The Transformative Power of AI in USG Procurement

By Molly Colaneri, University of Dayton School of Law

United States Government (USG) agencies are collaborating with industry and academia to understand limitations, risks, and ways to ethically integrate the benefits of Artificial intelligence (AI) into complex processes and systems. The USG Department of Defense has been continuously seeking ways to make procurement and acquisition cycles faster to maintain a competitive edge against worldwide threats. The possibility for AI to rapidly transform the way government procurement is approached and provide the needed process speed is becoming harder to ignore. As contracting professionals, we are responsible for managing a complex and ever-evolving system where transparency, efficiency, and compliance are critical. AI offers a solution to many of the challenges we face, from automating routine tasks to improving decision-making and reducing risks. By incorporating AI into our procurement processes, we can streamline operations, reduce costs, and stay competitive in a fast-changing environment.

Understanding AI and Its Relevance to USG Contracting

Before incorporating AI into USG processes, it is important to understand and define AI. At a basic level, AI is a branch of computer science that uses math, computational power, and cognitive science to create machines capable of performing tasks that typically require human intelligence. In its broadest sense, AI encompasses technologies such as machine learning (ML), natural language processing (NLP), and predictive analytics. These tools allow computers to analyze data, make predictions, recognize patterns, solve problems, and automate tasks that previously required human intervention.

The USG has three distinct AI definitions derived from statute and policy. The DoD AI Strategy (2018) defines AI as “the ability of machines to perform tasks that normally require human intelligence – for example, recognizing patterns, learning from experience, drawing conclusions, making predictions, or taking action – whether digitally or as the smart software behind autonomous physical systems.” The National Defense Authorization Act (NDAA) – FY2019 defines AI to include: “(1) Any artificial system that performs tasks under varying and unpredictable circumstances without significant human oversight, or that can learn from experience and improve performance when exposed to data sets. (2) An artificial system developed in computer software, physical hardware, or other context that solves tasks requiring human-like perception, cognition, planning, learning, communication, or physical action. (3) An artificial system designed to think or act like a human, including cognitive architectures and neural networks. (4) A set of techniques, including machine learning, that is designed to approximate a cognitive task. (5) An artificial system designed to act rationally, including an intelligent software agent or embodied robot that achieves goals using perception, planning and reasoning, learning, communicating, decision making, and acting.” The National AI Initiative Act of 2020 defines AI as a “machine-based system that can, for a given set of human-defined objectives, make predictions, recommendations or decisions influencing real or virtual environments. Artificial intelligence systems use machines and human-based inputs to – (A) perceive real and virtual environments; (B) abstract such perceptions into models through analysis in an automated manner; and (C) use model inference to formulate options for information or action.”

In the USG’s procurement process, AI's ability to quickly process and analyze large volumes of data makes it invaluable. Whether we’re managing vendor proposals, drafting contracts, or monitoring compliance, AI enhances our ability to make informed decisions. By reducing manual errors and speeding up time-consuming tasks, AI helps us focus on higher-level strategy and policy compliance.

Key Applications of AI in Procurement

One of AI’s greatest advantages is its ability to automate routine procurement tasks. For example, AI tools can handle data entry, generate purchase orders, and even assist with contract documentation. In an era of resource constraints, automating these processes reduces the likelihood of human error and frees up valuable time for more strategic work.

Incorporating AI into the USG procurement process creates the possibility of enabling humans to focus on making quick and informed decisions with an enhanced appreciation for contract risks. AI’s ability to rapidly analyze data, discover patterns, and provide recommendations allows humans to make more strategic decisions. AI’s predictive analytics capabilities allow procurement teams to forecast future demand based on historical data. This helps agencies anticipate procurement needs and optimize purchasing schedules, leading to more efficient inventory management. AI can also play a critical role in vendor selection, analyzing vast datasets to identify the most reliable and compliant suppliers.

Enhancing Contract Management and Regulatory Compliance with AI

AI is also transforming contract management by introducing risk identification tasks with automated data entry and risk assessment mapping, streamlining data entry, and evaluation. AI-driven tools simplify contract drafting by automatically generating documents that meet legal and regulatory requirements. With natural language processing (NLP), AI can review contracts, identify potential risks, and ensure compliance with federal procurement laws, such as the Federal Acquisition Regulation (FAR) and Defense Federal Acquisition Regulation Supplement (DFARS).

In real-time, AI can track contract performance, monitor deadlines, and flag any compliance issues, ensuring contracts remain compliant throughout their lifecycle. This reduces the need for extensive manual oversight, audit, and revision. AI reduces time spent on tedious tasks to enhance time spent making critical and mission-essential strategic decisions, which in turn can save the USG money.

Predictive Analytics for Risk Management

One of AI's most powerful applications in USG contracting is its ability to predict risks. By analyzing historical data, AI tools can identify potential performance issues before they arise. For example, AI can flag vendors with a history of delivery delays or cost overruns, allowing procurement teams to proactively address these risks before they impact a project and lead to better vendor selections during a competition.

