Generative Artificial Intelligence ("GENAI") - 2300
Policy
This policy, procedures, and requirements apply to all acquisition types regardless of dollar amount or contract form (e.g. FI$Cal Purchase Order (PO), STD 65, STD 213, etc.), some exceptions are noted.
Executive Order (EO) N-12-23 signed by Governor Gavin Newsom on September 6, 2023, establishes statewide policy for the state’s use of Generative Artificial Intelligence (GenAI), such as those involving consequential decisions affecting access to essential goods and services. GenAI is defined as follows:
“Generative Artificial Intelligence (GenAI): The class of AI models that emulate the structure and characteristics of input data in order to generate derived synthetic content. This can include images, videos, audio, text, and other digital content.” – State Administrative Manual (SAM), section 4819.2
Procurement professionals and others involved in the procurement process (e.g., contract managers, Chief Information Officers, etc.), must adhere to these procurement requirements which incorporates expectations noted in the following two documents:
- State of California GenAI Guidelines
- GenAI Toolkit for Public Sector Procurement, Uses, and Training and Procurement process
Procedure
State departments are required to implement internal procedures to carry out the following requirements:
Step 1 - Mandatory GenAI Procurement Training
Designated Purchasing Authority Contacts (PACs) must complete mandatory GenAI procurement training please refer to SCM vol. 2, section 100.3 for detailed requirements.
State employees involved in the procurement process are also encouraged to complete the training available through the California Procurement and Contracting Academy (CalPCA).
Step 2 – Pre-Procurement Requirement for Acquisitions Known to Include GenAI
Before proceeding with a GenAI purchase or approving a contract that includes services generated by GenAI, procurement professionals must confirm with their department CIO that the purchase may proceed. Confirmation must be kept in the procurement/contract file and can be an email or a form created by the department.
Through June 30, 2024, CIO’s must consult with CDT prior to proceeding with a GenAI purchase, including contracts that incorporate the use of GenAI by vendors, please refer to California Department of Technology policy in Technology Letter (TL) 24-01.
Effective July 1, 2024 – A mandatory risk assessment is required and consultation with CDT is dependent upon the risk assessment outcome. Please refer to TL 24-01 for details.
Step 3 - The Solicitation
- Written Solicitation Requirement
Acquisitions for the purchase of GenAI technology or that include the purchase of services generated by GenAI, must be conducted using a written solicitation. Use of acquisition methods that do not require a written solicitation (e.g., Fair and Reasonable Acquisition Method) are prohibited for these purchases. The State Chief Procurement Officer (Procurement Division Deputy Director) may grant an exception on a case-by-case basis for transactions subject to DGS’ procurement authority; submit a request to pams@dgs.ca.gov.
- Mandatory GenAI Disclosure Notification Clause & GenAI Disclosure & Factsheet Form All written solicitations regardless of acquisition type (e.g., IT, non-IT, goods and services, etc.) or acquisition method (e.g., Small Business Option, informal competitive, etc.) must include the standard GenAI disclosure notification clause requiring the bidder/offeror to identify GenAI use. Bidders/offerors must submit a completed GenAI Disclosure & Factsheet Form STD 1000 with their bid/offer to be deemed responsive.
All solicitations and contracts, must contain the following GenAI disclosure notification clause:
“The State of California seeks to realize the potential benefits of GenAI, through the development and deployment of GenAI tools, while balancing the risks of these new technologies.
Bidders/Offerors must notify the State in writing if their solution or service includes, or makes available, any GenAI technology, including GenAI from third parties or subcontractors. The State has developed a GenAI Disclosure & Factsheet to be completed by the Bidder/Offeror.
Failure to disclose GenAI to the State and submit the GenAI Disclosure & Factsheet will result in disqualification of the Bidder/Offeror and may void any resulting contract. The State reserves its right to seek any and all relief it may be entitled to as a result of such non-disclosure.
Upon receipt of a Bidder/Offeror GenAI Disclosure & Factsheet the state reserves the right to incorporate GenAI Special Provisions into the final contract or reject bids/offers that present an unacceptable level of risk to the state.”
