ProcurementSecurityCompliance

Vendor Due Diligence: Questions to Ask AI Providers About Data Residency and FedRAMP

UUnknown

2026-02-16

10 min read

Practical due diligence questions travel procurement teams must ask AI vendors about data residency and FedRAMP — with templates and checklists.

Hook: Stop guessing — ask the right questions about AI, data residency, and FedRAMP

Travel procurement teams are under pressure. You must automate reprice workflows, surface flash fares, and integrate AI into booking pipelines — all while protecting traveler privacy, meeting regional residency rules, and avoiding costly compliance failures. In 2026, AI vendors arrive with glossy demos and claims of 'secure-by-design.' But how do you separate marketing from verifiable controls? This guide lays out the exact, practical due diligence questions and contract language procurement teams should use when vetting AI platform and SaaS vendors — with a specific focus on data residency and FedRAMP.

Why data residency and FedRAMP matter for travel automation

Travel data is uniquely sensitive: passenger name records (PNR), itinerary details, payment information, frequent flyer numbers, and sometimes government IDs. That mix triggers a matrix of obligations:

Local and regional privacy laws (GDPR, UK DPA, CPRA and other U.S. state laws, EU AI Act implications).
Industry rules — airline and GDS data-sharing contracts often require precise handling and storage locations.
Government customers and corporate travel teams demand FedRAMP or equivalent assurances for cloud-hosted systems used in government or high-risk contexts.

Put simply: if your vendor can’t prove where data resides, who can access it, or whether a model was trained on customer PII, you’ve inherited regulatory and reputational risk.

Key 2025–2026 trends procurement teams must factor into vendor evaluations

Since late 2025 the market has accelerated in three ways that affect vendor selection:

FedRAMP momentum: Several AI platform providers acquired or pursued FedRAMP-authorized offerings to win government business — a signal that FedRAMP compliance is now a competitive differentiator (see late-2025 moves such as BigBear.ai acquiring a FedRAMP-approved AI platform).
Regional cloud & residency options: Cloud providers and AI vendors increasingly offer per-region operational enclaves and ‘data residency’ toggles; travel teams must verify these are more than marketing labels. Operational patterns for regional and edge storage are discussed in guides like Edge-Native Storage in Control Centers (2026).
Model governance & training-data scrutiny: Regulators and enterprise buyers now treat model training pipelines as part of the data-residency conversation — asking whether vendor models were trained on exported PII or customer datasets. See work on automating compliance checks for model pipelines.

These trends mean procurement must go beyond standard SOC 2 checkboxes and ask specific, operational questions that confirm how a vendor will store, process, and use travel data.

High-level vendor due diligence framework (step-by-step)

Pre-RFP risk triage: Define data types (PNR, payments, ID scans), regulatory contexts (EU travelers, U.S. government customers), and required controls (FedRAMP Moderate/High, regional residency).
RFP and vendor questionnaire: Send a focused, scored questionnaire (examples below) that prioritizes residency, encryption, access control, and FedRAMP status.
Technical validation & POC: Validate claims with a sandboxed POC using representative data (or synthetic data with identical schema) and verify API routing, VPC endpoints, and logging. Consider developer and telemetry reviews such as developer CLI and telemetry reviews when evaluating vendor toolings and endpoints.
Third-party assessment: Request evidence: FedRAMP ATO letter, System Security Plan (SSP), PenTest reports, SOC 2 Type II, and if needed, an independent assessment by a security firm.
Contract negotiation: Embed residency clauses, breach timelines, audit rights, and model-use restrictions; set remediation SLAs and termination data handling commitments.
Ongoing monitoring: Require continuous attestations, quarterly vulnerability scans, and re-check FedRAMP status and subcontractor changes.

The essential vendor questionnaire: grouped, ready-to-use questions

Below is a vendor questionnaire organized by theme. Use it as-is in an RFP or adapt to your company's risk appetite.

1) Data residency & sovereignty

Where will our data be stored at rest? Provide regions and cloud providers (e.g., AWS us-east-1, Azure UK South).
Where will our data be processed (inference and training)? Can processing be limited to specific regions?
Do you offer a contractual data residency guarantee (no cross-border transfers without our consent)? Provide clause language or refer to your DPA.
Is cross-border replication used for high availability? If so, what data is replicated and to which regions? See considerations for replication and edge storage in distributed file systems and replication.
How do you handle requests from foreign governments to access data stored in our region?

