On April 3, 2025, OMB released two new memorandums on artificial intelligence (“AI”) as directed by Executive Order 14179, Removing Barriers to American Leadership in Artificial Intelligence. (As a reminder, President Trump issued Executive Order (EO) 14179 on January 23, 2025 after rescinding President Biden’s AI Executive Order (EO 14110)).
The first memo (M-25-21) provides guidance to agencies on federal AI use while the second memo (M-25-22) focuses on agency acquisition of AI. In a nutshell, these memos signal that the federal government is embracing AI and plans to maximize its AI use. Federal agencies can leverage AI to enhance operational efficiencies, improve decision-making, automate routine tasks, and analyze large datasets for insights that could inform policy and regulatory compliance. Contractors can expect to see a flurry of guidance and agency adoption of AI technologies.
OMB Memo M-25-21
M-25-21, Accelerating Federal Use of AI through Innovation, Governance, and Public Trust – This memo focuses on responsible federal agency AI use. We note below key points and timelines:
- Guidance. Agencies must issue AI strategies within 180 days and post those strategies publicly on their websites. In addition, agencies must designate a Chief AI Officer within 60 days (if they have not already done so). Agencies will also develop internal policies and generative AI policies within 270 days.
- AI Boost. Agencies must identify and remove barriers to AI adoption and application. Contractors should see a streamlined boost in federal interest in AI products, especially American-made AI.
- High-Impact AI. The memo introduces the concept of “high-impact AI,” which is AI with output that “serves as a principal basis for decisions that have a legal, material, binding or significant effect on rights or safety.” M-25-21 at 14. This replaces the earlier concept in materials prepared by the Biden administration of safety-impacting and rights-impacting AI. There are particular considerations and expected requirements for use and implementation of high-impact AI set forth in the memo.
- Code Sharing. Agencies are required to share any custom-developed federal AI code in active use, including models, among the federal government, with limited exceptions. Contractors should consider this when providing custom-developed code and the potential impacts on proprietary information.
- Public Input. It is recommended that agencies solicit public input on AI policies. Contractors should be on the lookout for any rulemaking, public comment periods, or hearings to provide feedback.
OMB Memo M-25-22
M-25-22, Driving Efficient Acquisition of Artificial Intelligence in Government – This memo provides guidance on federal AI acquisition. Note that it will apply to any solicitations issued 180 days after the memo, including any option periods on existing contracts. Commercial products with embedded AI (e.g., word processer, navigation system) are not within the scope of this guidance. Below are notable points and timelines:
- American-Made AI Boost. Acquisition will be focused on AI developed and produced in the U.S.
- Policy and Acquisition Guides. Within 270 days, agencies must update internal acquisition procedures. Within 100 days, GSA and OMB will publicly release guides to assist the federal acquisition workforce with AI procurement. Contractors should be on the lookout for these guides as they should provide valuable insight for doing business with the government in the AI space.
- Federal Information Sharing. Within 200 days, GSA and OMB will develop an internal best practices repository for AI acquisition. While not expected to be publicly available, this will likely be the internal resource for standard contract clauses and prices. This signals that the government will strive to maximize uniformity in AI acquisition practices across agencies.
- AI Use by Contractors. The memo directs agencies to consider AI use by vendors and contractors in contract performance that may occur outside of deliberate acquisition of AI. While there are already avenues for vendor and contractor disclosure of AI use, the memo explicitly cautions agencies about unsolicited AI use that may pose risks, especially in performance situations where the government may not anticipate it. Contractors should be on the lookout for any solicitation or contract provisions that require more detailed reporting on AI use.
Moving Forward
The OMB memos provide important insight into how the federal government will handle AI and acquisition of AI technologies moving forward. Due to the nature of AI technology, contractors can expect this field to be ever-evolving. However, it is clear AI is taking a strong foothold in the federal government. We anticipate more federal guidance and proposed rulemaking resulting from these memos and will continue to provide updates.