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Recent federal government actions regarding contractor offering and use of artificial intelligence (AI) products raise significant issues for government contractors and AI companies. As widely reported, the Department of Defense (DOD) designated AI company Anthropic as a supply chain risk because it refused to agree to the government’s demands regarding the scope of its use of Anthropic’s AI product. President Trump subsequently issued an order barring federal agencies from using Anthropic’s technology. Separately, the General Services Administration (GSA) has issued a draft contract clause governing how contractors offer and use AI technology in the performance of GSA contracts. Taken together, these actions reflect tighter government control over AI products offered to government customers as well as contractor use of AI technology in the performance of government contracts.

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Reports emerged in February 2026 that DOD and Anthropic were engaged in discussions regarding the scope of DOD’s use of Anthropic’s AI product Claude. According to <a href="https://www.anthropic.com/news/statement-comments-secretary-war" target="_blank" rel="noreferrer noopener">public statements by Anthropic’s chief executive officer</a>, the company objected to DOD’s demand that the company remove two restrictions prohibiting the use of Claude for fully autonomous weapons and mass domestic surveillance. When the company refused to accede to DOD’s request, the DOD secretary designated Anthropic a supply chain risk to national security and stated that any contractor working with DOD was prohibited from engaging in any commercial activity with Anthropic. President Trump separately stated on social media that he was directing all federal agencies to “immediately cease all use” of Anthropic technology. The company has sued the federal government, challenging DOD’s supply chain risk designation.

On March 6, GSA <a href="https://buy.gsa.gov/interact/system/files/GSA_Federal_Acquisition%20Service%20Proposed%20Government%20AI%20System%20Terms%20and%20Conditions.pdf" target="_blank" rel="noreferrer noopener">issued</a> a draft contract clause, GSAR 552.239-7001, “Basic Safeguarding of Artificial Intelligence Systems,” for inclusion in solicitations and contracts involving AI capabilities. The clause will affect not only contractors who sell AI technology to GSA and agencies that utilize GSA-administered contracts, but also contractors who use another company’s AI technology in the performance of such contracts.

The clause initially states that if the contractor is providing or using in the performance of a contract an AI system owned and/or operated by a “services provider” (defined as an entity that directly or indirectly provides, operates or licenses an AI system but is not a party to the contract), the contractor is responsible for the service provider’s adherence to the clause. The clause further provides that the contractor grants the government an irrevocable, royalty-free, non-exclusive license to use the AI system provided or used by the contractor for the duration of the contract for “any lawful Government purpose.” The clause does not define “lawful Government purpose,” but should be read in the context of the administration’s <a href="https://www.whitehouse.gov/presidential-actions/2025/01/removing-barriers-to-american-leadership-in-artificial-intelligence/" target="_blank" rel="noreferrer noopener">executive</a> <a href="https://www.whitehouse.gov/presidential-actions/2025/12/eliminating-state-law-obstruction-of-national-artificial-intelligence-policy/">orders</a> on AI policy. The scope of the government’s license is broad, including the right to receive data outputs without restrictions from the contractor’s or service provider’s discretionary policies and to integrate the AI system with government systems as necessary for any lawful government purpose.

The clause also imposes several compliance obligations upon contractors and AI service providers:

The contractor must disclose all AI systems used in the performance of the contract.

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The contractor and service provider must use only “American AI systems” (defined as AI systems developed and produced in the United States) and are prohibited from using any foreign AI system (including any AI components manufactured, developed or controlled by non-U.S. entities).

The contractor must provide a means for the government to implement human oversight, intervention and traceability of the AI system, and the AI system must include summarized intermediate processing actions and decision points, model routing decisions with accompanying rationale and data retrieval methods employed.

The contractor and service provider must notify the government of applicable security incidents within 72 hours and provide daily status updates.

At the government’s request, the contractor must provide existing commercial documentation or disclosures that are sufficient to demonstrate the AI system’s compliance with specified requirements, including AI system decision-making processes, logic and operational parameters, the NIST AI Risk Management Framework and “Unbiased AI Principles.”

