Leveraging AI to Deliver Efficiency to the Federal Government

2025 promises to be an unprecedented year for federal government acquisition. The United States faces exceptional challenges given the increasing national debt (annually, we spend more on national debt interest than on national defense), rapid technology innovation, and an increasingly unstable international and domestic landscape. The newly minted United States DOGE Service’s primary mission is to modernize and enhance interoperability of federal information technology and increase transparency, accountability, and cost-effectiveness in federal procurement. This stands to significantly reshape government contracting—putting pressure on agencies and contractors alike to identify unnecessary regulation, introduce standardized practices, and leverage advanced technologies. 

Imperative for Innovation at the Federal Government Level

The Federal Government aims to cut costs and boost efficiency by focusing on innovative solutions for national issues. To speed up requirements identification and approval, contractors must deliver these solutions faster and take on more risk. Most R&D contracts are currently cost-reimbursable, placing risk on the government. Shifting to shorter, fixed-price, or other transaction authority (OTA) contracts with cost-sharing will likely require a change in industry behaviors. This could mean a shift from fulfilling detailed government requirements to addressing broader problem statements with incremental solutions. Interestingly, using non-traditional methods to achieve extraordinary results is not new. In 1958, NASA became the first federal agency to receive other transaction authority in response to the United States’ realization that our astronautics capability was trailing the Soviet Union. OTA gave NASA the ability to do business with any entity that could deliver innovative solutions at the speed of need.

Renewed Focus on Supply Chain Resiliency

There will also be a renewed focus on foreign and domestic supply chain resiliency. This includes examining who the federal government engages with for inventories of critical supplies and components, access to precious materials, and reliance on overseas manufacturing. Prime contractors must ensure that their business partners meet compliance standards, can deliver on time, and offer competitive prices. 

With a renewed focus on efficiency and supply chain resiliency, government contractors need to integrate prime and subcontracting activities to ensure that their supply chain meets the requirements of their prime contracts. This integration enables contractors to utilize negotiated rebates and volume discounts fully. Contractors can maximize profitability through actionable business insights by effectively linking their buy-side and sell-side operations. This strategic approach facilitates real-time decision-making to improve contract performance, now, instead of waiting for “lessons learned” to apply to future contracts that may not even happen.

GenAI Tools and Their Pivotal Role

GenAI tools will significantly aid these efforts. It is critical that all parties prioritize AI that optimizes contract intelligence and streamlines contract processes that form the foundation of government-contractor relationships. With AI, and especially AI agents, government contractors can achieve real-time decision guidance to ensure they maximize contract revenue, ensure compliance, and mitigate risk. 

The sweeping changes can certainly appear to be challenges, however, for those willing to digitally transform, they can be rewarding opportunities.