The General Services Administration (GSA) has proposed a new contract clause that could have sweeping ramifications for artificial intelligence (AI) use by government contractors across the federal IT supply chain. Titled "Basic Safeguarding of Artificial Intelligence Systems," the proposed clause deserves close attention from federal contractors, regardless of whether they primarily sell AI-enabled products or services.

The proposal is broader than its title suggests. Despite being framed as a safeguarding clause, the draft reaches well beyond cybersecurity. It would establish a broader contractual framework for how AI systems may be used in furtherance of the contract goals, what information contractors must disclose, how government data may be handled, and what rights the government would retain over AI-enabled solutions delivered under contract.

The proposed clause, which was released in early March, is comprehensive in scope. Among other things, it addresses:

• Contractor responsibilities for AI systems used in contract performance.
   
• The treatment of intellectual property rights.
   
• Contractor obligations for compliance, reporting, and documentation.
   
• Controls for privacy and confidentiality protections.
   
• Requirements for data portability and interoperability.
   
• Contractor responsibilities for change management.
   
• The government’s rights to evaluate AI performance and require remediation.

The provisions discussed below are among the most notable, but they are part of a much broader proposed framework.

The clause could apply to a wide range of contractors. As drafted, the proposed clause is prescribed for contracts involving "AI capabilities," which is broad enough to reach more than contracts for standalone AI products. Contractors whose software, platforms, or services incorporate AI features may also be affected. The draft also reaches service providers supporting the AI system, meaning compliance may depend on third-party vendors and other providers in the contractor’s technology stack.

The clause would give the government ownership of government data and custom developments (including AI outputs such as responses, results, analyses, anonymized data, derivative data, metadata, logs, synthetic data, and any other outputs produced by an AI system), while also sharply limiting a contractor’s ability to use government data to train, fine-tune, or improve models for broader commercial purposes. For many AI and SaaS providers, those restrictions could conflict with standard commercial terms and common service-improvement practices.

The proposal would also impose significant disclosure, sourcing, and operational requirements. Contractors would need to disclose the AI systems used by contractors and subcontractors, including certain information about modifications and compliance frameworks. The draft also requires use of AI systems developed and produced in the United States and restricts certain foreign AI systems or components.

The clause includes several other operational requirements and restrictions, such as:

• That an AI system generally may not refuse to provide output based on the AI provider’s discretionary use policies (i.e., internal policies prohibiting outputs to certain queries).
   
• That contractors must disclose AI systems used in performance of the contract and provide advance notice of certain changes to those systems.
   
• That confirmed or suspected incidents related to AI system use must be reported within 72 hours of discovery.
   
• That the government may engage in ongoing benchmarking and monitoring of AI systems and suspend use of a system if performance or compliance concerns are not adequately addressed.

Key Takeaways for Government Contractors

GSA’s proposed AI clause is important because it signals a more demanding procurement framework when AI is involved.

The draft goes far beyond basic safeguarding and reaches core business issues, including data rights, model governance, sourcing, and performance oversight.

Contractors should begin assessing now whether their products, contracts, and third-party relationships can support these requirements if the clause moves forward.

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