Why It Matters

A recent Congressional Research Service report on Department of Defense (DOD) contractors and foreign influence mitigation efforts identifies significant gaps in how the Pentagon tracks and restricts foreign ties to its supply chain, while laying out options for Congress to tighten oversight. DOD is now operating under a secondary 'Department of War' designation pursuant to Executive Order 14347, dated September 5, 2025.

Some DOD contractors have foreign connections, including ownership, investment, supplier or producer relationships, or overseas production, which may pose a risk to U.S. national security, especially when those performing sensitive or classified work have potential ties to adversarial countries. Congress has responded with a steady stream of restrictions over 15 years, especially targeting the People's Republic of China and Russia. DOD's foreign influence mitigation programs are spread across multiple agencies and components, raising questions about coordination and consistency.

The Big Picture

DOD's foreign influence mitigation programs are spread across multiple agencies and components, including DCSA, DARPA's FRRBS program, and DOD S&T offices. A 2020 Government Accountability Office report found that DOD lacked an agency-wide process for identifying conflicts of interest in grant awards.

The National Industrial Security Program Operating Manual's current description of foreign ownership, control, or influence assessment criteria does not elaborate on what factors security officers consider most critical or how they identify those factors.

Defense industry groups have raised concerns about the complexity and scope of requirements, particularly around the Huawei ban. An industry representative warned that the potential impact of the Section 889 statute could affect nearly every contractor and subcontractor across the entire federal government. Current law has allowed contractors and subcontractors with under $5 million in contracts to escape ownership disclosure and Foreign Ownership, Control, or Influence (FOCI) mitigation requirements.

The FY2026 National Defense Authorization Act (NDAA) includes a new prohibition on DOD procurement of advanced batteries composed of material from certain foreign sources, taking effect in 2028. The FY2025 NDAA required DOD briefing on foreign capital disclosure requirements involving private equity and venture capital. S.4648 would close the sub-$5 million disclosure gap for DOD contractors.

The Bottom Line

The report identifies multiple congressional options for improvements, including expanding Title 10 prohibitions, standardizing DOD's definitions of foreign influence, and centralizing fragmented mitigation programs.

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