Algorithms and Acquisition: What Federal Contractors Need to Know About AI

Welcome back to another insight-packed edition of FedBiz’5, the podcast where government contracting gets real. In this episode, host Bobby Testa breaks down one of the most transformative trends reshaping federal procurement: Artificial Intelligence (AI). Spoiler alert: AI isn’t on its way – it’s already here, wearing a badge, scanning mail, and even fielding calls at the IRS.

Let’s dive into what contractors need to know to stay relevant, compliant, and visible in this rapidly shifting space.

AI Is Not the Future — It’s the Present

Bobby kicks off the conversation with a clear message: AI isn’t emerging, it’s operating. More than 200 active AI applications exist across federal agencies right now. Think DoD’s Project Maven analyzing drone footage faster than you can scroll TikTok, the IRS chatbot replacing grumpy hold music, and even the USPS using AI to decode your scribbled handwriting.

From NIH predicting disease outbreaks to intelligent automation in VA claims processing, agencies are embedding AI into their missions. This means contractors offering AI-related services—even those in supporting roles like integration, training, or compliance—have a real opportunity to make noise in the space.

Follow the Money: FY25 Budget & Agency Priorities

Thanks to the CHIPS and Science Act, multiple executive orders, and the AI in Government Act, federal investment in AI is ramping up fast. The FY25 budget is packed with AI funding for the DoD, VA, NIH, and more. But it’s not just about cool tech like image recognition or next-gen chatbots. Agencies are also buying:

Cloud infrastructure that supports machine learning
Predictive analytics and fraud detection tools
Ethical advisory services
AI training programs

This isn’t just a big tech party. Primes are actively looking for small, agile partners with niche capabilities and faster turnaround times. If you’re sitting on an innovative solution, now’s the time to bring it forward.

Learn More About FedBiz365 Market Research

Regulations Are Here, and They’re Not Optional

Let’s be honest—no trend in federal contracting comes without regulation. And AI is no different. To compete in this arena, your solution needs to be more than flashy demos and buzzwords.

Here’s what agencies want to see:

Data discipline: Handle sensitive data like it’s classified, because it might be.
Explainability: If your AI can’t answer “why?” without shrugging, that’s a red flag.
Interoperability: Your tool should mesh with frameworks like FedRAMP, NIST 800-53, and CMMC.
Human-in-the-loop functionality: AI must allow human override when necessary.
Compliance-readiness: New FAR clauses specific to AI are coming. Prepare now.

To put it simply, the government is looking for secure, transparent, and responsibly managed AI. If your solution is a black box, you might be boxed out.

Visibility is Key: Market Yourself Like You Belong

Having a killer AI tool isn’t enough if nobody can find you. Bobby hammers this point home: Your SAM and DSBS profiles should clearly reflect your AI capabilities in plain language. Ditch the jargon, focus on clarity, and show how your solution solves real problems.

Same goes for your capability statement. If you lead with “algorithmic innovation” but never explain how you improve mission outcomes, you’re missing the mark.

Want to take the guesswork out of marketing? This is where tools like FedBiz365 shine. With it, you can:

Track pre-solicitation and upcoming AI-related opportunities
Identify which agencies are investing in AI now
Analyze your competitors and spot AI-adjacent trends
See which contracting officers are researching AI before they buy

It’s not just about selling. It’s about seeing—and showing up prepared.

Show Up Before the RFP: Relationships Still Rule

Even in the AI age, relationships beat algorithms. To position your business for success:

Respond to Sources Sought and RFIs
Attend Industry Days and AI-focused events
Connect with innovation hubs and tech-forward program offices
Join pilot programs and working groups

Also consider strategic teaming. Many primes are eager to partner with small businesses that have AI expertise. But they won’t know about you unless you make the first move.

AI may be advanced, but your outreach doesn’t have to be. Just be clear, relevant, and timely. Tell contracting officers what you solve—not just what you sell.

AI is Here. Are You in the Conversation?

AI is not some far-off futuristic concept. It’s embedded in daily operations at agencies across the board. It’s scanning emails, reviewing video, and even assisting with late-night tax questions.

So the question isn’t, “Will agencies use AI?” It’s “Will they use yours?”

Let’s recap:

AI is already operational in over 200 federal agency applications.
Budgets are increasing, especially in defense, health, and logistics.
Compliance is non-negotiable but manageable with preparation.
Visibility is everything—optimize your SAM, DSBS, and capability statement.
Relationships still drive results—engage early and strategically.

If you’re building AI solutions, expanding your GovCon strategy, or simply trying to understand where the opportunity is headed, this episode of FedBiz’5 offers real talk and actionable guidance.

And remember, FedBiz Specialists are just a simple phone call away. Whether you need help building a capability statement, optimizing your SAM profile, or launching a targeted outreach campaign to federal buyers, we’re here to help.

Schedule your complimentary consultation today by calling 888-299-4498

Until next time, stay proactive, stay visible, and please—if your AI becomes sentient, let legal know first.