2) FedRAMP and certifications

Do you hold any FedRAMP authorization? If yes, specify the authorization level (Low/Moderate/High) and provide the ATO letter and SSP references.
If not FedRAMP-authorized, are you enrolled in a FedRAMP authorization path? Provide timeline and milestones.
List other attestations and reports (SOC 2 Type II, ISO 27001, PCI-DSS) and provide dates and third-party assessor information.
Do you use a FedRAMP-compliant cloud environment for specific customers or workloads?

3) Data handling, retention, and deletion

What is your default data retention policy for customer data and logs? Can retention be customized?
Explain your data deletion process. How do you verify complete deletion from live systems, backups, and logs? Validate deletion across backups and archival storage using distributed FS best practices like those in distributed file systems.
Do you retain training data or model artifacts derived from customer data? If so, under what controls?

4) Model use, training, and derivatives

Do you use customer data to train or fine-tune models? If yes, is this opt-in and documented in the contract?
Can you guarantee that models served to us were not trained on PII from other customers?
Do you offer isolated model instances or private fine-tuning per customer? Automating model governance checks can help validate these claims — see automated compliance tooling.

5) Security architecture & controls

Describe your network segmentation, VPC, and private endpoint options. Can our traffic avoid the public internet?
How is data encrypted at rest and in transit? Provide algorithms and key management (do you offer customer-managed keys/KMS?).
Describe access controls: MFA, SSO/SAML, role-based access control (RBAC), least privilege enforcement, and session logging. For identity and takeover threat modeling, see guidance on phone number and identity takeover defenses.

6) Incident response, breach notification & forensics

What is your incident notification SLA for confirmed breaches? (Aim for 72 hours or less.)
Do you provide forensic artifacts, chain-of-custody logs, and remediation plans as part of an incident response? Design and audit guidance for evidentiary trails is covered in resources on audit trails and chain-of-custody.
Do you perform tabletop exercises with customers and share after-action reports?

7) Auditing, logging & monitoring

What logs do you collect and retain (access logs, API calls, model predictions)? Are logs exportable to our SIEM?
Do you enable continuous monitoring and vulnerability scanning, and do you share results with customers on request?
Can we perform on-site or remote audits? What are the notice periods and costs?

8) Subcontractors and supply-chain

List major subcontractors (cloud hosts, CDNs, third-party models) and their locations. Do they have FedRAMP or equivalent accreditations?
How do you ensure flow-down of our privacy and residency requirements to subcontractors?

9) Contractual & commercial

Provide sample DPA and security addendum (include residency, deletion, breach notice, audit rights).
What are the exit and data export procedures? Are there fees for data export or for re-hosting into a FedRAMP environment?
Do you indemnify for regulatory fines arising from vendor misconfigurations or failures to meet residency commitments?

Why each question matters — and what an answer should look like

It’s not enough to collect answers — procurement teams must interpret them. Below are signals that indicate a trustworthy response:

Good sign: Vendor supplies an ATO letter, SSP, and a named FedRAMP sponsor or cloud enclave for government-class workloads.
Good sign: Vendor offers customer-managed keys (CMKs) and private endpoints to ensure data never traverses public networks.
Red flag: Vendor refuses to commit to region-limited processing or gives vague answers about backups and replication.
Red flag: Vendor claims "we do not train on customer data" but cannot demonstrate separate model instances or contractual prohibitions.

Scoring rubric (simple)

Use a 0–3 scale per question: 0 = unacceptable, 1 = partial, 2 = meets standard, 3 = best practice / exceeds. Prioritize FedRAMP, residency guarantees, and encryption for your travel data types; require minimum cumulative scores for shortlisting.

