D.C. Circuit Upholds Exclusion of Anthropic from DOW Supply Chain Under FASCSA

On September 25, 2026, the U.S. Court of Appeals for the D.C. Circuit upheld the U.S. Department of War's (DOW or Department) determination that Anthropic poses a supply chain risk under Section 4713 of the Federal Acquisition Supply Chain Security Act (FASCSA), 41 U.S.C. § 4713 (FASCSA Order).

The majority adopted a broad interpretation of "supply chain risk" as defined in 41 U.S.C. § 4713(k)(6), concluding that the training methodology underlying Anthropic's Claude model could constrain DOW operations – even absent any ability for Anthropic to access or manipulate models after deployment. The court also rejected Anthropic's procedural challenges on two grounds. First, it held that DOW had sufficiently demonstrated the unavailability of less-restrictive alternatives to address the identified national security concern. Second, it found that DOW's failure to comply with FASCSA's mandatory pre-deprivation procedures was harmless error.

The majority further determined that the FASCSA Order bore no connection to Anthropic's public advocacy regarding artificial intelligence safety, concluding instead that it was prompted by Anthropic's refusal to accept a specific DOW contract term. The court's judgment will be stayed for seven days to allow Anthropic to seek rehearing en banc.

Notably, the D.C. Circuit addressed a different statutory scheme from the one at issue in the U.S. District Court for the Northern District of California's (NDCA) recent Anthropic decision, which is based on the same operative facts and record. See Anthropic PBC v. U.S. Dep't of War, No. 26-cv-01996 (N.D. Cal. Aug. 27, 2026). In that case, the NDCA invalidated the DOW's use of 10 U.S.C. § 3252, whose definition of "supply chain risk" focuses on the risk that an "adversary" may compromise a covered national security system. The D.C. Circuit distinguished that reasoning rather than rejecting it: FASCSA defines "supply chain risk" more broadly, covering the risk that "any person" may sabotage, introduce unwanted functionality, extract data, or otherwise manipulate covered articles or information stored or transmitted on them. On that broader statutory footing, the D.C. Circuit concluded that the Department could treat Anthropic as presenting a supply chain risk under FASCSA even though the narrower Section 3252 rationale had failed.

What This Means for Contractors

From a practical standpoint, the decision does not immediately alter the operating environment for government contractors. The broader supply chain risk determination issued under 10 U.S.C. § 3252 – along with related agency enforcement actions – remains subject to a permanent injunction entered by the NDCA. However, the D.C. Circuit's ruling permits DOW to continue exercising its authority under FASCSA to direct the exclusion or removal of Anthropic products and services from DOW contracts. DOW took such steps earlier in 2026, including issuing requests that contractors certify they were not utilizing Anthropic offerings. These enforcement efforts may intensify as DOW approaches its September 30, 2026, deadline to terminate all Anthropic-related activities.

Contractors should be aware that no affirmative obligation to exclude or remove Anthropic products or to provide related certifications arises absent specific written direction by DOW contracting officers. Contractors should review FAR 52.204-29 (Federal Acquisition Supply Chain Security Act Orders – Representation and Disclosures) and FAR 52.204-30 (Federal Acquisition Supply Chain Security Act Orders – Prohibition) for specific procedures and requirements, including posting the FASCSA Order in the System for Award Management, amending solicitations to incorporate the Anthropic FASCSA Order and/or modifying contracts to do the same. Contractors should consult experienced counsel for guidance specific to their situation.

Even if a DOW contracting officer has taken action to apply the Anthropic FASCSA Order to a solicitation or contract, the prohibition does not necessarily apply across a contractor's entire enterprise. FAR 52.204-30 prohibits contractors from providing or using, "as part of the performance of the contract," any covered article or any products or services produced or provided by a source that is prohibited by an applicable FASCSA order, absent an applicable waiver. In practice, that means the relevant inquiry is contract-specific: contractors should determine whether Anthropic technology is being furnished to DOW, embedded in a deliverable, used to perform contract work, or used by subcontractors or suppliers in support of the covered contract. Use of Anthropic products in unrelated commercial, back-office or enterprise environments is not, by itself, necessarily prohibited merely because the same contractor performs DOW work. Contractors should nonetheless be prepared to document that separation because FAR 52.204-29 requires offerors to conduct a "reasonable inquiry" before representing that they will not provide or use covered products or services in response to a solicitation, and FAR 52.204-30 requires contractors to review System for Award Management (SAM) periodically and report if a covered article or source-related product or service was provided to the government or used during contract performance.

Conclusion

The D.C. Circuit's decision carries several important takeaways for government contractors. Most notably, the court's broad reading of "supply chain risk" under Section 4713 means that a supplier need not act with hostile or malicious intent to be excluded – ordinary model training, safety guardrails and contractual use restrictions can qualify as "manipulation" if they risk denying or disrupting government functionality. The D.C. Circuit's application of harmless-error principles to DOW's failure to provide advance notice also sets a high bar for suppliers seeking to challenge exclusions on procedural grounds alone.

Specific to the FASCSA Order, government contractors should proactively assess their exposure by inventorying any Anthropic products or services used in DOW contract performance, reviewing applicable task orders and subcontracts for FASCSA compliance clauses, and engaging with contracting officers to clarify the scope and applicability of the Anthropic FASCSA Order to their specific contracts.

For more information or questions, please contact the authors.

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