OpenAI Is Going After Defense Contracts

Earlier this year, OpenAI quietly removed some language from its usage policies prohibiting people from using its products for “military and warfare,” as CEO Sam Altman and his fellow execs opened the company up to defense work. As a path to getting business with the Pentagon, OpenAI has since partnered with Carahsoft, a government contractor recently accused of allegedly price fixing on Department of Defense contracts.

According to Carahsoft’s website, it added OpenAI to what’s called a contract vehicle with the DoD titled Computer Hardware, Enterprise Software and Solutions (CHESS). The vehicle is a method the government uses to buy services from private companies quickly and without much administrative burden. It allows Carahsoft to quickly provide tech — everything from cloud computing networks, AI software and productivity tools like Google Workspace — to the Pentagon from a long list of tech companies beyond OpenAI, including Google, Microsoft and HP. Per the military’s own description of CHESS, it’s “the Army’s designated primary source for commercial IT,” making it simple to start using “off-the-shelf” technologies without having to go through any additional contractual negotiations or bureaucracy.

OpenAI confirmed it was added to the CHESS contract in May, shortly after it started working with Carahsoft. To date, it hasn’t executed a contract with the DoD via the vehicle, but Carahsoft has helped it land other government contracts. In the last year, Carahsoft sold ChatGPT licenses worth $108,000 to NASA, and over $70,000 in unspecified OpenAI licenses to the National Gallery of Art, according to contracting records reviewed by Forbes. In September, it signed a $100,000 contract with the U.S. Department of Agriculture for access to multiple AI large language model platforms, but did not name which ones.

OpenAI’s addition to the CHESS roster of suppliers opens up a route to easy business with the DoD, but it comes at a time when there are question marks around both the use of AI in military applications and Carahsoft’s own business practices.

Since its founding in 2004, Carahsoft has become one of the most profitable government tech contractors by acting as a liaison between some of the world’s biggest companies and local and federal departments, helping those agencies use products from companies like Amazon, Google and Salesforce. Helmed by president and billionaire founder Craig Abod, the Virginia-based company serves almost all federal government branches, but the Pentagon is by far its biggest client. According to official government contracting data, it’s been awarded contracts worth $5.63 billion from the DoD alone over the last 18 years. Its next biggest customer has been the Department of Health and Human Services, with $1.47 billion in contracts. The company also scores tech contracts with local and state governments, though there’s no data showing how big that side of its business has become. It ranked No. 45 on the 2023 Forbes list of America's Largest Private Companies and made about $16 billion in revenue last year.

Yet it made headlines for the wrong reasons last month when its offices were raided by the FBI for undisclosed reasons, according to multiple reports. Carahsoft told the press at the time that it was complying with the investigation, which was looking into “a company with which Carahsoft has done business in the past.” Bloomberg also reported that the government had sued Carahsoft for allegedly conspiring with SAP to fix contracts so they were overcharging the Defense Department. Carahsoft is yet to comment on the case and its legal filings remain under seal. Carahsoft did not respond to requests for comment for this story.

It isn’t the first time Carahsoft has come under legal scrutiny. In 2015, Carahsoft and cloud computing firm VMWare agreed to pay a $75 million fine to resolve allegations that it had overcharged the government. It did not admit to wrongdoing.

OpenAI's efforts to develop close ties with the Pentagon began last year when it spent over $200,000 lobbying the Department of Defense and the Department of Homeland Security, Forbes reported. OpenAI is also working with the U.S. military to develop tools that can automatically fix vulnerabilities in systems and prevent cyberattacks, according to Bloomberg.

Beyond defense work, OpenAI appears to be actively courting government agencies through a string of events and webinars co-hosted with Carahsoft. In May, OpenAI hosted a webinar to show local and state government officials how they can use ChatGPT internally to improve employees’ productivity. In a demo published on Carahsoft’s website, Felipe Millon, who leads government sales at OpenAI, said the AI juggernaut’s models are becoming more intelligent at an exponential rate and claimed the next generation of models will be 100 times more capable than the models that underpin ChatGPT today. During the demo, OpenAI employees touted how the company’s models can be used for data analysis, translation and writing first drafts of policy memos.

Carahsoft looks to be jumping on the AI bandwagon via other startups beyond OpenAI. Scale AI, a $14 billion-valued company that provides data and software for training AI models, is among the vendors listed on Carahsoft’s CHESS contract. Multiple AI startups told Forbes they were also using Carahsoft as a way into doing government business. Among them is AI coding startup Codeium, and nascent AI infrastructure startup Thread AI, which was founded by ex-Palantir engineers, and Resemble AI, which provides deepfake audio detection and AI voice generation tools.

Resemble CEO Zohaib Ahmed said it partnered with Carahsoft about three months ago. The company’s AI voice detection models are already being used by law enforcement officials and intelligence agencies in the U.S. as well as internationally. He hopes that ties with Carahsoft could help the young startup get more exposure to government agencies.

“Startups typically have a difficult time to surface their technologies into the public sector,” he told Forbes. “If you approach any agency and you mention Caresoft, they would know what you're talking about and who you're talking about at least.”