Lawmakers introduce bipartisan bill to promote competition in DOD cloud and AI procurement

A bipartisan, bicameral group of lawmakers has introduced legislation to curb market concentration in Defense Department contracting for artificial intelligence and cloud capabilities and protect government data.

The move comes as the Pentagon is pumping billions of dollars into cloud and AI programs with plans to spend more in the coming years to boost its digital modernization and give new tools to warfighters and back-office workers.

The Protecting AI and Cloud Competition in Defense Act of 2025 was reintroduced in the Senate by Sens. Elizabeth Warren, D-Mass., and Eric Schmitt, R-Mo., and introduced in the House by Reps. Sara Jacobs, D-Calif., Pat Fallon, R-Texas, and Chris Deluzio, D-Pa., according to a press release issued Thursday by Warren’s office.

Warren and Schmitt are members of the Senate Armed Services Committee. Jacobs, Fallon and Deluzio are members of the House Armed Services Committee.

The bill “would ensure that DoD’s new contracts protect competition in the AI and cloud computing markets, instead of giving an unfair advantage to a few big players,” per the release.

If enacted, the Pentagon would be required to have a competitive award process for each procurement of cloud computing, data infrastructure and foundation model solutions when contracting with vendors that have entered into contracts totaling $50 million or more with the department in any of the five previous fiscal years.

Additionally, it directs department leaders to pursue modular open systems approaches, mitigate barriers to entry faced by small businesses and nontraditional contractors, and prioritize multi-cloud technology “unless doing so is infeasible or presents a substantial danger to national security.”

The Pentagon would also have to keep lawmakers updated.

“Not later than January 15, 25 2027, and annually thereafter for four years, the Chairman of the Joint Chiefs of Staff, in coordination with the Under Secretary of Defense for Acquisition and Sustainment, shall submit to the congressional defense committees a report assessing the competition, innovation, barriers to entry, and concentrations of market power or market share in the AI space for each period covered by the report … The report shall also include recommendations of appropriate legislative and administrative action,” the bill states.

Lawmakers also aim to protect data.

The legislation calls for the Pentagon’s Chief Digital and AI Office (CDAO) to update or promulgate provisions of the Defense Federal Acquisition Regulation Supplement to ensure that government-furnished data “provided for purposes of development and operation of AI products and services to the Department of Defense, is not disclosed or used without proper authorization” — and that such data “cannot be used to train or improve the functionality of commercial products offered by a covered provider without express authorization by the Department of Defense.”

Government-furnished data stored on vendor systems “for purposes of development and operation of AI products and services” must also be “appropriately protected from other data on such systems.”

Violation of these provisions would be subject to penalties, including fines and contract termination.

However, the legislation allows for DOD component acquisition executives to issue exemptions if they determine that doing so is “necessary for national security.” The acquisition execs would be required to notify the CDAO about each exemption and provide a justification for the move.

“It’s a mistake to let Silicon Valley monopolize our AI and cloud computing tools because it doesn’t just stifle innovation, it increases costs and threatens our national security,” Warren said in a statement. “Our bill will make sure the military can access cutting-edge tools and will keep our markets strong and our information secure.”

In the press release from Warren’s office, Schmitt warned against “allowing a select group of companies to dominate the awards process,” adding that the Defense Department should adopt policies that create opportunities for emerging AI defense companies.

Jacobs said in a statement that competition “always pushes the limits of creativity, innovation, and excellence – whether in AI or any other field. That’s why the Department of Defense needs to prioritize competition in its AI and cloud computing contracts to ensure we deploy the best technologies to protect and strengthen our national security.”

Deluzio added that enacting the legislation would help “protect data and public money from the failures of concentrated power” and “promote real competition” in the defense tech sector.

“By relying on free market principles, the Department of Defense can help ensure competition and innovation when it comes to the bidding process for government AI and cloud contracts,” Fallon stated in the release. “Due to the varied cyber threats facing our nation today, we must also ensure that AI and cloud related data is secure when it is held exclusively by the federal government. For these reasons, the Protecting AI and Cloud Competition in Defense Act is the next step forward Congress must take in the interest of US national security.”

Warren and Schmitt introduced similar legislation in December during the previous session of Congress, but it was never enacted.

Meanwhile, the Trump administration is looking to bring more companies into the fold for AI, cloud and other digital capabilities.

“Competition in the marketplace enables the government to acquire the best solutions at lower cost to the taxpayer. As agencies seek to accelerate the adoption of AI-enabled services, they must pay careful attention to vendor sourcing, data portability, and long-term interoperability to avoid significant and costly dependencies on a single vendor,” White House Office of Management and Budget Director Russell Vought wrote to department and agency heads in an April memo.

Secretary of Defense Pete Hegseth issued a memo in March directing all Defense Department components to embrace a rapid software acquisition pathway and use commercial solutions openings and other transaction authority to speed up the procurement of digital tools for warfighters.

“When we take that software pathway mechanism and we combine it with innovation that [the Defense Innovation Unit] has been working in commercial solutions openings, or CSOs, and other transaction authorities, OTAs, we get to the point where now we can expose the programs, the software programs, to nontraditional and commercial software developers, while we simultaneously … lower the barrier for those nontraditional and commercial software developers to get into defense programs of record,” a senior defense official told reporters during a background briefing in March regarding Hegseth’s directive.

The Office of the DOD Chief Information Officer recently released an updated software modernization implementation plan. The first goal outlined in the document is to accelerate and scale the Pentagon’s enterprise cloud environment.

At AFCEA’s TechNet Cyber conference last week, Rob Vietmeyer, chief software officer for the deputy CIO for information enterprise, said the contract vehicle for the $9 billion Joint Warfighting Cloud Capability program — under which Google, Oracle, Amazon Web Services and Microsoft have been competing for task orders — was “suboptimal” for large acquisitions. Officials in the CIO’s office are currently planning for JWCC 2.0, a follow-on phase that aims to add more vendors and different contracting mechanisms to the program.

The DOD has a variety of cloud efforts beyond JWCC. The software modernization implementation plan also calls for the establishment of additional contract options for cloud innovation geared towards smaller vendors and “niche providers.“

“In the implementation plan, we’re trying to build that next-generation cloud infrastructure and extend it. Not just looking at JWCC, but we’re also looking at how we extend for small business cloud providers,” Vietmeyer said.