The General Services Administration spent several months this year drafting a new contract clause for artificial-intelligence acquisitions. Early versions were so broad that they would have barred typical service contractors from using any AI tools while supporting federal work, and would have forced unrealistic obligations on the AI suppliers themselves. The final version now excludes ordinary contractors from the requirement.
Flow-down provisions let the government impose its clauses on a prime contractor and require the same language to be passed to subcontractors or suppliers. While such mechanisms work for straightforward demands,like prohibiting illegal hiring,they falter when the obligation clashes with a supplier’s core business model. GSA’s language even acknowledges that a contractor cannot command a third-party commercial provider it does not control.
The clause attempts to force vendors to support open export formats and to avoid terms that hinder migration, aiming to curb lock-in. However, the government usually purchases AI through system integrators or resellers, leaving it without direct contractual privity with the underlying large-language-model provider. A 2024 dispute illustrated that a software license delivered via a reseller may not create an enforceable relationship between the vendor and the federal customer, complicating any attempt to compel compliance.
Vendor-lock practices have become entrenched across the cloud market. Since 2019, Microsoft’s licensing has penalized customers who run software they already own on competing clouds, effectively forcing a re-license to leave Azure. In April, SAP announced an API policy that bars certain AI engines from accessing data hosted on its platform, creating a licensing penalty and an access restriction for competitors. Both policies are applied uniformly to all customers and are rarely negotiable.
Beyond contractual language, AI tools develop a cognitive and emotional incumbency that makes organizations reluctant to switch even when no formal barrier exists. This natural stickiness erodes federal negotiating power at renewal, and when combined with contractual exit fees, it eliminates price competition. While the Federal Trade Commission could pursue broader antitrust action against such practices, that route is slower and more political than immediate procurement reforms.
Michael Garland, founder of a consulting firm that advises on federal procurement law, suggests adding an optional competitive-neutrality attestation to the FedRAMP authorization process. Under this model, cloud providers could voluntarily certify that their licensing lacks lock-in clauses, exit tolls, or data-access restrictions, giving agencies a clear view of portability before purchase. Because the certification would be non-mandatory, it would not interfere with FedRAMP’s security focus while encouraging vendors to compete on openness.