AI Is Turning Federal Compliance Into a Competitive Weapon

The federal contracting rulebook keeps changing, and falling behind on any single requirement can cost a firm its contract.

Today’s contractors face overlapping demands spanning cybersecurity certifications, new purchasing mandates and diversity-related restrictions.

That pressure is driving a growing share of the industry toward embedded artificial intelligence (AI) directly into compliance operations in order to keep up.

That is the case Chris Crowder, executive vice president of government contracting solutions at Unanet, makes in a piece for Federal News Network, drawing on findings from Unanet’s upcoming 2026 GAUGE benchmarking report. Already, 36% of government contracting firms are using AI to support compliance work, Crowder said, with another 42% actively exploring it.

“What was once a back-office function is now directly impacting how firms win work, deliver programs and withstand audit scrutiny,” Crowder wrote.

Crowder identified five areas where AI is making the biggest difference. The first is regulatory tracking. Updates to the Federal Acquisition Regulation are arriving faster than before, affecting contracts, clauses and delivery expectations. AI tools can monitor those changes in real time and map it to specific contracts and business processes, reducing the lag between a rule change and a firm’s response.

The second is audit readiness. Federal audits are becoming more frequent and more aggressive. Static documentation packages are no longer enough. Crowder argued firms need to treat audit readiness as a continuous process, not a preparation sprint. AI can flag gaps in documentation as requirements evolve and create audit trails as work happens, not after the fact.

Third is subcontractor oversight. Prime contractors are now responsible for ensuring their suppliers meet the same compliance standards they do. “Buy American” domestic content thresholds are rising to 65% now and 75% by 2029. Cybersecurity certification requirements flow down the supply chain as well. AI can track subcontractor certifications, assess risk across a contractor’s entire supplier base, and flag problems before they threaten a prime contract.

Fourth is policy modernization. Regulations written even a year or two ago may now be out of date. Crowder said AI can compare existing policies against new requirements, identify what needs updating and monitor ongoing projects to ensure they stay aligned with current rules. This is especially urgent in areas like cost accounting and labor classification, where outdated policies create compliance exposure quickly.

The fifth area is data quality. All of this only works if the underlying data is solid. Crowder argued that clean, integrated data systems are now a compliance requirement in themselves. When core systems are connected and data flows without gaps, AI can flag billing errors, cost classification problems and missing documentation before auditors do.

Compliance is no longer just about avoiding penalties. In a market where federal agencies are paying close attention to contractor performance, firms that handle compliance well are gaining a real advantage in winning new work. The ones that rely on manual processes and periodic reviews are increasingly at a disadvantage.

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