AI promises to revolutionize both industry innovation and government contracting in the U.S. As such, the federal government is making unprecedented levels of investment in the technology and is creating extensive business opportunities for GovCons.
The One Big Beautiful Bill Act, or OBBBA, signed into law in July, allocates over $8 billion in AI funding for tasks such as modernizing defense capabilities, bolstering border security and improving healthcare for rural America. The OBBBA spending on AI is even more noteworthy considering that federal AI spending for fiscal years 2022–2024 totaled $5.6 billion in total, according to Michael Greenman, Deltek senior marketing manager for cloud solutions.
Greenman recently hosted a GovCon Wire webinar on AI opportunities for GovCons. Let’s dive into the five biggest takeaways for GovCons.
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1. National Security, Energy Set to Benefit From OBBBA Spending
Greenman said the OBBBA spending has an additional tens of billions of dollars for national security programs where AI and automation technologies will play a major role. These include AI accelerating technology-driven border security, including non-intrusive inspections at land, air and sea points of entry.
There is also money for Department of Energy initiatives to harness national laboratory scientific data for next-generation AI model development and energy technology innovation. The OBBBA, Greenman said, has nearly $2 billion for military cryptography modernization and an expansion of U.S. Cyber Command. There’s also lots of money for autonomous sea vessels.
2. GovCons Are Using AI in Federal Bidding
GovCons are using AI to rapidly perform tasks in the federal bidding process that used to take many manhours. These tasks include identifying contracts and win themes and searching for keywords and terms in documents such as requests for proposals, requests for information and statements of work.
Greenman said many GovCons are also using AI to develop texts for formal proposals and RFI responses.
3. AI Is Transforming GovCon Proposal Generation
Greenman said a recent study showed that GovCons using generative AI in their proposals could reduce their average proposal hours by 30 percent, a boon to both contractors and federal agencies. But this also brings risk, he said, as more proposals leveraging GenAI brings more risk of misinformation by AI hallucinations, or errors.
Some agencies, Greenman said, have expressed opposition to using AI in proposal generation for various reasons, especially if they are dealing in sensitive data. He gave one example of the National Science Foundation encouraging contractors to indicate the extent of how GenAI was used in a project.
Greenman doesn’t expect federal-wide rules regulating AI in proposal development. Instead, individual agencies will probably develop rules in their rulemaking process and clarify the use cases and guidelines for using AI in proposals.
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4. The Federal Government Could Use AI in Managing Contracts
Contractors aren’t the only entities expected to use AI in procurement. The federal government could also use it, Greenman said. He expects agencies to use AI for tasks including spend analysis, vendor selection, predictive maintenance, contract management and demand forecasting.
AI could also be used by the federal government in fraud detection, supplier performance monitoring, workflow automation and contract compliance monitoring. Greenman expects this list to grow in the future.
5. Tips for GovCons in Using AI in Contracting
While more and more contractors are using AI for proposal generation and analyzing business opportunities, there are still plenty of guidelines they need to follow. GovCons should better understand the regulatory landscape and build internal AI literacy and governance. They should collaborate with agencies early and prepare for evolving contracting requirements.
Greenman said GovCons need to strengthen their data and cybersecurity foundations while having a human-in-the-loop to review and confirm the AI’s work. GovCons can’t afford to just take an AI solution and start implementing it in business opportunities without ensuring the data is not only safe, but has no inherent dangers being implemented with the AI programs.
“Don’t just go find an AI solution, buy it, and make it happen,” Greenman said. “Really put some thought behind this because as powerful as AI is, it can quickly take you in the wrong direction.”
Greenman recommends that GovCons not risk any security or bias in their AI solutions. He also reminds GovCons that one of the priorities of the second Trump Administration is to create an American-focused, built and backed AI technology stack that can be not only used domestically but be provided to U.S. allies around the world.
