D.C. Circuit Upholds the Anthropic Ban: What It Means for Federal Contractors

Robyn N. Burrows, Michael J. Montalbano, and Justin A. Chiarodo ●


On September 25, 2026, the U.S. Court of Appeals for the D.C. Circuit issued its much-anticipated decision in Anthropic PBC v. U.S. Department of War, No. 26-1049, upholding the Department of War’s (“DOW”) exclusion of Anthropic’s Claude artificial intelligence (“AI”) models from its supply chain under the Federal Acquisition Supply Chain Security Act of 2018 (“FASCSA”), 41 U.S.C. § 4713. The ruling means the Government may continue its efforts to require contractors to cease the use of Anthropic as part of the performance of federal contracts. This post summarizes the decision and steps contractors should consider taking in response.

Background

As we covered in our prior blog post, the dispute between Anthropic and the federal government began with a contract disagreement over AI usage restrictions (Anthropic held a $200 million Pentagon contract and was the first frontier AI company to deploy models on classified government networks). Anthropic maintained two “red lines”: it refused to allow its Claude AI model to be used for mass domestic surveillance of Americans or in fully autonomous weapons systems. When the DOW demanded that Anthropic agree to “all lawful use” of its technology without these restrictions, Anthropic refused. On February 27, 2026, President Trump and Secretary of War Pete Hegseth announced on social media their intention to remove Anthropic from the federal supply chain.

On March 3, 2026, Secretary Hegseth issued a formal determination under FASCSA to take covered procurement actions against Anthropic, finding that the continued integration of Claude into DOW systems presented a “significant supply chain risk,” that removal was “necessary to protect national security,” and that no “less intrusive measures” were “reasonably available.” The Secretary also determined that an “urgent national security interest” required immediate action. The DOW’s Chief Information Officer then ordered removal of all Anthropic products from DOW systems within 180 days and prohibited contractors from using Anthropic products in DOW work.

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Blank Rome Welcomes New Government Contracts Associate Kaitlyn E. Toth in Washington, D.C.

We are pleased share that Kaitlyn E. Toth has joined our Washington, D.C., office as an associate in the Government Contracts group. Kaitlyn joins Blank Rome from Baker Hostelter, LLP.

Kaitlyn focuses on government contracts counseling, compliance, and litigation. 

Read the full press release on our website.

VA OIG Releases Report on the Federal Supply Schedule Program

Merle M. DeLancey, Jr. ●

On September 9, the Department of Veterans Affairs (“VA”) Office of Inspector General (“OIG”) released its findings based on a review of the VA Federal Supply Schedule (“FSS”) Program. See, VA Federal Supply Schedule Contracts. The VA and other government agencies annually purchase approximately $25 billion in medical equipment, pharmaceuticals, and services through the VA FSS Program. The OIG’s findings are based on information identified during its VA FSS contract audits. The report sets forth opportunities to improve the efficiency of the VA FSS Program and strengthen price protections to ensure the government obtains the best possible prices using taxpayer dollars. 

The OIG identified three primary areas for improvement:

1. Improving Tracking Customer Guidance

The Price Reductions clause is unique to FSS contracts. Under the Price Reductions clause, a tracking customer (or basis of award customer) is used to track price reductions FSS contract holders provide to tracking customers during the term of an FSS contract. The FSS contract holder is required to pass on the price reductions to the government. During contract negotiations, the parties agree on the tracking customer or category of customers. The broader the tracking customer, the more transactions an FSS contract holder must monitor.

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SBA Proposes Sweeping Overhaul of Small Business Size Standards: What Government Contractors Need to Know

Elizabeth N. Jochum ●

The U.S. Small Business Administration (“SBA”) has proposed a rule that would reshape how the federal government defines a “small business” across 338 industry groups and industries, dramatically increasing the number and size (by average annual revenue or number of employees) of companies that would qualify as small businesses for government contracts and SBA purposes. The proposed changes touch nearly every sector of the economy—from agriculture and manufacturing to construction, IT, and professional services—and carry significant implications for government contractors, subcontractors, and any business that relies on SBA-backed programs by significantly increasing size standards for hundreds of thousands of businesses.

