Insights

Significant shifts in U.S. technology policy are taking shape at the start of the new administration. This is especially true in the field of artificial intelligence (AI), where President Trump revoked President Biden’s Executive Order 14110, titled “Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence,” as part of his flurry of Day One executive actions. The administration is now moving quickly to put its own stamp on this area in an effort to strengthen U.S. AI leadership and competitiveness and outpace other nations, particularly the People’s Republic of China.

On January 15, 2025, the Federal Acquisition Regulatory Council issued a Proposed Rule that would implement changes to the Federal Acquisition Regulation (FAR) Organizational Conflict of Interest (OCI) rules as required by the 2022 Preventing Organizational Conflicts of Interest in Federal Acquisition Act (P.L. 117-324).  Comments on the Proposed Rule are due on March 17, 2025.  (Note that pursuant to President Trump’s January 20, 2025 “Regulatory Freeze Pending Review” Executive Order, the Proposed Rule is subject to further review, which may result in revisions and an extension of the 60-day comment period.)

On September 24, 2024, the Office of Management and Budget (OMB) released Memorandum M-24-18, Advancing the Responsible Acquisition of Artificial Intelligence in Government (Memo).  The 36-page Memo builds on OMB’s March 2024 guidance governing federal agencies’ use of AI, Memorandum M-24-10, which we reported on here.  The Memo addresses requirements and guidance for agencies acquiring AI systems and services, focusing on three strategic goals: (i) ensuring collaboration across the federal government; (ii) managing AI risks and performance; and (iii) promoting a competitive AI market.

On August 21, 2024, the National Institute of Standards and Technology (NIST) released the Second Public Draft of Digital Identity Guidelines (hereinafter, “Draft Guidelines”) for final review. The Draft Guidelines introduce potentially notable requirements for government contractors using artificial intelligence (AI) systems. Among the most significant draft requirements are those related to the disclosure and transparency of AI and machine learning (ML). By doing so, NIST underscores its commitment to fostering secure, trustworthy, and transparent AI, while also addressing broader implications of bias and accountability. For government contractors, the Draft Guidelines are not just a set of recommendations but a blueprint for future AI standards and regulations.

On July 25, 2024 the Office of Management and Budget (OMB) issued Memorandum M-24-15, Modernizing the Federal Risk Authorization Management Program (FedRAMP) (the Memo).  The Memo proposes substantial updates to FedRAMP, replacing the December 2011 memorandum (2011 Memo) that established FedRAMP as the government-wide security and risk assessments program for cloud services providers (CSPs) supporting federal government operations.

Now more than ever, federal contractors find themselves at the intersection of innovation and regulation, particularly in the realm of Artificial Intelligence (AI).  AI is now incorporated into a broad range of business systems, including those with the potential to inform contractor employment decisions.  For that reason, the Office of Federal Contract Compliance Programs (OFCCP) has issued new guidance entitled “Artificial Intelligence and Equal Employment Opportunity for Federal Contractors” (the “AI Guide”).  OFCCP issued the AI Guide in accordance with President Biden’s Executive Order 14110 (regarding the “Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence”), which we reported on here.  The AI Guide provides answers to commonly asked questions about the use of AI in the Equal Employment Opportunity (EEO) context.  The AI Guide also offers “Promising Practices,” which highlight a number of important considerations for federal contractors.  Focusing on federal contractors’ obligations and attendant risks when utilizing AI to assist in employment-related decisions, the AI Guide also provides recommendations for ensuring compliance with EEO requirements while harnessing the efficiencies of AI.

On March 28, 2024, the Office of Management and Budget (OMB) released Memorandum M-24-10, Advancing Governance, Innovation, and Risk Management for Agency Use of Artificial Intelligence (Memo), updating and implementing OMB’s November 2023 proposed memorandum of the same name.  The Memo directs agencies “to advance AI governance and innovation while managing risks from the use of AI in the Federal Government.”  In the Memo, OMB focuses on three major areas – strengthening AI governance, advancing responsible AI innovation, and managing risks from the use of AI. 

