Defense Federal Acquisition Regulation Supplement: Mitigating Risks Related to Foreign Ownership, Control, or Influence

The Intelligence and National Security Alliance (INSA) supports the Department of Defense's objective of strengthening visibility into foreign ownership, control, or influence (FOCI) risks. They provide specific recommendations to ensure the rule is workable for the industrial base, focusing on predictable review timelines, clear guidance on NISS onboarding, and risk-based reporting thresholds.

Dechert LLP, a law firm representing clients in defense matters, supports the proposed rule but requests specific clarifications and improvements. They advocate for clearer contract valuation methodologies, the inclusion of risk mitigation guidance for uncleared contractors, the incorporation of reporting efficiencies for existing FCL holders, and the addition of safe harbor provisions for publicly traded contractors to avoid False Claims Act exposure.

The Council of Defense and Space Industry Associations (CODSIA) supports the Department of War's objective to mitigate risks related to foreign ownership, control, or influence (FOCI) to protect national security. However, they argue that the proposed rule lacks clear implementation procedures and could create significant acquisition delays, administrative burdens, and barriers to competition if not refined to be more practical and risk-based.

Moody’s Corporation supports the Department’s objective of increasing visibility into foreign ownership and beneficial ownership within the defense industrial base. However, the company requests clarifications and adjustments regarding implementation timelines, DCSA processing capacity, the commercial products exemption, and prime contractor verification obligations to ensure the rule is workable and effective.

Counsel for a defense industrial base supplier opposes the proposed rule, arguing that it exceeds the authority of section 847 of the NDAA by imposing burdensome pre-offer filing requirements, automatic NISS eligibility bars, and unilateral mitigation structures. The commenter recommends conforming the rule to the statutory minimum, providing risk-tiered treatment for allied nations, and ensuring that mitigation processes are negotiated rather than unilaterally imposed.

The commenter, representing a business entity in the defense industrial base, argues that expanding FOCI requirements to unclassified contracts without a scalable, risk-based framework will create unnecessary complexity and disrupt supply chains. They advocate for a tiered approach that focuses on actual risk and influence rather than uniform requirements, and they request a longer implementation timeline of at least 180 days.

The Aerospace Industries Association (AIA) is submitting comments on behalf of its aerospace and defense industry members, expressing concerns that the proposed rule imposes an undue and unworkable administrative burden on contractors. They argue that the requirements for subcontractor FOCI disclosures are impractical for prime contractors to manage and recommend shifting reporting responsibilities directly to subcontractors and the DCSA.

USTelecom – The Broadband Association supports the Department's goal of mitigating national security risks from foreign ownership, control, or influence (FOCI) but argues the rule needs specific refinements. They recommend making the commercial products and services exception categorical, extending reporting deadlines for ownership changes, and clarifying cost allocations and harmonization with existing frameworks to avoid burdening commercial providers.

The commenter argues that the proposed rule underestimates the time and effort required to verify Foreign Ownership, Control, or Influence (FOCI) information, noting that meaningful verification requires deep investigation into corporate structures. They suggest that the Defense Counterintelligence and Security Agency (DCSA) should implement a standardized, third-party validation model similar to the CMMC program to improve scalability and consistency across the defense industrial base.

Dexter C. Wells, President of S4L Services LLC, supports the proposed rule but argues it should go further by moving from a disclosure-based framework to a validation-based one. He recommends integrating internal control standards (OMB Circular A-123), enhancing DCSA's enforcement authority, and establishing a government-led, contractor-supported subject matter expert capability to manage FOCI risks.