Recent developments in government contracting highlight the administration’s evolving approach to artificial intelligence, continued scrutiny of DEI initiatives, and ongoing implementation of Executive Order 14398. The latest updates include a new national security policy memorandum on AI adoption, a proposed Small Business Administration rule affecting 8(a) eligibility, an Office of Management and Budget directive concerning federal funding of certain nonprofit organizations, and litigation challenging the administration’s DEI-related contractor requirements.
White House Issues National Security AI Policy
The president recently issued National Security Presidential Memorandum-11 (NSPM-11), establishing the administration’s policy framework for the use of artificial intelligence across the national security enterprise. The memorandum rescinds and replaces NSM-25 issued during the Biden administration.
NSPM-11 frames the administration’s AI national security policy around four pillars:
- Adoption – Accelerating the use of AI in national security mission areas where it can enhance operational effectiveness; the memorandum aims to eliminate unnecessary barriers to rapid deployment.
- Adaptation – Directing the national security enterprise to adapt commercial and open-source AI technologies to leverage private-sector innovation or, where commercial solutions are not appropriate, deploy customized or internally developed solutions.
- Assurance – Implementing controls, through contractual clauses and other mechanisms, to ensure AI technologies used for national security purposes are reliable and cannot be disabled, degraded, materially modified, or otherwise controlled by commercial entities or foreign adversaries.
- Accountability – Ensuring AI will not be used by the national security enterprise to censor free speech, impose ideological bias, or otherwise infringe upon civil liberties protected by the US Constitution and other applicable laws.
The memorandum also directs agency heads to update internal processes to support AI adoption, including procurement practices.
For government contractors, NSPM-11 signals continued federal interest in rapidly integrating AI capabilities into defense and national security operations while maintaining security, supply chain, and operational safeguards.
Contractors supporting defense, intelligence, and national security agencies should monitor implementation efforts closely as agencies begin translating these policy objectives into acquisition requirements and contracting strategies.
SBA Proposes New Pathway for 8(a) Eligibility
The Small Business Administration recently issued a proposed rule that would allow certain small business owners to qualify for the 8(a) Business Development Program if they self-certify that they were negatively impacted by government or private-sector policies that favored other groups.
The proposal specifically references DEI programs, affirmative action policies, and similar initiatives as potential sources of harm that could support eligibility.
The proposed rule reflects the administration’s broader efforts to revisit federal programs that incorporate race-conscious or diversity-based considerations. If finalized, the rule could expand eligibility for certain applicants while potentially reshaping how economic disadvantage is evaluated within the 8(a) program.
Contractors participating in or considering participation in SBA programs should continue monitoring the rulemaking process and evaluate whether any changes could affect eligibility determinations or certification strategies.
OMB Directs Agencies to Report Funding Sent to Certain Nonprofits
The Office of Management and Budget recently circulated a memorandum directing executive branch agencies to provide agency-level spending data relating to a targeted list of 49 nonprofit organizations.
According to the memorandum, the listed organizations include nonprofits focused on DEI initiatives, LGBTQ+ advocacy, immigration issues, and civil liberties.
While the memorandum does not itself impose funding restrictions, it reflects continued administration interest in reviewing federal spending connected to organizations involved in these areas. The directive may also signal additional oversight or policy actions involving federal grants and cooperative agreements.
Organizations that receive federal funding, directly or indirectly, should continue monitoring developments as agencies respond to the reporting request and assess potential implications for future funding decisions.
State Attorneys General Challenge DEI Requirements for Federal Contractors
A coalition of 19 state attorneys general and the Attorney General for the District of Columbia recently filed suit seeking to block Executive Order 14398, which prohibits federal contractors from engaging in what the order characterizes as racially discriminatory DEI activities.
The complaint argues that the executive order does not provide a sufficiently clear explanation of how the prohibited conduct differs from existing federal anti-discrimination requirements and challenges the inclusion of related language in government contracts.
The litigation arrives as federal agencies continue implementing EO 14398 through incorporation of FAR 52.222-90 into new contracts and existing contracts through modifications. Contractors have already begun evaluating compliance obligations and flowing the requirements down to subcontractors.
Because the litigation was filed only recently, it remains unclear whether the challenge will affect ongoing implementation of the executive order or the associated FAR clause. For now, contractors should continue monitoring developments while assessing compliance obligations under the evolving regulatory framework.
Looking Ahead
These developments demonstrate the administration’s continued focus on AI adoption, federal program eligibility, oversight of federally funded organizations, and implementation of DEI-related contracting requirements.
Contractors should monitor both regulatory developments and ongoing litigation, particularly where evolving policy initiatives may affect procurement requirements, certification programs, grant funding, and contract compliance obligations.