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

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.

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 Main Street Foundation's Center for Regulatory Analysis and Engagement (CRAE) supports the Department of Defense's proposed rules on beneficial ownership and foreign ownership, control, or influence (FOCI) to protect the defense industrial base. They argue that the implementation should prioritize practical utility, minimize administrative burdens through technological modernization and data reuse, and ensure that risk mitigation remains proportionate to actual security concerns.

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 Council of Graduate Research (COGR), representing over 230 research universities, opposes the proposed rule because it imposes significant administrative and financial burdens on academic institutions. They argue that the Department of Defense's economic analysis underestimates the costs of compliance, particularly for smaller institutions performing unclassified research.

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.

The commenter, representing a business entity, supports the objectives of the proposed rule but argues that it imposes overly burdensome "cleared-environment" requirements on contractors performing unclassified work. They recommend limiting mitigation instruments to board resolutions for unclassified work, creating express exceptions for commercial products and services, and extending the implementation window to 180 days.

A cleared defense contractor supports the Department's goal of enhancing visibility into Foreign Ownership, Control, or Influence (FOCI) risks but argues that the proposed rule needs refinement to be operationally feasible. They recommend implementing a risk-based framework with clear definitions, "safe harbor" provisions for existing instruments, and mechanisms to address DCSA backlogs and reporting impracticalities.

Bristol Bay Native Corporation (BBNC), an Alaska Native Regional Corporation, supports the goal of mitigating foreign ownership, control, or influence risks but expresses concern over the administrative burden on small businesses and Alaska Native Corporations. They recommend extending reporting deadlines for small businesses, creating streamlined pathways for statutorily domestic entities, and adopting a risk-based review framework to avoid operational delays.