Lenovo, NTT Data, Thales Could Face Closer Scrutiny Under New DOD Regulations, Boosting Fortunes for Domestic Government Contractors

CFIUS and Industrial Security Team Leader Antonia Tzinova was quoted in a Capitol Forum article exploring how a new U.S. Department of Defense (DOD) rule affecting non-U.S. government contractors could spur new opportunities for domestic contractors and potentially reshape the direction of federal contracting. Section 847 of the 2020 National Defense Authorization Act requires the DOD to establish a framework for mitigating foreign ownership, control or influence (FOCI) in unclassified defense contracts worth at least $5 million. Under the regulations implementing Section 847, foreign-owned firms looking to enter into contracts with the federal government meeting those criteria and involving cybersecurity, personally identifiable information or other threats to national security will be required to undergo FOCI assessments with the Defense Counterintelligence and Security Agency (DCSA). The article analyzed how these new compliance burdens, which target high-value areas in the defense industrial base considered vulnerable to foreign influence, could work to reduce America's reliance on internationally managed companies and create chances for smaller businesses in the federal procurement market. Ms. Tzinova noted a key aspect of the new process is that a contracting officer, not DCSA, will decide whether and what type of mitigation to request following the FOCI evaluation – which could mean no mitigation measures are imposed altogether.

"Based on comments from DCSA, if a contractor has been reviewed within the preceding year, DCSA will update the review with new relevant information rather than conducting a completely new assessment. However, it remains to be seen how this will play out in practice once the rule is fully implemented," she said.

Ms. Tzinova also co-authored a Holland & Knight alert on this topic.

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