For government contractors, regulatory changes continue to occur, resulting in ever-increasing compliance responsibilities.
Continuous updates to the Federal Acquisition Regulations (FAR) are forcing government contractors to adapt to new federal purchasing practices on the fly. Cybersecurity Maturity Model Certification (CMMC) 2.0 continues to be implemented with new cybersecurity requirements and additional obligations in mind. Expectations for FedRAMP are becoming increasingly demanding. And recent executive actions bring new restrictions and potential penalties related to diversity, equity, and inclusion.
This fundamental shift in the regulatory environment has transformed compliance from a series of point-in-time events to an ongoing, cross-functional discipline. What was once a back-office function now directly impacts how companies win work, deliver programs, and withstand audit scrutiny. In this fluid environment, companies that excel at tracking, understanding, and managing their compliance responsibilities have a distinct advantage in winning new work from the U.S. government, while reducing their exposure to audit findings, fines, and delivery disruptions.
As many companies are finding, incorporating artificial intelligence directly into compliance workflows can help government contractors operationalize compliance, making it an integral and proactive part of daily operations rather than a separate, reactive effort. In fact, findings from Unanet’s upcoming 2026 GAUGE Benchmark Report show that 36% of government contractors are actively using AI to support compliance, and another 42% are considering using AI for compliance.
Here are five areas where AI can make a big difference on the compliance front.
Build a real-time compliance framework. From CMMC 2.0 to the FAR overhaul, the rulebook is no longer static. The cycle of FAR updates alone is becoming faster and faster, impacting contracts, provisions, and enforcement expectations. Centralized regulatory tracking powered by AI is essential here, allowing businesses to stay on top of the latest updates and new requirements at the executive and agency level. AI agents can monitor and report on regulatory changes in real-time, interpret new regulatory language (such as FAR updates), and map that language to contracts and business processes.
result: Accelerate coordination between regulatory changes and contract fulfillment, reducing compliance risk and operational delays.
Move to constant audit preparation. From CMMC enforcement to new FAR requirements, audits are closing in on government contractors more than ever. Additionally, given the federal government’s more aggressive approach to auditing, companies are likely to be subject to more stringent audits than in the past. In such a dynamic environment, static documentation alone is not sufficient for most audits.
Instead, companies should strive to establish continuous audit readiness. With AI support, you can make documentation an enterprise-wide discipline and map evidence/documents directly to internal controls. AI agents can also continuously assess on behalf of businesses whether evolving requirements are creating gaps in documentation and data, recommend steps to address those gaps, and create an audit trail as work progresses.
result: It improves audit results and reduces the internal confusion and wasted resources typically associated with audit preparation.
Take subcontractor compliance seriously. FAR increases domestic content threshold for “Buy American” compliance (65%, increasing to 75% in 2029) due to CMMC flowdown requirements [to verify subcontractors are compliant with CMMC, particularly if they handle federal contract information(FCI) and/or controlled unclassified information (CUI)]This means prime contractors will need advanced insight and oversight of the subcontractors that make up their supply chain. Strong tracking of subcontractor certifications and compliance proofs will be required, along with risk-based segmentation. Not only can AI handle these functions, but it can also predict potential exposure to risks associated with subcontractors across projects and programs.
result: Reduces the risk of subcontractor issues threatening your eligibility for the main contract.
Update your policies as they change. From new cybersecurity standards to revamped federal purchasing approaches to new DEI restrictions, all the regulatory disruption means even policies created a year or two ago can become outdated. This puts the onus on companies to conduct systematic policy reviews across different parts of their business, including human resources, IT, cybersecurity, finance, and project accounting. AI also plays a key role here, comparing policies to regulatory updates/changes, flagging areas that need updating, and even recommending how certain policies should be updated. AI can also monitor projects to ensure related policies and procedures are tracked. This is especially important in areas such as cost tolerances, indirect rate structures, and labor category adjustments, where outdated policies can quickly create compliance risks.
result: Internal policies are up to date with the latest regulatory changes, reducing your company’s risk of non-compliance.
Improve and maintain data quality – Because compliance depends on data quality. For government contractors, data integrity is rapidly becoming synonymous with compliance reliability. With the new regulations placing emphasis on traceability, transparency and accuracy of reporting, it is important that businesses are confident that the data they provide to regulators (and of course their own employees) is timely, accurate, complete and verifiable. This becomes a more straightforward proposition when a company’s core systems are integrated, eliminating silos and spreadsheet-based processes and allowing data to flow throughout the business.
A single source of truth allows companies to ensure data consistency, traceability, and defensibility across audits and reporting. When systems are connected and the data flowing through them is stable, AI comes to life to flag missing or incomplete compliance documents and identify errors and anomalies (such as invoices, invoices, cost classifications, etc.) before audits.
result: Because businesses are confident in their data, they can be confident in the AI they are using to support their compliance efforts.
From time lost in the scramble to find and collate information, to substandard audit results, to being disqualified from project work due to subcontractor compliance issues, the stakes are too great for government contractors to cut corners on compliance.
In a world where federal agencies place greater emphasis on compliance factors when evaluating the performance of government contractors, companies that effectively leverage AI in these areas can turn compliance excellence into a true competitive advantage, improving the way they win jobs, deliver programs, and operate with confidence in an increasingly dynamic and demanding federal environment.
Chris Crowder is Executive Vice President of Government Contracting Solutions. unanet.
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