(Reuters) -Elon Musk's xAI has struck a deal with the U.S. General Services Administration (GSA) to provide the artificial intelligence startup's Grok chatbot to federal agencies, the government's procurement arm said on Thursday.

The contract underscores Washington's push to expand the use of AI in government operations, while intensifying competition among leading developers of the booming technology for federal business.

The agreement, effective through March 2027, allows agencies to buy Grok models for 42 cents per organization, compared with the $1 per year OpenAI charges for access to its ChatGPT service, GSA said.

The contract covers Grok 4 and Grok 4 Fast, which xAI describes as its most advanced reasoning models. The agency said xAI engineers would also assist agencies with implementation.

Agencies will also have the option to upgrade to Grok enterprise subscriptions aligned with federal security standards, offering expanded features and higher usage limits.

The deal is the latest under GSA's "OneGov Strategy," launched in April to standardize technology procurement and expand government use of AI. Other suppliers under the program include OpenAI, Meta Platforms, Alphabet's Google and Anthropic.

GSA has also approved Meta's Llama model for agency use earlier this week, making it available to federal customers at no cost.

(Reporting by Akash Sriram in Bengaluru; Editing by Anil D'Silva)