Government Contracts Intelligence Briefing

When world events move quickly, the government contracting space is one area where impacts are felt immediately. Just within the last few days, the Trump administration launched an effort to remove Anthropic’s AI tools from the federal supply chain and executed extensive strikes against the Iranian regime. Both of these news stories will have a broad impact on the government contracting community.

As has been widely reported and stated by the administration, the federal government is launching an effort to remove Anthropic’s AI products from the government contracting supply chain after the Department of Defense/War and Anthropic could not come to an agreement on guardrails for the use of its AI products.  To date, these efforts have included:

• an announcement from the President that he would ban Anthropic from selling directly or indirectly to the federal government;
• a declaration from Secretary Hegseth that Anthropic is a supply chain risk;
• an announcement from the General Services Administration that it has removed Anthropic from the GSA Schedules program, among other things; and
• other federal agencies announcing that they will stop using Anthropic’s AI LLM.

This is very similar to the early days of the last Trump administration’s effort to remove Kaspersky from the government contracting supply chain (which predated the prohibition in the 2018 National Defense Authorization Act (NDAA) and subsequent FAR rule), where there was not much guidance. In that instance, most companies took a safer approach and stopped using Kaspersky products and services or providing them to the federal government. Kaspersky challenged this effort in court and eventually lost.

Since that time, Congress passed the Federal Acquisition Supply Chain Security Act of 2018, which allows a more orderly process to eliminate sources, products, or services that the federal government deems a risk without the rigmarole of inserting such a provision into the NDAA. That is probably the most efficient process for the administration to accomplish this goal though it will have to justify an exclusion order. This process gives a targeted company an opportunity to answer any security concerns and fight the outcome in court (here, the DC Court of Appeals).

Contractors have an ongoing responsibility to regularly review sam.gov to determine whether there are any exclusion orders impacting their current contracts.

With respect to the federal government’s efforts to rid Anthropic’s AI products from the supply chain, contractors should consider taking the following steps if they utilize or resell Anthropic’s products:

• review existing contracts to determine whether there is immediate action that needs to be taken:
• reach out to the appropriate contracting officer to better understand their timeline as publicly there is a six month wind-down period; and
• determine whether eliminating Anthropic products will change the cost, timing, or deliverables and seek an appropriate change to the contract.

In the end, contractors have to operate from certainty, and that means following the letter of the contract and written instructions from the contracting officer.  But contractors should also be prepared for the possibility that they will no longer be able to utilize Anthropic’s AI products whether related or unrelated to their contract performance.

The military conflict with Iran also poses challenges to contractors that support the Department of Defense/War.  With an ongoing conflict, the Pentagon may make use of the Defense Production Act (DPA) to ensure needed products are available. Among other things, the DPA is used to ensure that orders rated by the federal government move to the front of the line (ahead of unrated orders). Contractors should keep the following in mind if they receive a rated order from the contracting officer or a high-tiered contractor:

• review the rating and determine whether all of the required elements (such as a date certain for delivery) are noted;
• reject the order if the prerequisites for a rated order are not included;
• if delivery is not possible within the time required by the order, reject the order within the time frame required and propose a new date; and
• ensure the supply chain can deliver by the deadline required and appropriately flow down the DPA to suppliers.

The DPA regulations are complicated and not every agency is permitted to utilize them. Because there are two ratings with different levels of urgency (DO and DX), contractors should understand how to prioritize orders depending on order time, rating, and delivery date.

It would not be surprising to see other challenges and opportunities for contractors from the conflict with Iran and related military action. That coupled with the federal government’s move against Anthropic will mean that companies in this space should continue to monitor updates with vigilance and be prepared to make immediate adjustments.