VI. Emerging Threat – AI and Automation
While the immediate battles over the Rule of Two and APA adherence are urgent, the next critical front is already emerging: the integration of Artificial Intelligence (AI) and automation into federal procurement. These technological advances have enormous potential to enhance efficiency, accuracy, and responsiveness. However, without explicit and rigorous enforcement of statutory requirements like the Rule of Two, the adoption of AI-driven procurement systems could institutionalize exclusionary practices, severely disadvantage small businesses, and permanently reshape federal contracting markets.
The Promise and Peril of AI and Automation
The rapid integration of AI and automation into procurement processes is fundamentally reshaping how government agencies identify suppliers, conduct market research, evaluate proposals, and make awards. AI-driven procurement tools promise increased speed, efficiency, and analytical capabilities—but their reliance on historical data, existing supplier networks, and predefined criteria carries serious risks of embedding biases and reinforcing market concentration.19
Without explicit safeguards, AI and automation can unintentionally or deliberately institutionalize biases against smaller, newer, and more innovative firms—firms that historically have lacked the resources or market presence to be prominently featured in government datasets. Over time, this could result in significant barriers to entry for new small businesses and diminished competition overall.19
The Statutory Requirement: Integrating the Rule of Two into AI Systems
Current laws, notably the Small Business Act and FAR-based Rule of Two, do not cease to apply simply because procurement is becoming automated. The Rule of Two remains statutory and mandatory, requiring proactive identification and prioritization of small businesses whenever market conditions meet its criteria.18
It is critical—and legally mandatory—that any AI-driven procurement tool or automated sourcing system explicitly integrates the Rule of Two into its algorithms, decision processes, and market research methodologies. Failure to do so constitutes not just a violation of statutory requirements, but a fundamental threat to the fairness, transparency, and competitive integrity of federal contracting.18
APA Compliance and Transparency in AI Systems
Just as with manual procurement processes, APA compliance is mandatory when implementing procurement innovations and new regulatory guidance involving AI or automation. Regulatory frameworks and agency-specific procedures governing AI procurement systems must be publicly available, subject to comment, and transparently documented under the APA.14
Unfortunately, the Deviation Doctrine’s pattern of bypassing APA requirements could easily extend to these new technological systems, resulting in opaque procurement decisions, hidden biases, and diminished public oversight.
The Expert Warning: AI Bias and Exclusion Risks
Acquisition experts and technology ethicists warn that AI and automated procurement tools, if not transparently and rigorously regulated, can institutionalize historical biases and unintentionally exclude viable small businesses. Experts highlight the urgent need to explicitly encode regulatory safeguards like the Rule of Two into algorithmic decision-making, ensuring these tools do not perpetuate exclusionary outcomes but instead facilitate genuine, inclusive competition.19
Congressional and Public Accountability
As AI becomes increasingly embedded in federal procurement, robust congressional oversight and public accountability become essential. Congress must explicitly require federal agencies to demonstrate that any AI-driven procurement systems they adopt actively and transparently enforce statutory requirements, including the Rule of Two, and comply fully with APA transparency and public participation standards.
Call to Action
AI and automation represent a pivotal and imminent challenge to federal procurement. Immediate legislative and regulatory action is essential to ensure these powerful technologies serve the public interest rather than perpetuate exclusionary practices. Congress must urgently mandate transparency, accountability, and rigorous enforcement of statutory requirements in all AI-driven procurement systems.
The choice is clear: harness AI responsibly to preserve competitive integrity, innovation, and economic diversity—or risk embedding irreversible market concentration and bias in federal procurement processes.