The Defense Department on Monday awarded OpenAI a one-year, $200 million contract for use of its artificial intelligence (AI) tools for administrative tasks and proactive cyberdefense – the first project of what the ChatGPT maker hopes will be many under its new OpenAI for Government initiative.
The contract signals a major step for the Microsoft Corp.-backed company in its pursuit of defense technology deals, underscoring OpenAI’s growing role beyond consumer-facing AI.
“Under this award, the performer will develop prototype frontier AI capabilities to address critical national security challenges in both warfighting and enterprise domains,” the Pentagon said in a statement. The arrangement will largely be performed in and around Washington, D.C., with an estimated completion date of July 2026, it said.
“The work will be primarily performed in the National Capital Region, with an estimated completion date of July 2026. Fiscal 2025 research, development, test and evaluation funds in the amount of $1,999,998 are being obligated at the time of award,” the department said in its contract order.
OpenAI landed the contract following a competitive bidding process involving 12 offers to develop a prototype with frontier AI capabilities “to address critical national security challenges in both warfighting and enterprise domains,” according to the Defense Department’s Chief Digital and Artificial Intelligence Office.
The deal is likely to lead to similar arrangements as OpenAI pushes to build on its endeavors with the federal government. Like its AI rivals, OpenAI is scrambling to secure public sector contracts. (In April, the White House’s Office of Management and Budget released new guidance directing federal agencies to ensure the government and “the public benefit from a competitive American AI marketplace.”)
As AI grows in necessity for government use and potentially billions of dollars in contracts, others have leaped into the fray. Anthropic has partnered with Amazon Web Services and Palantir to provide its Claude AI models to U.S. intelligence and defense agencies. Palantir’s annual Defense Department AI revenue run rate is about $210 million.
For now, OpenAI is a relative newbie to government contracts. In addition to its part in Stargate, a $500 billion project with SoftBank, Oracle Corp., and others to develop AI infrastructure across the U.S. over four years, it entered a partnership with defense tech startup Anduril Industries in December to improve the nation’s defense systems.
And things could get a lot more interesting if the Trump Administration follows through on AI.gov, a major new initiative to adopt AI throughout the federal government. Under the current plan, the General Services Administration (GSA) and its Technology Transformation Services (TTS) group would oversee the effort of government agencies adding AI to their day-to-day operations when the effort presumably launches July 4.
