The House-passed fiscal 2027 defense policy bill, H.R. 8800, would bar companies from installing or operating data-center equipment containing printed circuit boards, advanced semiconductors, or chipsets sourced from adversary nations inside AI data centers built on military installations — a provision the Army says could scare off roughly $1.3 billion in private investment already committed to two active projects.
Background
The National Defense Authorization Act for Fiscal Year 2027 has passed the House, according to Federal News Network. House Armed Services Committee Chairman Rep. Mike Rogers (R-Ala.) leads the panel that produced the underlying bill. Tucked inside the sprawling defense policy package is a floor amendment authored by Rep. Cory Mills (R-Fla.) that targets the Pentagon's growing appetite for commercially built artificial intelligence data centers sited on Army land.
The Army has been leaning on private partners to build and operate the compute infrastructure the service says it needs to process intelligence, run simulations, and support AI-enabled operations without funding the construction itself. Two of those partnerships are already underway: Carlyle Group is developing a data-center project at Fort Bliss, Texas, and CyrusOne is building at Dugway Proving Ground, Utah. The Mills Amendment would apply new supply-chain restrictions to any data facility equipment installed on federal land the Army leases or licenses to these commercial partners, a category that until now has largely operated under looser rules than equipment the Army itself procures directly.
That gap matters because the commercial-partnership model depends on private companies bringing their own capital, hardware, and vendor relationships to Army-controlled land in exchange for long-term lease or licensing arrangements. Restricting the components those partners can install shifts risk that previously sat with the vendor onto the government's own siting decisions, and it does so mid-negotiation rather than at the outset of a procurement, which is the crux of the Army's objection.
Key Details
The amendment prohibits companies from installing or operating data facility equipment containing components the bill deems national-security risks — specifically citing certain printed circuit boards, advanced semiconductors, and chipsets manufactured by U.S. adversary nations — in AI data centers on military installations. It passed as part of the broader H.R. 8800 package on a floor vote.
The provision drew opposition from an unusual pairing of members. Rogers, the HASC chairman, spoke against the Mills language, framing the stakes in terms of great-power competition: "The nation with the best data infrastructure will possess a decisive advantage in the next warfare. The U.S. cannot afford to lose this position." Rep. Derrick Van Orden (R-Wis.) also opposed the amendment, saying he believed it would "stand in the way of us maintaining AI dominance over China."
The chip-sourcing fight was not the only AI-data-center dispute playing out in Congress this cycle. A similar measure offered by Rep. John Garamendi, a Democrat, was voted down during committee markup, while Rep. Rashida Tlaib introduced a separate standalone bill, the "No AI Data Centers on Federal Lands Act," reflecting broader unease across both parties about how quickly the Pentagon is turning over federal land to AI infrastructure builders. Mills defended his provision as a response to the same underlying security concern: "Honored to pass this amendment to protect our military installations from Chinese components being used in data centers on our installations."
The Army's public response was pointed. Service officials characterized the amendment as a "federal land penalty" that would create an "unworkable standard" for commercial partners, warning it could drive away the roughly $1.3 billion in private investment tied to the Fort Bliss and Dugway Proving Ground projects. The Army's argument centers on timing and specificity: because the Mills language applies component-level restrictions to equipment installed by private developers on Army-controlled land, it would require commercial partners to requalify supply chains for projects already under contract, potentially unwinding negotiated terms.
H.R. 8800 has now cleared the House and moves to the Senate, where the chip-sourcing provision will need to survive conference negotiations alongside the rest of the defense bill before it can reach the president's desk. With the Mills language intact in the House-passed bill, senators will decide whether the chip-sourcing restriction survives, is narrowed, or is stripped entirely during conference.
What It Means for Contractors
Companies building or supplying equipment for military AI data centers should treat the Mills language as a live compliance risk rather than a settled requirement. Carlyle Group and CyrusOne, the two publicly identified partners on the Fort Bliss and Dugway Proving Ground projects, are the most directly exposed: if the Senate keeps the House provision intact, both companies may need to document the origin of printed circuit boards, semiconductors, and chipsets already specified for their builds, and potentially requalify vendors mid-project.
More broadly, any contractor pursuing Army data-center work on federal land — not just AI-specific facilities — should watch how the Senate treats the provision's scope. The Army's objection was not to supply-chain security as a principle but to applying a new, equipment-level standard retroactively to negotiations already underway. Contractors bidding on future data-center opportunities should expect the Army to push for either a narrower definition of covered components or a phase-in period that protects projects with signed agreements, and should build supply-chain documentation into proposals now rather than waiting for the conference report.
The provision also signals that congressional scrutiny of Pentagon AI infrastructure deals is intensifying beyond this single amendment. With a Democratic alternative from Garamendi voted down in committee and Tlaib's separate federal-lands bill introduced independently, contractors should anticipate additional riders touching AI data-center siting, land use, or foreign-component restrictions in future defense and appropriations bills, even if the Mills language itself is narrowed or dropped in conference.
Firms without a direct stake in Fort Bliss or Dugway Proving Ground should still track the Senate's handling of the bill closely. The Army's public break with its own committee chairman over a land-use and supply-chain rider is a signal that similar friction is likely to recur as the Pentagon expands commercial AI data-center leasing to additional installations, and contractors positioning for that next wave of opportunities will want clarity on component-sourcing rules before, not after, they commit capital.
