A (Mis)Anthropic Approach to Supply Chain Security

By Marcos Gonzalez | April 3, 2026

This article was co-authored with Glen Bittenbender (GW Law 2027), Risheek Priyadarshi (GW Law 2026), and Jakub Berkowicz (GW 2025).

Anthropic PBC (“Anthropic”) has been in the headlines for the past few weeks, after coming into the sights of the Trump administration. In this article, GovSpring analyzes the dispute to determine the merits of the Government’s designation of Anthropic as a supply chain risk. 

GovSpring is available to help contractors and companies using or contracting with Anthropic understand how the ongoing dispute affects their business and legal rights. Click here to schedule a consultation or fill out our online contact form to be contacted by our Managing Attorney.

During his second presidency, President Donald Trump has sought to establish the United States government as an AI powerhouse.1 To facilitate this, the General Services Administration (GSA) added Anthropic’s flagship AI product, Claude,  to the agency’s Multiple Award Schedule (MAS) program, also known as the Federal Supply Schedule (FSS) program, with a $200 million ceiling.2

In late 2025, Anthropic and the DoW negotiated an agreement concerning the DoW’s continued use of Claude.3 The DoW sought broader authority, requesting that Anthropic loosen its restrictions and allow the use of its AI systems for “all lawful uses.” While Anthropic mostly agreed with the government, it objected to the use of its technology for “lethal autonomous warfare” and “mass surveillance of Americans.”4 Anthropic’s Usage Policy (effective September 15, 2025), strictly prohibits its products from being used for mass surveillance or the development of weapons.5 Previously, the government had operated under this Usage Policy without issue. Although the policy permitted the government to perform certain functions unavailable to civilian customers, this exception never extended to weaponry or mass-surveillance tools.

The DoW’s Retaliation and Supply-Chain Risk Designation

On February 27th, 2026, President Trump and Secretary Pete Hegseth posted on Truth Social and X, respectively, recommending that federal agencies and contractors cease doing business with Anthropic. The posts designated Anthropic as a “Supply-Chain risk to National Security.”6 Secretary Hegseth subsequently sent Anthropic a letter threatening to exercise the Department’s authority 10 U.S.C. § 3252 to safeguard national security.7 

Notably, the letter failed to articulate how Anthropic constituted a supply-chain risk. Nonetheless, the government terminated Anthropic’s contracts, prompting over 100 companies to express concern over their ability to continue doing business with the AI provider.

Can Anthropic Restrict the Government’s Use of Its Product?

A central issue is whether an AI company can legally restrict the government’s use of its product. As Professor Jessica Tillipman from The George Washington University Law School observes, this depends heavily on the acquisition pathway and contract type.8 

The MAS/FSS program provides agencies “a simplified process for obtaining commercial supplies and commercial services…”9 Once the GSA negotiates an overarching agreement with MAS/FSS contractors, ordering agencies possess limited authority to modify the initial terms. Consequently, an ordering agency usually cannot override a company’s acceptable use policy if it is included in the GSA agreement.10  

Lending further support to the restriction on use, Anthropic’s contract is an “Other Transaction Agreement” (OTA) to design a prototype AI service for the Department.11 Since OTAs are exempt from Federal Acquisition Regulation (FAR) requirements, the binding terms are those that survive negotiations. As Professor Tillipman notes, while agencies can use OTAs to secure broad usage rights, OTAs also permit contractors to restrict the government’s use of their products.12

Anthropic Files Suit

In response to the government’s actions, Anthropic initiated litigation on two fronts.

On March 9th, 2026, Anthropic filed suit against the DoW in the United States District Court for the Northern District of California.13 The complaint challenges the “supply-chain risk” designation, and the Secretary’s enforcement letter, arguing they violate 10 U.S.C. § 3252,14 exceed the scope of the Department’s statutory authority, and are arbitrary and capricious under the Administrative Procedure Act (APA). Furthermore, Anthropic alleges violations of its First Amendment free speech guarantees and its Fifth Amendment right to due process, specifically arguing the government’s actions constitute a de facto debarment.15 

Separately, on the same day, Anthropic filed suit in the U.S. Court of Appeals for the District of Columbia Circuit. This filing challenges a notice from Secretary Pete Hegseth indicating that Anthropic would additionally be deemed a supply chain risk under the Federal Acquisition Supply Chain Security Act (FASCA).16

