GSA Proposes New AI Contract Clause
by
June 23, 2026
The General Services Administration has issued a proposed contract clause addressing the standards that contractors must comply with when using LLMs in their dealings with the federal government. This excerpt from a Crowell & Moring memo summarizes the proposed regulation:
The General Services Administration (GSA) is seeking public comment on a new GSA Regulation clause, 552.239-7001, Basic Safeguarding of Data within Large Language Model Artificial Intelligence Systems (LLMs), governing data safeguards and requirements prime contractors must comply with when providing or using LLMs under federal contracts. This updated clause (Revised Clause) reflects substantial revisions from an earlier version released in March 2026 (Original Clause) that faced substantial pushback from industry.
Where the Original Clause cast a wide net — imposing obligations broadly across AI systems with little differentiation among supply-chain participants — the Revised Clause is more narrowly tailored. The Revised Clause:
– Focuses on LLMs that process government data.
– Exempts LLMs embedded in common commercial products or when LLM functionality is “incidental to the primary purpose of the core requirement being procured.”
– Allows the government to retain intellectual property rights in its data and prohibits LLMs from training on that data.
– Replaces certain supply-chain sourcing requirements in the Original Clause with a requirement to “maximize” the use of LLMs developed, managed, and operated by U.S.-incorporated entities.
– Requires contractors to ensure an LLM is “developed and monitored” in accordance with “unbiased AI principles.”
– Imposes mandatory, role-based flow-down clauses on subcontractors.
– Includes liability caps, disclosure safeguards, and trade secrets protections, among other provisions.
Comments on the proposal are due by August 3, 2026 and the GSA will hold a public listening session on Tuesday, July 14th at The George Washington University Law School from 11:00 am to 2:00 pm Eastern.