AI also provides predictive alerts based on real-time data, enabling contracting professionals to mitigate risks early and avoid disputes or project disruptions. This proactive approach helps ensure that contracts are executed smoothly and that potential problems are identified and addressed promptly. For example, AI can monitor the number of days a given acquisition is in a particular phase of the procurement cycle. By identifying turnbacks, bottlenecks, and delays, procurement teams can quickly reassign roles and rotate task assignments to reduce inefficiencies.

Realizing Cost Efficiencies with AI

AI not only enhances efficiency but also helps drive significant cost savings. By analyzing procurement spending patterns, AI identifies inefficiencies and opportunities for cost reduction. AI-driven spend analysis can highlight areas where consolidating purchases or negotiating better terms with suppliers can lead to significant savings. For example, AI-based demand forecasting can optimize inventory levels, ensuring that agencies maintain the right amount of stock without over- or under-purchasing. This approach leads to more efficient use of resources and reduces storage costs. The more data-driven decisions are made, the more money will be saved as inefficiencies within USG processes are minimized.

Enhancing Vendor Selection with AI

Vendor selection is a critical part of the procurement process, and AI helps make it more objective and data-driven. AI tools can evaluate vendors based on a wide range of factors, including financial stability, past performance, risk to technical approaches, and compliance history. This ensures that vendors are selected based solely on merit by eliminating human subjective bias. Moreover, AI helps eliminate human biases in vendor evaluation by standardizing the criteria used to assess each vendor. This not only promotes fairness but also supports diversity and inclusion goals, helping agencies work with a broader range of qualified suppliers.

Streamlining the Procurement Process with AI Automation

AI dramatically shortens procurement timelines by automating approval workflows, managing procurement documents, and tracking contract performance. By automating these processes, procurement teams can accelerate decision-making, and ensure that projects move forward on schedule. AI also plays a role in reducing errors. Automated compliance checks, for example, ensure that contracts meet regulatory requirements before they are finalized. This reduces the risk of non-compliance and the potential for costly legal challenges later.

The Future of AI in Government Procurement

The future of AI in procurement is promising. We are likely to see more comprehensive AI-powered procurement platforms that integrate data from various sources to provide end-to-end solutions. These platforms will enable seamless vendor selection, contract management, and performance tracking, allowing USG agencies to make faster, more informed, and more efficient decisions. Advances in AI-driven predictive analytics will further improve demand forecasting, vendor performance predictions, and supply chain management, helping USG agencies prevent disruptions and optimize procurement strategies. As AI continues to evolve, it will play a larger role in decision-making, allowing procurement professionals to focus more on strategic planning and less on routine tasks.

Legal and Ethical Considerations in AI-Driven Procurement

As we integrate AI into the USG procurement process, it is essential to consider the legal and ethical implications. AI tools must be designed to ensure transparency, fairness, and accountability. AI systems must avoid perpetuating biases in vendor selection or decision-making. President Biden issued the Blueprint for an AI Bill of Rights to provide guidance identifying five principles to protect the American public in the design, use, and deployment of automated systems. The first principle refers to safe and effective systems in that you should be protected from unsafe or ineffective systems. The second refers to algorithmic discrimination protections whereby you should not face discrimination by algorithms, and systems should be used and designed equitably. The third relates to data privacy in that you should be protected from abusive data practices via built-in protections, and you should have agency over how data about you is used. The fourth is notice and explanation, whereby you should know that an automated system is being used and understand how and why it contributes to outcomes that impact you. The fifth principle is related to human alternatives, consideration, and fallback by which you should be able to opt out, where appropriate, and have access to a person who can quickly consider and remedy problems you encounter. Although this blueprint centers on AI ethical considerations at large, the tenants can apply to the application of the USG procurement process. In this ever-evolving landscape, contracting professionals must be aware of guidance and regulations to ensure that AI is used responsibly and ethically.

Skills and Training for AI-Driven Environments

To fully leverage the benefits of AI, USG contracting professionals must hone existing skills and develop new skills. Contracting professionals must ensure they have a strong understanding of the underlying regulations to avoid allowing a dependency on AI tools to reduce inherent contracting knowledge. In terms of new skills, technical proficiency in AI and data analytics tools is essential. Professionals need to understand how to use AI-driven platforms for vendor evaluation, contract management, and risk assessment. Moreover, a solid understanding of ethical AI use and compliance will be crucial as AI adoption increases. Continuous learning and adaptability will be key as AI technologies evolve, allowing contracting professionals to remain competitive in an AI-driven procurement landscape.

Conclusion

AI has the potential to revolutionize government procurement. By automating routine processes, improving decision-making, and reducing risks, AI can significantly enhance the efficiency, accuracy, and cost-effectiveness of procurement operations. For contracting professionals, embracing AI is not just a technological upgrade—it’s an opportunity for career growth and development. As AI becomes more integrated into procurement, now is the time to explore its applications, invest in skills development, and experiment with AI-driven solutions. Those who adapt to this changing landscape will be well-positioned to lead in the next era of USG procurement.