September 26, 2022

Insights from the Fifth National Forum on Foreign Ownership, Control, or Influence (FOCI) and the Defense Counterintelligence and Security Agency

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Key Takeaways

  • The DOD's Defense Counterintelligence and Security Agency is increasingly concerned about foreign influence.
  • The agency has stressed that anticipated changes to the 2020 Defense Authorization Act will help create more resilient and secure supply chains.

The Defense Counterintelligence and Security Agency (DCSA), of the U.S. Department of Defense (DOD), is responsible for (among other things) ensuring that foreign ownership, control, or influence (FOCI) of government contractors does not compromise U.S. national security interests. When a cleared government contractor is acquired by a foreign company there can be parallel reviews by DCSA and the Committee on Foreign Investment in the United States (CFIUS). In light of recent events, the DOD is increasingly focused on supply chain resiliency of government contractors and the U.S. military industrial base. 

DCSA has publicly noted that one of its core missions is ensuring cleared contractors and classified facilities are not compromised by FOCI. While there is overlap with CFIUS's reviews in terms of the information required, DCSA reviews are not optional when there are issues of unmitigated FOCI. While CFIUS reviews move on a quicker and set timeline, FOCI reviews by DSCA are more open ended and can take considerably more time. It is noteworthy that DCSA's is also moving away from more standard mitigation agreements and towards customizing agreements to reflect the specific circumstances of each contractor and their foreign ownership, influence, and control. 

Impact of Defense Authorization Act Changes on DCSA Covered Contractors and Subcontractors

The 2020 Defense Authorization Act at Section 847 added on FOCI mitigation obligations in regard to the beneficial ownership of both covered contractors and subcontractors. A DOD official stated at the conference that as Section 847 is implemented, DCSA will have the additional responsibility of reviewing the supply chain of covered entities with contracts over $5 million. The details will be released in a Defense Federal Acquisition Regulation Supplement this fall.

Further, a DOD February 2022 report assessed critical supply chains and highlighted areas of improvement to create resilient and secure supply chains. DCSA will prioritize areas of focus highlighted in the February 2022 report. The DOD is increasingly concerned about foreign influence and emphasized that implementing Section 847 will result in "not draconian but deliberate" changes over time, including to the standard FOCI questionnaire (also known as the SF-328).

Buchanan has a coordinated team of international trade and national security attorneys ready to help your compliance officers and departments continue to navigate these new changes and assist with FOCI compliance.

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