OMB Directs Agencies to Accelerate AI Adoption and Devise Governance Strategy
The Office of Management and Budget releases highly anticipated guidance to federal agencies on the use and deployment of artificial intelligence and how to manage its risks.
On April 3, 2025, the Office of Management and Budget ("OMB") published M-25-21 establishing new requirements for agencies in the development, use, and procurement of Artificial Intelligence ("AI"). The memorandum, "Accelerating Federal Use of AI through Innovation, Governance, and Public Trust," directs agencies to develop AI strategies, share AI functions, and invest in the technology. Citing President Trump's January 23, 2025, Executive Order, "Removing Barriers to American Leadership in Artificial Intelligence," the memorandum emphasizes: "Now more than ever, agencies are empowered to drive AI innovation and seize the opportunity to apply the best of American AI."
Covered agencies, defined in 44 U.S.C. § 3502(1), include executive departments, government corporations, and independent regulatory agencies like the SEC and FTC. M-25-21 exempts AI that is part of a "National Security System," noting that these uses are governed by other policies and guidelines.
M-25-21 directs agencies to:
- Develop AI that strengthens service accessibility, government efficiency, national security, and economic competitiveness.
- Upskill existing staff.
- Appoint a Chief AI Officer within 60 days to establish processes for "high-impact AI."
- Generate AI compliance plans.
M-25-21 establishes a Chief AI Officer Council to coordinate AI use across covered agencies. Agencies subject to the Chief Financial Officers Act must publish strategies within 180 days outlining current AI use and plans to achieve maturity. Such agencies must also convene an Agency AI Governance Board within 90 days to coordinate the use of AI within the executive branch.
Agencies are required to implement risk management practices for "high-impact AI" systems, which are defined as those whose output serves as a "principal basis for decisions or actions that have a legal, material, binding, or significant effect on rights or safety" or whose use relates to national security or protected speech, among others.
This directive, in tandem with guidance regarding government acquisition of AI (M-25-22), reflects the administration's emphasis on promoting U.S. leadership in developing and deploying AI. This is different from the aims embodied in the EU AI Act, which seeks to adopt AI risk-management practices and under which prohibitions on certain AI systems and requirements on AI literacy became applicable February 2, 2025.
While M-25-21 is legally binding only on agencies, government contractors may be affected by agency initiatives pursued under the OMB directive. The memorandum's emphasis on sharing AI data, upskilling staff, and applying "the best of American AI" also suggests that businesses will play a vital role in supporting federal AI initiatives.
