Issuance of HUD Acquisition Instruction 26‑02 – Acquisition of Artificial Intelligence and New Agency‑Specific Clauses

The AS-2604 Vendor Lock-In Protections clause, applicable to all solicitations and contracts above the micropurchase threshold, mandates safeguards to ensure long-term agency control over systems, data, and Artificial Intelligence (AI) Systems. Key requirements include utilizing open standards for AI Systems, comprehensive knowledge transfer to agency personnel or successor contractors, and ensuring data and model portability in machine-readable, non-proprietary formats. The government retains rights to custom-developed code, AI Systems, and outputs. Contractors must also provide licensing transparency, detailing usage rights and costs, and pricing transparency for all services and future expenses. Upon contract expiration or termination, transition support is required. All vendor lock-in protection requirements must be flowed down to subcontractors. Failure to comply can result in disincentives, liquidated damages, or actual damages, with the government reserving the right to stop work.

The AS-2602 clause outlines stringent requirements for contractors handling federal information, especially concerning privacy, intellectual property (IP), and government data use, particularly with Artificial Intelligence (AI) Systems. Contractors must comply with various acts and policies including the Privacy Act of 1974 and the Federal Records Act. The government retains ownership of all government data, queries, prompts, searches, and AI-generated outputs, along with any modifications. Contractors are prohibited from using non-public government data to train or enhance their AI systems without explicit written consent and must ensure all AI system components are accessible to the government. Strict data handling protocols are mandated, including obtaining approval for subcontractor relationships involving data disclosure, complying with records management laws, and preventing unauthorized destruction or removal of federal records. All contractor employees handling federal records must complete HUD-provided training. Subcontractors must adhere to the same requirements, and any violations by subcontractors will be attributed to the prime contractor. Failure to comply can result in disincentives, damages, or work stoppage.

This government clause, AS-2606, mandates that contractors comply with federal and agency risk mitigation requirements for High-Impact AI Systems used in solicitations and contracts above the micropurchase threshold. Contractors must implement and document risk management measures, including pre-deployment testing, continuous monitoring post-deployment for performance and security, and support for government-led training on system use and risk management. Key requirements also include enabling human oversight, providing comprehensive technical and non-technical documentation for government oversight and audit, maintaining detailed logging and traceability, and promptly reporting incidents and failures. Contractors are required to notify the government of any material updates or changes that could alter the AI system's risk profile and ensure subcontractors also comply with these requirements. Failure to adhere to these stipulations can result in contract termination or other penalties.

The AS-2603 AI Use Transparency Requirements mandate that contractors disclose all AI use in products or services for government contracts above the micropurchase threshold. Contractors must obtain prior written authorization from the Government for any AI system use, submitting detailed documentation within ten business days of award or discovery. This documentation must include design, function, operational context, compliance with Unbiased AI Principles, a Software Bill of Materials for AI components, and a description of human oversight for automated decision-making. Contractors must also outline how AI systems mitigate risks like bias and privacy violations, and provide a completed HUD AI Assurance Packet. The policy emphasizes adherence to Unbiased AI Principles from Executive Order 14319, ensuring truth-seeking and ideological neutrality. Contractors are required to monitor AI system use, rectify unacceptable behavior, and notify the Government of new features or updates at least 30 days prior to implementation. All AI transparency requirements extend to subcontractors. Failure to comply can result in contract termination, withholding payment, and other penalties.

Acquisition Instruction 26-02 (AI 26-02) provides guidance for federal agencies to procure safe, secure, and unbiased artificial intelligence (AI) systems, aligning with various executive orders and OMB memoranda. This instruction emphasizes improving government efficiency and mission effectiveness while ensuring AI models produce reliable, bias-free outputs. Key policies include a Federal Information Technology Acquisition Reform Act (FITARA) review, convening an Integrated Project Team (IPT) to assess risks, and incorporating specific Agency Specific Clauses into all contracts. These clauses address privacy, intellectual property, AI transparency, vendor lock-in protections, ongoing testing, and requirements for high-impact AI systems. AI 26-02 applies to all HUD acquisitions above the micro-purchase threshold, effective upon issuance, and aims to strengthen responsible AI acquisition across the government.

This government clause, AS-2605, mandates ongoing testing and monitoring requirements for Artificial Intelligence (AI) Systems in all solicitations and contracts above the micropurchase threshold. It grants the Government the right to independently monitor, test, and evaluate AI systems for performance, accuracy, fairness, bias, security, explainability, and overall fitness for purpose, utilizing its own datasets. Contractors are required to provide necessary access, technical support, test results, methods, and documentation for these evaluations, ensuring transparency. The clause also emphasizes that the Government retains full authority to assess and audit AI systems. Contractors must ensure subcontractors comply with these requirements and provide cost estimates for bringing AI systems into compliance. Non-adherence can lead to penalties, including disincentives, liquidated damages, or actual damages, and potential work stoppage.