The National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2024, signed into law on December 22, 2023, makes numerous changes to acquisition policy. Crowell & Moring’s Government Contracts Group discusses the most consequential changes for government contractors here. These include changes that impose a new conflict of interest regime for government contractors with a connection to China, impose new restrictions and requirements, require government reporting to Congress on acquisition authorities and programs, and alter other processes and procedures to which government contractors are subject. The FY 2024 NDAA also includes the Federal Data Center Enhancement Act, the American Security Drone Act, and the Intelligence Authorization Act for FY 2024.

The Department of Defense recently issued a long-awaited final rule prohibiting DoD prime contractors from “flowing down” FAR and DFARS clauses in subcontracts for commercial products or services, unless flowdown is specified by regulation. This rule implements language, dating from the 2017 National Defense Authorization Act, intended to reduce administrative burdens on DoD contractors and subcontractors by adding a prohibition on extraneous flowdowns at DFARS 252.244-7000 Subcontracts for Commercial Products or Commercial Services.

On October 30, 2023, President Biden released an Executive Order (EO) on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence (AI).  This landmark EO seeks to advance the safe and secure development and deployment of AI by implementing a society-wide effort across government, the private sector, academia, and civil society to harness “AI for good,” while mitigating its substantial risks.

Contractors barely had time to digest the prior administration’s changes designed to tighten the Buy American Act restrictions when, on January 25, 2021, President Biden issued Executive Order 14005 on “Ensuring Future of America is Made in America by all of America’s Workers” directing further tightening and perhaps even a new approach to determining what will constitute a “domestic end product” under the implementing regulations (previously discussed here).

The Biden administration has identified the Defense Production Act (DPA) as a key part of its new “National Strategy for the COVID-19 Response and Pandemic Preparedness” (Strategy), buttressed by a new “Executive Order on a Sustainable Public Health Supply Chain” (Executive Order). Issued on January 21, 2021, the Biden administration’s Strategy calls for immediate action to address critical shortfalls of vaccination supplies, testing supplies, and personal protective equipment (PPE). The Executive Order, issued the same day, directs agencies to use “all available legal authorities, including the Defense Production Act, to fill those shortfalls as soon as practicable by acquiring additional stockpiles, improving distribution systems, building market capacity, or expanding the industrial base.”

Government procurements for architect-engineering services do not follow the typical Federal Acquisition Regulations (FAR) rules applied to the purchase of other goods and services. Instead, these services are procured under the authority of the Brooks Act, according to special procedures designed to identify the most qualified firms; specifically, the Two-Phase Design-Build Selection Procedures set forth in FAR subpart 36.3, and Architect-Engineer Services Contract Procedures set forth in FAR subpart 36.6. But those procedures provide no exceptions from bid protest. In the protest of Evergreen JV, B-418475.4, Sept. 23, 2020, the disappointed offeror argued that the Air Force failed to evaluate its qualifications according to the qualitative evaluation criteria identified in the Agency’s synopsis. GAO sustained the protest. For more, click here.

In Chronos Solutions et al., GAO sustained a pre-award protest challenging the terms of a solicitation issued by the United States Department of Housing and Urban Development (HUD). The solicitation sought asset management services to support the disposition of properties conveyed to HUD following foreclosure of loans guaranteed by the Federal Housing Authority. The solicitation was initially issued in June 2019, but HUD encountered multiple delays, including a prior pre-award bid protest. Following that protest, on April 27, 2020, HUD issued a solicitation amendment that changed the procurement to a total small business set-aside and reset the deadline for receipt of proposals to June 30, 2020, but did not update the solicitation’s original 2019 estimated quantities of services.