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In addition, the clause directs the contractor to make “commercial efforts” to ensure that the AI system is developed and monitored in accordance with specified “Unbiased AI Principles,” including that the AI system “must be truthful in responding to user prompts seeking factual information or analysis,” “must prioritize historical accuracy, scientific inquiry, and objectivity,” “must acknowledge uncertainty where reliable information is incomplete or contradictory” and “must be a neutral, nonpartisan tool that does not manipulate responses in favor of ideological dogmas such as Diversity, Equity, Inclusion.” The clause further requires the contractor to commit to implementing continuous improvement processes to enhance the detection and mitigation of performance, trustworthiness, bias and/or systems generating illegal or prohibited content as well as OMB directives related to AI systems (when requested by the government to the maximum extent possible). In cases of noncompliance with the clause’s requirements, the government retains the right to suspend use of the AI system until performance issues are satisfactorily addressed, and the contractor is responsible for any reasonable decommissioning costs if the agency terminates the contract for noncompliance.

GSA has provided limited time for industry to provide feedback, with comments due by March 20. When GSA finalizes the clause, it will be incorporated into all GSA-issued solicitations and contracts contemplating the use of AI capabilities during performance as well as all new and existing Multiple Award Schedule (MAS) contracts. GSA has indicated that it intends to incorporate the clause into all MAS contracts through its Refresh 31 planned for March or April 2026, and that a MAS contractor must accept changes associated with the refresh (including the AI clause) within 60 days.

The government’s actions against Anthropic and GSA’s proposed clause governing AI technologies raise significant questions for contractors who offer AI products to government customers or use those products in the performance of their government contracts.

First, the DOD’s designation of Anthropic as a supply chain risk and the president’s ban on agency use of Anthropic technology reflect an aggressive government posture in negotiating terms for the government’s use of AI technology and willingness to punish companies that fail to accede to the government’s demands on those terms. Traditionally, federal procurement regulations provide that where the government procures or uses commercial technologies (specifically software), it will acquire such technology pursuant to the vendor’s standard commercial license, consistent with federal law. In practice, that meant that the government and vendor would modify the vendor’s standard license to remove terms (such as indemnification) that violate federal law. With respect to Anthropic’s negotiations with DOD, the government appears to go beyond that standard to require the company to permit uses not clearly defined under federal law.

Second, the government’s actions against Anthropic and the draft GSA clause have broad implications for contractors and AI technology companies. DOD’s designation of Anthropic as a supply chain risk prohibits DOD contractors from using Anthropic’s AI technology in the performance of their DOD contracts. Although DOD has not yet issued a formal directive, contractors working on DOD contracts presumably must conduct an internal review for use of Anthropic products in relation to those contracts. The draft GSA clause imposes compliance obligations not only on contractors providing AI systems to government customers but also on the AI service providers themselves. As a result, companies that offer AI products may find themselves having to assess their compliance obligations under the GSA clause where their products are used or resold as part of GSA contracts.

Third, the draft GSA clause contains several undefined or unreferenced terms. It provides the government with a license to use an AI system for “any lawful Government purpose” without defining the term. Contractors and service providers therefore are left to contemplate various scenarios in which the government may use an AI system and whether such use runs contrary to the contractor’s or service provider’s corporate values. And while “Unbiased AI Principles” appears to refer to the term as defined in the <a href="https://www.whitehouse.gov/presidential-actions/2025/07/preventing-woke-ai-in-the-federal-government/" target="_blank" rel="noreferrer noopener">July 2025 executive order</a> regarding “woke AI” in government, the draft clause uses terms such as “ideological dogmas” without any specific definition.

Given the growth of AI and the federal government’s focus on controlling how contractors provide and use AI systems, government contractors and companies that develop AI technologies should note these developments and be prepared for further government actions impacting AI technologies.

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Government Increases Compliance Obligations for Contractors Providing or Using AI and AI Companies

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