Challenging the Designation Under § 3252

Section 3252, enforced through DFARS Subpart 23973, allows the DoW to exclude sources that fail to meet evaluation criteria “providing for the consideration of supply chain risk.”17 The statute defines “supply chain risk” as the risk that an adversary may “sabotage…or otherwise subvert the design, integrity…or maintenance” of an information system used for national security purposes.18 Section 3252 is enforced through DFARS Subpart 239.73.19

Crucially, before exercising this exclusionary authority, the agency head must consult with relevant procurement officials within the agency. Following this, the agency must notify relevant congressional committees, providing a summary of the risk assessment and the rationale behind the supply chain risk determination. Notably, the statutory provision is silent regarding a private company’s refusal to relax its acceptable use policy governing the government’s application of its technology.20 

In its California complaint, Anthropic contends that it possesses no ties to adversaries, as defined by prior executive orders, and notes that the “supply-chain risk” label has never before been applied to a domestic company.21 It also argues that the agency failed to consult other relevant agency procurement officials or any congressional committees before labeling the company as a supply-chain risk based on materials provided by the DoW.22 Moreover, past DoW correspondence praised Claude as “exquisite” and “vital to [the] national defense” which is contrary to failing to meet evaluation criteria concerning possible supply chain risk.23 Finally, according to Anthropic, a less restrictive means of reducing the alleged supply chain risk (which § 3252 also requires the government to consider, if possible) would have been to terminate the contract and hire another AI company instead.24

First Amendment Retaliation

Anthropic further alleges that the government violated the company’s First Amendment rights by retaliating against them for asking the government to honor Anthropic’s use restrictions. Anthropic stresses that while the government is not obligated to agree with the company’s stance or use its products, the First Amendment strictly prohibits retaliatory action for engaging in constitutionally protected speech.25 The financial and reputational harm inflicted by the government could severely chill speech across the highly competitive AI marketplaces.26

Due Process and De Facto Debarment?

Anthropic relies on D.C. Circuit precedent establishing that a de facto debarment from federal contracting  “constitutes a deprivation of liberty that triggers the procedural guarantees of the Due Process Clause.”27 Specifically, the Fifth Amendment’s concept of “liberty” includes a “right to follow a chosen trade or profession.”28 This right is extended to corporations with the concept encompassing freedom from bodily restraint, along with freedoms such as the right to contract and engage in “any of the common occupations of life…”29 In the D.C. circuit case Old Dominion Dairy Products, Inc. v. Secretary of Defense, a government contractor successfully alleged that even though it was not formally debarred by an unfavorable audit by the government, the government’s determination that the contractor “lacked integrity” was communicated through government channels without notice. The contractor was effectively put out of business by being prevented from winning government contracts and not being afforded an opportunity to clear its name.30 

Drawing parallels to Old Dominion, Anthropic alleges the DoWviolated its liberty interest by terminating its government contracts, actively urging Anthropic’s largest customers to cease business relations, and effectively barring Anthropic from contracting with the government or its prime contractors.31 Anthropic further alleges that the DoW failed to provide the company with any factual findings supporting the agency’s action, much less a meaningful opportunity to challenge them.32 Given Secretary Hegseth’s public rallying of government contractors to boycott Anthropic, several government agencies canceling Anthropic’s contracts, and the similarity between Anthropic’s case and D.C Circuit precedent, Anthropic possesses a highly persuasive argument for de facto debarment.

Arbitrary and Capricious

Lastly, Anthropic asserts that the supply chain risk designation violated the APA under 5 U.S.C. § 706.33 The allegation has three main bases. First, the designation exceeded the statutory authority provided by § 3252 due to an inability to determine that Anthropic may sabotage or subvert US activities directly or at the direction of an adversary.34 Second, the designation did not follow the required procedural guidelines, such as failing to consult with relevant procurement officials.35 Finally, the decision itself was arbitrary and capricious due to the lack of a rational and satisfactory explanation.36 Anthropic characterizes the government’s reasoning as a post hoc rationalization designed to justify the designation, arguing the primary motivation was retaliation.37

Preliminary Injunction Granted

Following the development of the record, U.S. District Judge Rita Lin issued a preliminary injunction on March 26. Judge Lin ruled that Anthropic established a prima facie case of First Amendment retaliation based on the history of its government work.38 The court found the timing of the government’s actions weighed in favor of Anthropic, noting that no security concerns were raised until after the usage restriction dispute became public.39 

