TL;DR

• Commercial AI use in defense can shift negotiations toward contract scope, control rights, and audit design.
• That shift can affect procurement and subcontractors through 41 CFR § 201-1.303(a) and 15 CFR § 700.13–700.14.
• Split use cases, approvals, audit rights, and delivery forms in writing, then review exclusion and priority-performance exposure.

The request for “full-scale use” often appears in an operational meeting.
That request can shift focus from model selection to contract and audit design.
The central issues are scope of use, control rights, and responsibility boundaries.
Any specific incident needs separate verification.

Example: A field team wants broad model use. Security asks for approvals and records. Users resist extra steps. A simple permission approach seems tempting. It can blur accountability and approval logic.

Several mechanisms in the regulatory stack can make this conflict concrete.
One mechanism is exclusion or removal due to supply-chain risk.
That mechanism appears in 41 CFR § 201-1.303.
Another mechanism is priority performance under the Defense Production Act.
That authority appears in 50 U.S.C. § 4511.
There are also governance and log-control expectations for allowed and blocked functions.
These expectations appear in NIST AI RMF GOVERN 1.4 and related NIST controls.

Current state

Supply-chain risk concerns can create pressure to exclude or remove sources or items.
Applicability and scope often need case-by-case confirmation.
One axis is the FASCSA framework.
Based on FASC recommendations, certain officials can review and issue an order.
The order can be an exclusion or removal order under 41 CFR § 201-1.303(a).
Once issued, actions can propagate across procurement and subcontracting tiers.
Obligations often appear through contract clauses.
That means each contract can need separate verification.

Another axis is DPA Title I.
The law allows prioritization of performance of contracts or orders.
It can also require acceptance and performance by capable parties.
These authorities are described in 50 U.S.C. § 4511.
DPAS defines “services” broadly under 15 CFR § 700.8.
A rated order generally needs acceptance under 15 CFR § 700.13.
An accepted rated order should be scheduled ahead of unrated orders under 15 CFR § 700.14.
Based on confirmed text, compulsion resembles priority supply or performance.
Extension into model development or modification remains unclear here.
That question likely needs additional verification.

Operationally, evaluators may focus on constrained use cases, approvals, and records.
The NIST AI RMF asks for transparent policies, procedures, and controls.
This appears in GOVERN 1 and GOVERN 1.4.
Some implementations may map to NIST SP-family controls.
SP 800-171r3 aligns with least-functionality ideas.
It suggests enabling mission-necessary functions and restricting defined functions or services.
Full text quotation and contract applicability are outside this review’s scope.
This framing can conflict with “full-scale use” demands.

Analysis

Commercial AI in defense can be treated as a supply-chain component.
That categorization can shift negotiation beyond price and performance.
It can emphasize availability, continuity, control, and auditability.
An exclusion or removal order under 41 CFR § 201-1.303(a) can propagate broadly.
It can reach beyond one contract into procurement and subcontracting.
Each application should be checked case-by-case.

The risks can be organized into several categories.

First, broad usage rights can relax guardrails.
They can weaken approval procedures.
They can also blur legal responsibility boundaries.

Second, DPAS defines “services” broadly under 15 CFR § 700.8.
That breadth may matter depending on how AI is provided.
Disputes can form around “services you perform” in 15 CFR § 700.13.
Examples include on-premises deployment or weight delivery.
Another example is adding specific functionality.
Authoritative interpretations were not confirmed within this review’s scope.

Third, stronger logging and access control can increase auditability.
They can also increase operational friction and procedural cost.
Speed and control can trade off in practice.

Practical application

Separate control items can support contract and operational handling.
A broad use-case sentence can be hard to negotiate later.
Consider splitting terms into allowed categories and prohibited categories.
Also split exception approvals, auditability, and deployment method.
These separations can become negotiation units later.
They can also help discuss what to open and what to close.

For DPA priority performance, document service boundaries clearly.
Use 50 U.S.C. § 4511 as the reference for priority performance.
Use 15 CFR § 700.13 for acceptance and refusal boundaries.
Distinguish “existing services you provide” from “services you do not perform.”
This distinction can support responses to rated-order demands.
It can also support responses to exclusion or removal concerns.
Such concerns can arise under 41 CFR § 201-1.303.

For logs and approvals, design for auditable operations.
Avoid relying only on product-feature claims.
AI RMF emphasizes transparency about who allowed what and why.
This appears in GOVERN 1.4.
Procurement may evaluate guardrails, audit logs, and access control together.
Whether specific ATO or checklist enforcement applies needs verification.

Checklist for Today:

• Split allowed and prohibited use cases, and define exception approvals and record duties as clauses.
• Document delivery forms, and describe performed versus non-performed services for 15 CFR § 700.13.
• Specify audit viewing rights, retention periods, and protection responsibilities in operating procedures.

FAQ

Q1. If a supply-chain risk designation occurs, what changes?
A. FASCSA procedures can lead to an exclusion or removal order.
That order is described in 41 CFR § 201-1.303(a).
If issued, actions can exclude items from procurement or remove deployed items.
Effects can spread through contracts and subcontractor networks.
Obligations still vary by contract clauses and applicability scope.
Additional verification is often needed.

Q2. Can the DPA apply to AI?
A. The DPA covers materials, services, and facilities in 50 U.S.C. § 4511.
DPAS defines “services” broadly under 15 CFR § 700.8.
A rated order may be refused for “a service you do not perform.”
That boundary appears in 15 CFR § 700.13.
The practical dispute can center on existing services versus new development.
Support for compelled new development was not confirmed in this review.
Additional verification may be needed.

Q3. What can be proposed instead of “full-scale use” for workable negotiation?
A. Avoid phrases like “full-scale” or “unlimited” in contract language.
Propose a defined use-case scope and an exception approval path.
Define audit rights and logging expectations in terms that can be tested.
Align constraints to delivery form, such as API service or on-premises deployment.

Further Reading

• AI Resource Roundup (24h) - 2026-02-25
• CleaveNet Designs Protease-Cleavable Peptides for Urine Sensors
• Defense AI Procurement: Operations, Logging, Rights, And Incident Response
• Designing Dispute Procedures Beyond Generative Detection Scores
• DoD AI Contracts: Audit Logs, Retention, Access Controls

References

• 41 CFR § 201-1.303 Issuance of orders and related activities - law.cornell.edu
• 50 U.S. Code § 4511 - Priority in contracts and orders (LII / Cornell Law School) - law.cornell.edu
• 15 CFR § 700.8 - Definitions (DPAS) (LII / Cornell Law School) - law.cornell.edu
• 15 CFR § 700.13 - Acceptance and rejection of rated orders (LII / Cornell Law School) - law.cornell.edu
• 15 CFR § 700.14 - Preferential scheduling (LII / Cornell Law School) - law.cornell.edu
• GAO-25-108497, DEFENSE PRODUCTION ACT: Use and Challenges from Fiscal Years 2018 to 2024 (U.S. GAO) - files.gao.gov
• Govern - AIRC (NIST AI RMF Playbook) - airc.nist.gov
• AI RMF Core - AIRC (Excerpt from NIST AI RMF 1.0) - airc.nist.gov
• NIST SP 800-53A Rev. 5: Assessing Security and Privacy Controls in Information Systems and Organizations | CSRC - csrc.nist.gov