Government contractors generally look for stable and predictable partnerships to best serve their government customers. Contractors must establish and maintain well-structured compliance systems and frameworks to ensure they conform to federal statutes, regulations and guidance.

But the only constant in government contracting is, not surprisingly, change. Sometimes the change is minor and requires small adjustments; other times the change is more like a punch to the throat. The Department of Defense’s recent action concerning artificial intelligence company Anthropic and its AI system, Claude, is the latest high-profile example of disruption to the Defense Industrial Base’s stability and creates anxiety for contractors as they endeavor to deliver services and products in support of DoD’s national security mission.

While the Anthropic situation is perhaps a more complex and evolving challenge than others, the process for any contractor working through a government change can and should be structured and start sooner rather than later.

Whenever a government contractor faces changes that could require it to shift gears in their compliance or provision of products or services, I often suggest to clients that they identify the problem and then “RACE” to solve it – Review, Audit, Compare and Execute. While different problems or challenges require slightly different approaches or asking slightly different questions, RACE is an easy framework for getting started.

Review. Examine your relationships, contracts and obligations, as well as where use of the product or service may be relevant. With which federal agencies do you contract? What are your current contractual obligations? What certifications have you made to the government? What may be your contractual obligations in future opportunities in the coming weeks and months? What may you need to certify in those future opportunities?

Audit. Conduct a rigorous audit and analysis of your current supply chain as it relates to the product or service at issue and document that use. Do you currently directly use the product or service? Indirectly? From where, or through whom, are you sourcing it? For what purposes are you using the product or service: strictly internally for business; externally for purely commercial purposes; externally with and for the federal government?

Compare. Put your current offering that includes the product or service up against other potential substitute offerings that would allow continued performance. Are there alternative products, platforms or systems that you can use? From where will you secure the alternative or substitute resources? How will you replace the service or product with the substitute resource? Will you need to change partners with whom you work because partners cannot or will not ensure compliance? How much will it cost to substitute products or services? How quickly can you substitute with alternative resources?

Execute. Based on your review, audit, and comparison, develop and refine a plan to execute. Seek out trusted partners, consultants, and advisors to assist with monitoring and navigating the evolving landscape, as well as help implement and carry out your plan.

A situation like what is happening with Anthropic and Claude could continue with some level of ambiguity for the coming weeks or months, so it is important to not sit idle nor get stuck in the paralysis-by-analysis loop. Rather, recognize that you can lean forward and start the RACE right now.

Miles & Stockbridge’s government contracts lawyers are ready and available to help contractors examine all of their options when compliance requirements and performance obligations change.

Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. The author has provided the links referenced above for information purposes only and by doing so, does not adopt or incorporate the contents. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.