COBOL programmers — an endangered species if there ever was one. Human engineers still have the final say, but the future of government IT might just include a chatbot that can clean up 40 years of spaghetti code.
It’s Not Just About the Tech — It’s About the Procurement
Modernizing legacy systems doesn’t happen in a vacuum. It happens through contracts — and big ones.
DISA Encore III, a $17.5 billion, 10-year IDIQ contract awarded in 2017, is one of the federal government's go-to vehicles for modernization projects. It supports everything from legacy system support to cloud-based disaster recovery for the Department of Defense and beyond. If you're modernizing a DoD payroll database or replacing a 30-year-old logistics system, Encore III is probably involved.
GSA’s Multiple Award Schedule (MAS) — which absorbed the former IT Schedule 70 — remains a key tool for civilian agency modernization. It offers vendors and solutions for upgrading legacy systems, and GSA has actively pruned underperforming vendors to streamline purchasing. That cleanup is part of a broader effort to make modernization easier, faster, and less bureaucratic.
These procurement tools are critical because they allow agencies to move fast (well, federal fast) and bring in contractors with niche skills in legacy migration, system integration, and AI-powered modernization.
The Bigger Picture: Technical Debt and the Price of Procrastination
Why does any of this matter? Because the cost of doing nothing is massive — and the systems we’re talking about aren’t small side projects. They’re mission-critical.
Take the federal payment system, for example: in Fiscal Year 2023, it processed 1.3 billion payments totaling $5.4 trillion — and 97% were electronic, delivered on time. That’s the system underpinning everything from Social Security checks to military salaries.
When you’re operating at that scale, a glitch isn’t just inconvenient — it could be catastrophic. And yet, many of these core systems still rely on ancient code and hardware.
In 2015, a staggering 75% of federal IT budgets went just to keeping old systems alive. That’s money not going to innovation, cybersecurity, or services people actually use. The longer agencies wait, the more costly, risky, and complex modernization becomes.
The federal government is also facing a knowledge crisis. The folks who know how these systems work are retiring — or worse, taking their secrets with them. One GAO report even found the Department of Defense using floppy disks (yes, floppy disks!) for nuclear command and control as recently as 2016. We can’t make this up.
So, What’s Next?
Thanks to recent legislative changes, like the 2023 MGT Reform Act, agencies now have to report high-risk systems to the Office of Management and Budget (OMB), which then delivers a top-10 list to Congress. It’s a bit like a “Worst Dressed” list — but for software that’s still running your taxes.
Modernization is happening — just slowly, and not always evenly. Some agencies are taking bold steps with AI and cloud computing. Others are still trying to find their old COBOL manuals.
But if the government wants to keep serving the public — securely, efficiently, and with a straight face — it’s going to have to retire some very senior systems.
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Sources:
FedScoop
“CBP gets $15M to modernize import tracking system running on COBOL”
https://www.fedscoop.comGeneral Services Administration (GSA)
Technology Modernization Fund (TMF) Updates and Awards
https://tmf.cio.govU.S. Government Accountability Office (GAO)
“Critical Federal Legacy IT Systems” (GAO-19-471, 2019)
“Agencies Need to Fully Report on Critical Systems” (GAO-23-104719, 2023)
“Federal Agencies Need to Address Aging Legacy Systems” (GAO-16-468, 2016)
https://www.gao.gov
CBS News
“Musk's access to Treasury's payment system is raising alarms. Here's what to know.”
https://www.cbsnews.comHouse Oversight Committee
Modernizing Government Technology Reform Act of 2023
https://oversight.house.govGuidehouse
“DOD DISA Encore III Contract Overview”
https://guidehouse.comGSA Schedules / MAS Consolidation
“GSA to cut 577 vendors and 31 SINs from legacy schedules”
https://www.federaltimes.comFedTech Magazine
“How Legacy Systems and Technical Debt Hamper Innovation”
https://fedtechmagazine.comMacro Solutions
“Modernizing Legacy Systems: Challenges and Opportunities”
https://macrosolutions.comFederal News Network
“OPM using AI to help replace decades-old COBOL system”
https://federalnewsnetwork.com
