AI companies pitch Washington as cuts roil federal landscape

Politico

03-06-2025

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With help from Anthony Adragna
The Walter E. Washington Convention Center was buzzing Tuesday as roughly 15,000 attendees swarmed the floors of the Special Competitive Studies Project's second annual AI+ Expo.
Some 180 exhibitors showcased everything from fast-moving tactical drones to software that claims to decode geopolitical risk in real time. It was a snapshot of the massive wave of ambition around AI-based government contracting — dynamic, sprawling and deeply optimistic.
But beneath the glitz of AI-powered warfighting tools and defense integration platforms, a more complicated story is emerging. There's a growing bifurcation in Washington's AI landscape, with defense agencies charging ahead and many civilian agencies stumbling in the wake of sweeping budget cuts and policy churn.
The Pentagon is opening up newer, faster avenues for technological acquisition, confident about the growth of its purchasing budget. Meanwhile, civilian agencies are grappling with fallout from the work of the Department of Government Efficiency initiative, including staffing cuts, budget freezes, and uncertainties about their ability to buy and manage a complex new technology.
'It's really uncharted territory right now,' said Ben Edelman, who founded the AI business automation company EmberByte in Ashburn, Virginia. He attended SCSP to network and learn more about how to work with the government.
'They're still doing most of the cutting and trying to figure out what they don't want. So I imagine once they're done with that, they'll figure out what they do want,' he said.
One exhibitor for a federal AI contractor put it bluntly: 'There's a lot of angst right now,' said the exhibitor, granted anonymity to speak freely. 'Everyone's asking, when will the dust settle? What will this look like after the DOGE cuts?'
For one set of companies, AI looks like a way to stave off cutbacks. As the Trump administration targets the contracts of major government consulting firms, those companies are re-pitching themselves as AI implementation powerhouses. 'They're no longer just consultants. Now it's: 'We have AI products,' and they're partnering with startups and incubators, trying to evolve fast,' said the exhibitor, whose company works with consulting firms.
Contractors for agencies like the Department of Health & Human Services and USAID, which have been the focus of DOGE cuts, have been particularly worried, the exhibitor said.
By contrast, the Department of Defense is sending a much different signal. The exhibitors DFD talked to were convinced the boom in defense contracting for AI is just beginning. Under the Biden administration, the DOD requested $1.8 billion for AI programs in 2025; the Trump administration has yet to release details on its defense budget for next year.
'There's a lot of money going in there,' said Ron Wright, who staffed a booth of the Virginia-based business coalition National AI Association that he co-founded this year. Wright said the group has over 1,000 corporate members, many of them startups eager to contract with the DOD.
On the non-defense side, Wright said his member companies were optimistic that DOGE would ultimately create government opportunities for contractors with experience in the commercial world.
'The next step for DOGE is going to be more and more analysis, using AI to improve productivity,' he said. 'It's no different from what's happening on the corporate side.'
Despite the lack of clarity, walking the floor of SCSP was a testament to the perpetual optimism of the tech business world. But at least one contractor said implementing AI would require some work to build up federal contracting abilities, as agencies lose key technical talent needed to integrate AI into their operations.
Joel Meyer, who leads public sector business at the enterprise AI company Domino Data Lab, said having a capable technology procurement force in the government is a 'necessity.'
'It's important that the contracting officer workforce be strengthened and trained to be able to accelerate the procurement of commercial cutting-edge technology,' said Meyer, who previously served as deputy assistant secretary for strategic initiatives at the Department of Homeland Security. 'I would very much like to see them doing more of that.'
Pushback to state ai moratorium
A bipartisan group of 260 state lawmakers from all 50 states is calling on Congress to drop a proposed 10-year moratorium on states enforcing their own laws to regulate artificial intelligence.
'The sweeping federal preemption provision in Congress's reconciliation bill would also overreach to halt a broad array of laws elected officials have already passed to address pressing digital issues,' the lawmakers wrote in the letter Tuesday.
Their push follows a mid-May effort from 40 state attorneys general who also called on Congress to jettison the moratorium from the megabill, which passed the House last month.
The state lawmaker letter comes as senators prepare arguments under the so-called 'Byrd bath', a process for determining if provisions in the party-line reconciliation bill have a budgetary effect or have to be dropped. GOP senators are largely supportive of the moratorium but are skeptical it will survive the Byrd rule.
Sen. Ed Markey (D-Mass.) hailed the new bipartisan push on the Senate floor Tuesday.
'These state leaders are right: This provision would be devastating for our country,' Markey said.
Palantir pushes back
Palantir is pushing back on a report from The New York Times that the data analysis and technology firm is working with the Trump administration to gather information on Americans.
'Palantir never collects data to unlawfully surveil Americans, and our Foundry platform employs granular security protections. If the facts were on its side, the New York Times would not have needed to twist the truth,' the company wrote in a post on X Tuesday.
Trump signed an executive order in March calling on federal agencies to expand efforts to share data across the government, raising concern doing so might expand surveillance abilities to new heights.
The Times reported that the Department of Homeland Security and the Pentagon are working with Palantir, while the Social Security Administration and the Internal Revenue Service are in talks with the company.
The New York Times did not respond to request for comment.
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