The chart below provides a few examples of the significant changes in size standards:

NAICSDescriptionCurrent Size
Standard		Proposed Size
Standard
541330Engineering Services$25.5 million$252 million
541519Other Computer Related Services$34 million$531 million
541618Other Management Consulting Services$19 million$295 million
561210Facilities Support Services$47 million$156 million
336412Manufacturing Guided Missile and Space1,250 employees2,800 employees
336611Ship Building and Repairing1,300 employees2,300 employees
Continue reading “SBA Proposes Sweeping Overhaul of Small Business Size Standards: What Government Contractors Need to Know”

Court of Federal Claims Reaffirms Agency Discretion in TAA Country-of-Origin Determinations for Pharmaceuticals

Merle M. DeLancey, Jr. and Shane M. Hannon ●

On July 28, 2026, the U.S. Court of Federal Claims issued its decision in AvKare, LLC v. United States[1], upholding the Department of Veterans Affairs’ (“VA”) national contract award for Hydroxychloroquine tablets. The opinion is an important reminder of the discretion contracting officers have to evaluate pharmaceuticals for Trade Agreements Act (“TAA”) compliance and reaffirms that the country where a drug’s active pharmaceutical ingredient (“API”) is synthesized can be its country of origin for TAA purposes. The Court also declined to extend the scope of the Federal Circuit’s 2020 Acetris decision which would have conflated “manufacturing” and “substantial transformation.”

Overview of the TAA

The TAA provides that the Government may only acquire “U.S.-made or designated country end products.” See FAR 52.225-5. The TAA states that if a product comprises materials from multiple countries, its country of origin is where it was “substantially transformed into a new and different article of commerce with a name, character, or use distinct from that of the article or articles from which it was so transformed.” 19 U.S.C. § 2518(4)(B). If a product is “substantially transformed” in a TAA-designated country, the product complies with the TAA.

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DOW Updates Section 1260H List: Expanding Compliance Obligations for Government Contractors

Merle M. DeLancey, Jr. and Samarth Barot ●

The Department of War (“DoW”) updated its 1260H List on June 8, 2026. The update adds approximately 65 new entities and includes an array of Chinese companies across several key areas of China’s economy. For example, the additions include electric vehicle and battery manufacturers, solar equipment manufacturers, display and optical-component manufacturers, drone and robotics companies, and Chinese technology companies including Alibaba.

Among the newly designated entities are several biotechnology-related companies, including WuXi AppTec Co., Ltd., Complete Genomics, Inc., and Novogene Company Limited. WuXi AppTec, a China-headquartered contract research, development, and manufacturing organization with extensive relationships with U.S. pharmaceutical and life sciences companies, has received particular attention given the scope of its partnerships across the biotechnology supply chain. WuXi AppTec has disputed its designation and is pursuing all possible remedies.[1] This post addresses the implications for companies being placed on the 1260H List and how being placed on the 1260H List could also result in consequences under the BIOSECURE Act.

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CUI, FOCI, Quantum, and CMMC: The Federal Government Issues a Wave of Proposed Rules to Safeguard Government Information

Michael J. Montalbano ●

Ernest Hemingway once wrote about bankruptcy that it happens “gradually and then suddenly.” The same can be said about federal information safeguarding rules. The Cybersecurity Maturity Model Certification (“CMMC”) program has been around for seven years. The Controlled Unclassified Information (“CUI”) program for over 15 years. Information safeguarding used to be a slow process with progress measured in years. Not anymore.

Over the past three months, the federal government has issued a wave of proposed rules designed to better safeguard federal information and harden contractor information systems.

FOCI Rule for Non-Cleared Contractors

The Department of Defense (“DoD”) issued a proposed rule in May 2026 that would significantly expand Foreign Ownership, Control, and Influence (“FOCI”) reporting requirements beyond the cleared contractor community, reaching existing and prospective contractors and subcontractors at any tier with DoD contracts or subcontracts exceeding five million dollars, even where no classified information is involved.