Contract language and clauses to insist upon

Here are practical clauses procurement lawyers and negotiators should push for:

Data Residency Commitment: "Provider shall store and process Customer Data only within the geographic regions listed in Appendix A and shall not transfer Customer Data outside these regions without Customer's prior written consent."
FedRAMP Representation: "Provider represents that the environment used for Customer's workloads is FedRAMP-authorized at the [level] and will maintain authorization for the term of this Agreement. Provider shall promptly notify Customer of any change in FedRAMP status."
Breach Notification: "Provider will notify Customer within 72 hours of confirmed data breach affecting Customer Data and provide full forensic report and remediation plan."
Audit & Access: "Customer has the right to periodically audit Provider's controls, on-site or remote, and to receive third-party audit reports (SOC 2, FedRAMP SSP)."
Data Return & Deletion: "Upon termination, Provider will export Customer Data in machine-readable format and permanently delete all copies (including backups) within X days, with certification of deletion."

Real-world examples and short case studies

Example 1 — Mid-size travel management company (TMC): The procurement team required FedRAMP Moderate for any vendor handling government traveler PNR. During evaluation, Vendor A claimed 'regionally hosted' but could not provide an ATO or SSP; Vendor B offered a FedRAMP-authorized enclave and customer-managed keys. The TMC selected Vendor B, avoiding a potential compliance gap when bidding for government travel contracts.

Example 2 — Airline loyalty program: A startup used embeddings to power booking recommendations. Procurement insisted the vendor demonstrate that embeddings didn’t contain PII and that embedding servers were hosted in the EU for EU traveler data. The vendor implemented dedicated model instances and provided a technical attestation that embeddings were ephemeral and never stored beyond 24 hours, satisfying auditors.

"Acquisitions and FedRAMP moves in late 2025 signaled that authorization matters. Procurement teams are now using FedRAMP as a proxy for rigorous cloud controls when buying AI-enabled travel automation." — Industry observation, 2026

Operational checks to run during a POC

Route a synthetic PNR through the vendor pipeline and verify network traces and regional endpoints.
Request a temporary private endpoint or VPC peering and measure whether traffic leaves your region.
Simulate a data deletion and confirm deletion from backups and logs (or obtain proof from the vendor). Validate backup and deletion behaviors against recommendations in distributed file systems reviews.
Test access control by creating roles and confirming least-privilege enforcement for operator accounts. Threat modeling references such as phone number takeover defenses can inform identity tests.

Common procurement mistakes — and how to avoid them

Mistake: Relying solely on high-level certificates (SOC 2) without verifying region-specific controls. Fix: Request SSP and region-specific architecture diagrams.
Mistake: Assuming 'data residency' is default. Fix: Add explicit data residency and replication clauses in the contract.
Mistake: Accepting vendor-owned KMS keys. Fix: Demand customer-managed keys for sensitive workloads.

Future predictions (2026+): what procurement teams should watch

FedRAMP specialization for AI: Expect FedRAMP guidance and baselines to expand for generative AI and model governance, making FedRAMP status even more relevant.
Residency-as-a-feature: Vendors will package region-locking and per-customer model isolation as standard enterprise features — negotiate these into your SLA.
Regulatory overlap: Cross-border rules, the EU AI Act, and state-level privacy laws will converge — meaning enforcement will increasingly focus on operational controls, not just paper attestations. Keep an eye on evolving compliance coverage in broader regulatory reporting such as crypto and compliance news that often signals enforcement trends.

Practical next steps and a short checklist for procurement

Classify your data: identify all travel data types and map applicable laws.
Choose required controls: FedRAMP level, encryption, CMK, private endpoints.
Send the vendor questionnaire above and require documentary evidence (ATO, SSP, SOC 2).
Run a POC with representative data (or schema-identical synthetic data) and validate network flow and deletion.
Negotiate contract clauses on residency, breach notice, audit rights, and model-use restrictions.

Final takeaway

In 2026, AI is essential to travel automation — but so are data residency guarantees and rigorous FedRAMP-level controls for certain customers. Procurement teams that adopt a structured, evidence-driven approach (questionnaire + POC + contractual safeguards) will avoid downstream compliance failures, preserve traveler privacy, and unlock automation safely.

Call to action

Ready to move from checklist to contract? Download our ready-to-use vendor questionnaire and contract clause library tailored for travel procurement teams, or book a free consultation with Botflight's security and procurement specialists to run a POC and negotiate FedRAMP-friendly terms. Protect traveler data, accelerate automation, and close deals with confidence.

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