On March 27, 2020, the President signed an “Executive Order on Delegating Additional Authority Under the DPA with Respect to Health and Medical Resources to Respond to the Spread of COVID-19.” The new EO delegates significant additional authorities under the Defense Production Act of 1950 (DPA) to the Department of Health and Human Services (HHS) and Department of Homeland Security (DHS), and builds on Executive Order (EO) Nos. 13909, issued March 18, 2020, which we discussed here, and 13910, issued March 23, 2020, which we discussed here. The new EO delegates:

On March 23, 2020, the President signed an “Executive Order on Preventing Hoarding of Health and Medical Resources to Respond to the Spread of COVID-19” delegating additional authorities under the Defense Production Act of 1950 (“DPA”), which builds on Executive Order (EO) No. 13909, issued March 18, 2020, which we discussed here.  The new EO delegated to the Secretary of Health and Human Services (“HHS”) the authority to prevent hoarding of health and medical resources necessary to respond to the spread of COVID-19 by: (1) prescribing conditions for accumulation of such resources; and (2) designating any material as scarce or threatened by excessive accumulation as to reasonable business, personal, or home consumption, or for purpose of resale at excessive prices (i.e., price gouging).  These designations, in turn, trigger the prohibitions against hoarding.  The EO also delegated the authority to gather information, such as information about how supplies of such resources are distributed throughout the nation, through use of investigations, records, reports, and subpoenas.  The DPA and its implementing regulations and orders carry criminal penalties for noncompliance, as well as the possibility of injunctive relief in certain circumstances.

In our March 19 alert, C&M summarized President Trump’s recent executive order invoking the Defense Production Act (DPA). In this follow-up, we provide three separate analyses. First, we provide a discussion of the Defense Production Act, and the implications of the executive order for U.S. businesses and the government in its efforts to reduce the impact of COVID-19. Second, we discuss the current Department of Health and Human Services (HHS) regulations implementing its priorities and allocations authority prior to the executive order. And third, we discuss the manner in which the government most frequently has exercised similar authorities under the DPA pursuant to the Defense Prioritization and Allocation System (DPAS).

On March 18, 2020, President Trump significantly expanded the authority delegated to the Secretary of Health and Human Services (HHS) in his “Executive Order on Prioritizing and Allocating Health and Medical Resources to Respond to the Spread of Covid-19.” The Order is based on a finding that, “to ensure that our healthcare system is able to surge capacity and capability to respond to the spread of COVID-19, it is critical that all health and medical resources needed to respond to the spread of COVID-19 are properly distributed to the Nation’s healthcare system and others that need them most at this time.” 

In Noble Supply & Logistics, Inc., GAO sustained a pre-award protest challenging a General Services Administration request for quotations under FSS No. 51V, hardware store supplies and ancillary services. The RFQ contemplated four separate single-award blanket purchase agreements for use by the Army, Navy, Air Force, and Marines respectively, and provided that award would be made to the vendor(s) submitting the highest technically rated quotations with fair and reasonable prices. The protester challenged this methodology, alleging that it failed to meaningfully consider price as required by FAR Part 8.

On November 25, 2019, the Government Accountability Office (GAO) published a report examining risks posed to the Department of Defense (DoD) by contractors with “opaque ownership,” including financial and nonfinancial fraud and national security risks. Among other things, GAO found evidence that opaque ownership structures had been used to fraudulently inflate pricing and circumvent set-aside eligibility requirements in DoD procurements, and had enabled some foreign-owned companies to obtain contracts reserved for U.S. companies, access export controlled information without authorization, and/or misrepresent the country of origin of their offerings in order to meet domestic preference requirements. GAO recommended that DoD assess contractor ownership across DoD to determine whether additional ownership information should be collected to effectively manage potential fraud and national security risks. GAO noted that DoD has already begun a department-wide fraud risk management program, by requesting that DoD components identify risks and controls in place to mitigate these risks by July, 2019. The System for Award Management currently requires contractors to self-report information about their “immediate” and “highest-level” entity ownership – terms that do not necessarily match well with the often-complicated ownership structures of modern business, especially those contractors owned by private equity. This report may well result in additional reporting and certification requirements.