Continue reading “CUI, FOCI, Quantum, and CMMC: The Federal Government Issues a Wave of Proposed Rules to Safeguard Government Information”

Federal Contractors Face Uncertainty as Multi-State Coalition Challenges Executive Order 14398’s Anti-DEI Contracting Provisions

Dominique L. Casimir and Christina Manfredi McKinley●

Overview

Federal contractors: take notice. A significant lawsuit recently filed in the U.S. District Court for the District of Maryland challenges Executive Order (“EO”) No. 14398, “Addressing DEI Discrimination by Federal Contractors,” which President Trump issued on March 26, 2026. State of Maryland v. Hegseth, Case No. 1:26-cv-02322, was filed on June 10, 2026, by a coalition of 19 state attorneys general and the District of Columbia under the Administrative Procedure Act (“APA”). This case presents administrative law challenges that could reshape the compliance landscape for every entity that does business with the federal government, whether directly or indirectly.

The EO and Its Requirements

As we have previously covered, EO No. 14398 declares that diversity, equity, and inclusion (“DEI”) activities are “unethical and often illegal” and directs all federal agencies to include new contract terms in their contracts, subcontracts, and “contract-like instruments” barring contractors from engaging in “racially discriminatory DEI activities.” The order defines that term as “disparate treatment based on race or ethnicity in the recruitment, employment (e.g., hiring, promotions), contracting (e.g., vendor agreements), program participation, or allocation or deployment of an entity’s resources.”

Section 3 of the order directs federal agencies to insert a comprehensive clause into federal contracts that requires contractors to: (1) refrain from engaging in racially discriminatory DEI activities; (2) furnish all information and reports, including access to books, records, and accounts, as requested by the Contracting Officer to enable compliance reviews; (3) flow the clause down to subcontractors at every tier including to commercial item subcontracts; (4) report any subcontractor’s known or “reasonably knowable” conduct that “may violate” the clause; (5) inform the contracting agency if a subcontractor sues the contractor regarding the validity of the clause; and (6) recognize that compliance with the clause is “material to the Government’s payment decisions” for purposes of the False Claims Act (“FCA”).

The order threatens severe consequences for violations, including contract termination, suspension or debarment, and lawsuits under the FCA.

To read the full alert, please visit our website.

SBA Proposes to Eliminate the Rebuttable Presumption of Social Disadvantage for Individually Owned 8(a) Firms: What Contractors Need to Know

Elizabeth N. Jochum, Dominique L. Casimir, and Samarth Barot●



Summary

The U.S. Small Business Administration (“SBA”) published a proposed rule on June 11, 2026, that would reshape how individually owned small businesses establish social disadvantage for purposes of the 8(a) Business Development program. The proposed rule would eliminate the longstanding rebuttable presumption that members of certain designated racial and ethnic groups are socially disadvantaged. In its place, SBA proposes a single, race-neutral test requiring all applicants to show that a governmental or private entity discriminated against their clearly definable group and that the discrimination caused them “material harm.”

Critically, the proposed rule applies only to individually owned firms. Entity-owned 8(a) participants, including firms owned by Indian tribes, Alaska Native Corporations (“ANCs”), Native Hawaiian Organizations (“NHOs”), and Community Development Corporations (“CDCs”), are unaffected.

Comments on the proposed rule are due by July 13, 2026. Stakeholders may submit comments through regulations.gov under Docket No. SBA-2026-0133.

Key Takeaways

  • The rebuttable presumption of social disadvantage for designated racial and ethnic groups would be eliminated for individually owned applicants.
  • A new, uniform test would require all individual applicants to show that a governmental or private entity discriminated against or was biased against their clearly definable group and that this caused them “material harm” (defined as loss of access to or diminished opportunities for economic advancement).

To read the full alert, please visit our website.

Debarment or Suspension Based on a DEI Program? Let’s Think It Through

Dominique L. Casimir ●

Suspension and debarment are powerful administrative tools that the Government uses to exclude from federal contracting entities that are not “presently responsible.” These exclusions can be lengthy, effectively shutting debarred or suspended contractors out of the lucrative federal marketplace for years. Even after the period of exclusion ends, disclosure requirements in connection with proposal submissions and teaming arrangements make it difficult for a previously debarred or suspended contractor to shed the stain of a prior exclusion. Because of these severe consequences, contractors shape their compliance programs, organizational cultures, and conduct to minimize the risk of creating cause for debarment or suspension.

To read the full article, please click here.

“Debarment or Suspension Based on a DEI Program? Let’s Think It Through,” by Dominique Casimir, was published in The Government Contractor, Volume 68 Issue 21, on June 3, 2026.

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