Furthermore, Judge Lin determined that the government likely violated Anthropic’s procedural due process rights, characterizing the DoW’s actions as a “permanent debarment” executed without requisite procedural safeguards.40 She rejected the government’s argument for bypassing these procedures, classifying the purported urgency as self-imposed.41 Lastly, Judge Lin held that the APA claim would likely succeed, as Secretary Hegseth’s directive and the Supply Chain Designation “were likely in excess of statutory authority, contrary to law, and arbitrary and capricious.”42 Despite this preliminary injunction tackling the § 3252 violations, Under Secretary of War Emil Michael has indicated that the Supply Chain Risk designation will continue under 41 U.S.C. § 4713.43

The Threat of Exclusion Under the Federal Acquisition Supply Chain Security Act

Anthropic similarly filed a petition for review44 of its designation as a supply chain risk under 41 U.S.C. § 4713 with the U.S. Court of Appeals for the District of Columbia Circuit. The review challenged the designation with similar grounds to the California suit. Allegations included that the decision was a pretextual form of retaliation in violation of the First and Fifth Amendments; arbitrary, capricious, and an abuse of discretion; unsupported by the administrative record; not in accord with procedures required by law; and in excess of statutory authority.45

As part of its filing in the U.S. Court of Appeals for the D.C. Circuit, Anthropic attached a letter by DoW Secretary Hegseth notifying Anthropic that it has been designated a supply chain risk under the Federal Acquisition Supply Chain Security Act (41 U.S.C. § 4713). Under that law, the head of an executive agency is empowered to carry out several actions that result in the exclusion of a source from the supply chain of federal contracts. These actions include the following:

  • Disqualifying the source: Removing a supplier that fails to meet safety or risk standards established under section 3311.
  • Lowering their rating: Rejecting a proposal because the supplier received an unacceptable supply chain risk score during the evaluation process.
  • Declaring them “non-responsible”: Formally determining that a supplier is not a “responsible source” due to security concerns (per section 113).
  • Blocking subcontracts: Refusing to let a prime contractor hire a specific subcontractor or ordering them to exclude that source entirely.

The agency must notify the source of the exclusion before taking any action and provide thirty days to submit “information and argument in opposition to the recommendation.” Note that, as a prerequisite to exercising authority to do any of the above, the head of the agency must “obtain a joint recommendation” from the chief acquisition officer and chief information officer. The Statute allows the Secretary to declare an Urgent National Security Interest and immediately exercise authority under 41 U.S.C. §4713(c). This provision can delay the reporting requirements set out in 41 U.S.C. §4713(b), but still requires the procedural steps listed in that paragraph to be fulfilled. Even if these steps are delayed, the requirements under paragraph (b) need to be complied with “as soon as practicable after addressing the urgent national security interest.”

Under FASCSA, an excluded source may challenge its designation at the United States Court of Appeals for the District of Columbia Circuit. Anthropic did this on March 9, and on March 11, filed an emergency motion to stay the order. Given there is no actual source security concern involving Anthropic, and in light of public knowledge of the basis of the DoW’s designation, the D.C. Circuit is likely to grant Anthropic’s request to stay the designation.

What Does This Mean for Contractors?

Contractors are right to worry about repercussions of doing business with Anthropic. If the DoW prevails,, it could fundamentally alter how contractors approach government engagements and chill corporate speech regarding product usage. However, given the legal strength of Anthropic’s arguments, the “supply-chain risk” designation is likely to be struck down by the courts. 

Pending Anthropic’s lawsuit, contractors should still prepare to potentially use alternative AI technology in their course of operations, assessing how Anthropic is currently used throughout the organization. They should also stay up to date on developments concerning Anthropic’s lawsuit. Finally, contractors should be on the lookout for formal governmental guidance concerning doing business with Anthropic, as President Trump and Secretary Hegseth’s directives came from social media posts, not official orders.
GovSpring is available to help contractors and companies understand how these legal developments may impact current and future contracts. Click here to schedule a consultation or fill out our online contact form to be contacted by our Managing Attorney.