Step 4 – Evaluating Bids/Offers
Departments must obtain the GenAI Disclosure & Factsheet from each bidder/offeror prior to award.
When evaluating responses to solicitations, regardless of acquisition type, dollar value, or method, the evaluation must include a mandatory administrative requirement for bidders/offerors to submit the required GenAI Disclosure & Factsheet.
If the GenAI Disclosure & Factsheet is not submitted by the bidder/offeror, the bid/offer may be deemed nonresponsive.
Step 5 – GenAI Disclosure, CIO Involvement, and CDT Consultation
If GenAI is disclosed by the bidder/offeror that is to be awarded the contract, the procurement official must engage their CIO/AIO prior to proceeding with a GenAI purchase or approving a contract that includes services generated by GenAI. Procurement professionals must confirm with their department CIO that the purchase may proceed. Confirmation must be kept in the procurement/contract file and can be an email or a form created by the department.
Through June 30, 2024, CIO’s must consult with CDT prior to proceeding with a GenAI purchase, including contracts that incorporate the use of GenAI by vendors, please refer to TL 24-01.
In some instances, this may be a second check in with the CIO and CDT, a necessary step to assess the details disclosed by the bidder/offeror in the GenAI Disclosure & Factsheet Form STD 1000.
Effective July 1, 2024 - During the evaluation phase and prior to selection, the department must use the details provided in the GenAI Disclosure & Factsheet Form STD 1000 to conduct a risk assessment, please refer to Technology Letter 24-01 for risk assessment requirements. If the risk level is "Moderate" or "High", CDT's consultation is required prior to contract award.
Step 6 - GenAI Special Provisions
When a CDT GenAI consultation indicates the need for special provisions related to the GenAI technology function or service, CDT will require and provide special provision language. No changes are permitted to the GenAI Special Provisions or to any other state standard terms and conditions without the prior approval of CDT/DGS.
Effective July 1, 2024 - No solicitation shall be released, nor shall any contract be executed for the procurement of “Moderate” or “High” risk GenAI technology functions or services until CDT has reviewed and approved the use of GenAI Special Provisions for the solicitation and contract, please refer to Technology Letter 24-01 for risk assessment requirements.
These GenAI Special Provisions will be piloted and tested via 2024 GenAI procurements, as well as through a robust stakeholder engagement process. This piloting and stakeholder engagement will result in new GenAI provisions to apply to GenAI contracts beginning in January 2025, per the Governor’s Executive Order N-12-23.
Step 7 – GenAI Procurement Identification and Reporting
All transactions where GenAI is purchased must be identified and reported in FI$Cal State Contract and Procurement Registration System (SCPRS), please refer to SCM v2, Section 2200.1, FI$Cal SCPRS. Identify purchases that include GenAI as follows: The item description must start with "GenAI" before any other description is included in the “description” field.
Step 8 – Contract Management & Amendments
Contracts for the purchase of, or that include, GenAI may include unique, contract-specific requirements to ensure the State is adequately protected.
Contract managers shall continuously monitor, assess, and validate GenAI contract deliverables for equitable outcomes, output inaccuracies, fabricated content, hallucinations, biases, and the need for human action for all decision-making processes, to ensure applicable state laws and policies are followed. Contract managers must work closely with their department GenAI subject matter expert to assess and validate contract deliverables.
Any contract that received a GenAI CDT consultation, and requires an amendment, must be re-evaluated. Any addition or modifications of GenAI technology by a vendor after contract award must be reported to the CIO to complete a risk assessment prior to execution.
Other Procedures - DGS Leveraged Procurement Agreements
Please refer to the User Instructions for acquisitions conducted using a DGS leveraged procurement agreement (LPA) such as Software License Program (SLP) agreements for details on how to apply this policy and procedure.
Legal Reference
Related Policy, Procedures & Resources
State Administrative Manual (SAM), Section 4819.2
State Contracting Manual (SCM), vol. 2, Section 100.3
State Contracting Manual (SCM), vol. 2, Section 301
State Contracting Manual (SCM), vol. 2, Section 2200.1
GenAI Toolkit for Public Sector Procurement, Uses, and Training and Procurement
Attachments
Not Applicable.
Revisions
No Revisions for this item.