AI bigwigs bow to US gov’t demands on pricing, but could see long-term benefits

The deal-making US government this month struck deals with Google, OpenAI, and Anthropic for federal workers to access their top generative AI (genAI) models at virtually no cost.

Federal agencies will get access to Google Gemini for 47 cents per agency for a year — yes, 47 cents — with access to OpenAI’s ChatGPT and Anthropic’s Claude going for the still-low price of $1, respectively.

The genAI tools should be able to make government work faster and save taxpayers money, the companies all said in separate statements touting the agreements.

Said OpenAI: ChatGPT will ensure that “workers can spend less time on red tape and paperwork, and more time doing what they came to public service to do: serve the American people.”

Individual users pay a starting price of $19.99 per month for access to the full Gemini suite.

The deals are largely write-offs for the companies to stay in the good graces of the government, the biggest IT buyer in the US, analysts said. And they could help keep US President Donald Trump from poking into their operations. 

Trump recently demanded the resignation of Intel CEO Lip-Bu Tan, but later backed off the demand. (The president did announce Friday that the government would take a 10% share of the company.)

The frontier models are low-cost entry point for AI vendors to get payback later when more tools and capabilities are available and they can charge more, said Jack Gold, principal analyst at J. Gold Associates. “It’s basically a ‘freemium’ approach,” he said.

The tech vendors are treading cautiously, as it’s not clear how the Trump Administration —which operates differently than previous administrations — will handle things.

“No one is really sure how this will all play out, nor if or when they might get attacked with bans or tariffs. So, making nice is important,” Gold said.

The government acquisition process, previously transparent and open, is far more opaque now.

The essentially no-cost AI deals are part of America’s AI Action Plan, which the US General Services Administration (GS) argued would help make the nation a leader in AI while also reducing government spending.

The deals were part of GSA’s OneGov strategy, in which the government streamlines the acquisition of services by operating as one entity; that way individual federal agencies don’t have to negotiate their own separate deals.

The expectation is that, over time, the federal government will likely pay for more expensive AI tools — so offering virtually free access to the models now is a good deal, said Bob O’Donnell, principal analyst at Technalysis Research. “The presumption is that over time they’ll embed their services into the operations of those agencies and that eventually they’ll be able to charge higher rates,” O’Donnell said.

Regardless of administration, it’s always good to remain in the government’s good graces, he said. “This is a case of win-win, because not only is the government big business, but it’s also likely to grow over time,” O’Donnell said.

Google touted its 53-cent advantage over its rivals with its deal, which offers the government a product called “Gemini for Government.” Google Public Sector CEO Karen Dahut called the deal a win and took a dig at competitors in the deal announcement, saying that “while many AI models have been offered to the government, the ‘Gemini for Government’ offering is a complete AI platform.”

Federal workers will get access to Gemini’s video and image-generation models, the NotebookLM research tool, and access to Agentspace, which will allow them to create and deploy their own agents.

Agentspace recently hit general availability; it’s a major component of Google’s Gemini for Government offering, a Google spokesperson told Computerworld. From a timing perspective, it made sense to wait until Agentspace was fully available to reach the agreement, the spokesperson said.

Gemini for Government will allow government workers to choose from a range of homegrown and third-party AI agents. They can also work with advanced AI models in Vertex AI, which is part of Google Cloud. 

Access to Google Cloud is not part of this particular agreement, but access to Gemini could open the door for such a deal down the road.

While the OpenAI and Google deals cover federal agencies, the Anthropic agreement covers all three branches of government, including the legislative and judiciary branches, Anthropic said in a blog post.