ARTICLE · 02 JULY 2026

GSA Proposes Sweeping AI Data Safeguarding Rules For LLM Contractors

Holland & Knight

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The U.S. General Services Administration has published a proposed rule introducing comprehensive safeguarding requirements for government data processed by large language model AI systems. The rule establishes strict data ownership protections, jurisdictional controls, and a four-tier supply chain compliance framework that extends obligations to developers, operators, integrators and service providers throughout the LLM ecosystem.

United StatesGovernment, Public Sector

Anne M. Delmare

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Highlights

The U.S. General Services Administration (GSA) has published a proposed rule in the Federal Register introducing GSA Regulation 552.239-7001, "Basic Safeguarding of Data Within Large Language Model Artificial Intelligence Systems." The proposed rule is a significant revision to the GSA's March 2026 draft.
The clause applies to contracts where government data will be processed by a large language model (LLM). Its requirements must flow down through the entire LLM supply chain, reaching developers, operators, integrators and service providers who may not be party to the prime contract.
Key obligations include strict government data ownership and use restrictions, "eyes off" data handling requirements, U.S. jurisdictional controls on LLMs, robust incident reporting and a new "Unbiased AI Principles" framework with potential termination-for-cause liability.

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