  1. See, e.g., N.D. Cal. complaint at page 12. ↩︎
  2. CDAO, “CDAO Announces Partnerships with Frontier AI Companies to Address National Security Mission Areas” (July 14, 2025), https://www.ai.mil/Latest/News-Press/PR-View/Article/4242822/cdao-announces-partnerships-with-frontier-ai-companies-to-address-national-secu/. ↩︎
  3. Complaint for Declatory and Injunctive Relief at X, Anthropic PBC v. U.S. Dep’t of War, No. 3:26-cv-01996, (N.D. Cal. Mar. 9, 2026), https://storage.courtlistener.com/recap/gov.uscourts.cand.465515/gov.uscourts.cand.465515.1.0_5.pdf; see also Christopher Griesedieck, Jr. and Dismas Locaria, Pentagon’s Anthropic Supply Chain Risk Declaration Raises Federal Contractor Concerns, Venable (Mar. 4, 2026) https://www.jdsupra.com/legalnews/pentagon-s-anthropic-supply-chain-risk-5751214/. ↩︎
  4. See id. at 14. ↩︎
  5. Complaint page 2 ↩︎
  6. Complaint pages 18–19 ↩︎
  7. See complaint page 4 ↩︎
  8. Jessica Tillipman, What Rights Do AI Companies Have in Government Contracts?, Jessica Tillipman, https://jessicatillipman.com/what-rights-do-ai-companies-have-in-government-contracts/ds. ↩︎
  9. FAR 8.402(a). ↩︎
  10. See Tillipman supra note 8. ↩︎
  11. Anthropic, Anthropic and the Department of Defense to advance responsible AI in defense operations (Jul. 14, 2025), https://www.anthropic.com/news/anthropic-and-the-department-of-defense-to-advance-responsible-ai-in-defense-operations. ↩︎
  12. See Tillipman supra note 8. ↩︎
  13. Complaint for Declatory and Injunctive Relief at X, Anthropic PBC v. U.S. Dep’t of War, No. 3:26-cv-01996, (N.D. Cal. Mar. 9, 2026), https://storage.courtlistener.com/recap/gov.uscourts.cand.465515/gov.uscourts.cand.465515.1.0_5.pdf. ↩︎
  14. Id. ↩︎
  15. See id. pages 4–5; see page 40 (regarding the de facto debarment allegation). ↩︎
  16. Petition for Review. ↩︎
  17. 10 U.S.C. § 3252(a)(1), (d)(2)(B). ↩︎
  18. See 10 U.S.C. § 3252(d)(4)-(5). ↩︎
  19. See Griesedieck; see also Robyn Burrows & Merle Delancy, Understanding the Potential Anthropic Ban: Key Considerations for Federal Contractors, Blank Rome (Mar. 5, 2026), https://governmentcontractsnavigator.com/2026/03/05/understanding-the-potential-anthropic-ban-key-considerations-for-federal-contractors/. ↩︎
  20. 10 U.S.C. § 3252(b)(1), (b)(3). ↩︎
  21. See complaint at page 16, page 27 (citing Exec. Order No. 13,873, 84 Fed. Reg. 22689 (May 15, 2019) (listing specific countries as adversaries)). ↩︎
  22. Id. at 27. ↩︎
  23. Id. at 29. ↩︎
  24. See id. at 37. ↩︎
  25. See id. at 31 (citing Hous. Cmty. Coll. Sys. v. Wilson, 595 U.S. 468, 474 n.2 (2022)). ↩︎
  26. Id. at 34–35. ↩︎
  27. Quoting Trifax Corp. v. District of Columbia, 314 F.3d 641, 643 (D.C. Cir. 2003); see also Complaint at 40. ↩︎
  28. Trifax Corp. at 643 (quoting Cafeteria & Restaurant Workers Local 473 v. McElroy, 367 U.S. 886, 895–96 (1961)). ↩︎
  29. Old Dominion Dairy Products, Inc. v. Secretary of Defense, 631 F.2d 953, 961–62 (D.C. Cir. 1980) (quoting Meyer v. Nebraska, 262 U.S. 390, 399 (1923)). ↩︎
  30. Id. at 963. ↩︎
  31. See complaint at 40. ↩︎
  32. Id. ↩︎
  33. Id. at 31. ↩︎
  34. Id. at 32-34. ↩︎
  35. Complaint at 34-35. ↩︎
  36. Id. at 35-37. ↩︎
  37. Id. at 35-37. ↩︎
  38. Anthropic PBC v. U.S. Department of War, et al., No. 3:26-cv-01996-RFL (N.D. Cal. Mar. 26, 2026) (order granting preliminary injunction) at 20. ↩︎
  39. Id. at 21-22 ↩︎
  40. Id. at 26 ↩︎
  41. Id. at 28-29 ↩︎
  42. Id. at 30 ↩︎
  43. Under Secretary of War Emil Michael (@USWREMichael), Twitter (Mar. 26, 2026, 11:07 PM) https://x.com/USWREMichael/status/2037365881454428533?s=20. ↩︎
  44. Petition for Review at X, Anthropic PBC v. U.S. Dep’t of War, No. 26-1049, (D.C. Cir. Mar. 9, 2026) https://storage.courtlistener.com/recap/gov.uscourts.cadc.42923/gov.uscourts.cadc.42923.01208828684.0_4.pdf. ↩︎
  45. Id. at 2. ↩︎

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