How AI Is Quietly Reshaping Federal Contracts – And How You Can Get In Before It’s Too Late
Artificial intelligence isn’t coming to federal contracting, it’s already here. Agencies are using it to analyze data, manage supply chains, speed up service delivery, and even evaluate vendor performance. And while the headlines may focus on billion-dollar defense projects or flashy tech demos, the truth is that AI is opening up new doors for small and mid-sized businesses across the federal landscape.
If you're in IT, analytics, cybersecurity, facility management, or even business consulting, AI is changing what the government buys, and who it buys it from.
Let’s break down what’s actually happening, where the opportunities are, and how you can position your business to take advantage of this shift.
Across the federal space, agencies are actively investing in AI pilots, platforms, and integrations. The General Services Administration (GSA) has embedded AI into its acquisition tools and market research engines and is developing acquisition guidance for ethical and effective AI use. The Department of Defense (DoD) has ramped up activity through the Chief Digital and Artificial Intelligence Office (CDAO) and is allocating billions for AI-enabled capabilities in FY2025. Meanwhile, DHS and HHS are testing machine learning models for everything from threat detection to health care fraud prevention. The Department of Veterans Affairs (VA) has rolled out predictive maintenance pilots for hospital infrastructure and AI-powered claims review systems.
And it’s not just the top-line budget numbers that matter, these programs create real procurement opportunities. Each new AI initiative requires hardware, software, data infrastructure, training, compliance services, and support contracts. That’s where small businesses can plug in.
We’re seeing a rise in solicitations centered on AI-aligned services, think predictive analytics, cybersecurity automation, intelligent chatbots, real-time threat modeling, and fraud detection. Agencies are also requesting AI-driven dashboards and machine learning pipelines under broader IT modernization efforts. Relevant NAICS codes include:
541511 – Custom Computer Programming Services
541512 – Computer Systems Design Services
541519 – Other Computer Related Services
541690 – Other Scientific and Technical Consulting Services
518210 – Data Processing, Hosting, and Related Services
Several recently awarded contracts point to growth in this space. For example, the VA awarded a contract earlier this year for AI-assisted facilities maintenance, while DHS is actively issuing RFIs related to AI in border security and threat assessment. These aren’t moonshot R&D projects, they’re operational, funded, and open to smaller vendors.
On the policy front, the landscape is shifting fast. The AI Bill of Rights, issued by the White House Office of Science and Technology Policy, has already begun influencing how agencies structure requirements around fairness, transparency, and accountability. More concretely, the Office of Management and Budget (OMB) released guidance in March 2025 outlining how federal agencies must manage AI risk, document vendor-provided AI systems, and ensure procurement teams can evaluate model safety and data quality.
This guidance is showing up in RFPs in the form of new evaluation criteria. Some solicitations now require vendors to explain how their AI solutions align with the AI Governance and Accountability Framework, including documentation on training data, model bias mitigation, and security controls.
What does that mean for small and mid-sized businesses? You need to get proactive about aligning your offerings with this new environment. Here’s how to get ahead:
Update your GSA Schedule with relevant SINs tied to AI, data analytics, and IT modernization. If you offer anything related to automation, dashboards, or smart systems, make sure it’s clearly listed.
Tailor your capabilities statement to highlight any AI-adjacent services. Even if you’re not developing models yourself, showing how you support AI-powered solutions, through cloud services, data tagging, security, or performance monitoring, can help you stand out.
Explore teaming arrangements with larger contractors on vehicles like Alliant 3, CIO-SP4, and Polaris, all of which are emphasizing digital transformation and emerging tech capabilities.
Use your certifications strategically. If you have SBA 8a certification, women business certification, or disabled veteran small business certification, look for set-aside AI opportunities, especially within DHS, VA, and civilian agencies eager to meet small business goals while deploying cutting-edge tech.
Position yourself as a risk reducer. Agencies are nervous about ethical AI. If you can demonstrate that your team understands data privacy, cybersecurity, and compliance, you’ll become a more attractive partner, even if you’re not the AI lead.
Looking ahead, experts predict that AI will reshape not just what the government buys, but how it buys. Procurement offices are beginning to test predictive sourcing models, using AI to forecast future needs and automate portions of the acquisition process. Proposal evaluations are becoming faster, more structured, and in some cases partially automated. If you’re not aligning your proposals and documentation to that future, clean, well-organized, and compliance-friendly, you’ll get outpaced.
Here’s the bottom line: AI isn’t a niche. It’s becoming infrastructure. And just like cloud computing did a decade ago, it’s going to reshape the entire procurement environment.
If you’re a small business in the federal space, the time to pivot is now.
Need help aligning your NAICS code with this new AI-driven market? Check out our related post: Top NAICS Codes for Federal IT Contracts, a must-read for SMBs aiming to stay relevant and compliant in 2025 and beyond.
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