Proposed Rule - Federal Register

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Choosing an item from suggestions will bring you directly to the content. Comments on the proposed rule should be submitted in writing to the address shown below on or before July 6, 2026, to be considered in the formation of a final rule. Table of Contents Enhanced Content - Table of Contents This table of contents is a navigational tool, processed from the headings within the legal text of Federal Register documents. This repetition of headings to form internal navigation links has no substantive legal effect. Comments are no longer being accepted. See DATES for details. 37 comments have been received at Regulations.gov. Agencies review all submissions and may choose to redact, or withhold, certain submissions (or portions thereof). Submitted comments may not be available to be read until the agency has approved them. Docket Title Document ID Comments Mitigating Risks Related to Foreign Ownership, Control, or Influence (DFARS Case 2021-D011) FederalRegister.gov retrieves relevant information about this document from Regulations.gov to provide users with additional context. This information is not part of the official Federal Register document. Mitigating Risks Related to Foreign Ownership, Control, or Influence (DFARS Case 2021-D011) Document page views are updated periodically throughout the day and are cumulative counts for this document. Counts are subject to sampling, reprocessing and revision (up or down) throughout the day. Page views 7,843 as of 07/17/2026 at 4:15 pm EDT Other Formats Enhanced Content - Other Formats This document is also available in the following formats: This PDF is FR Doc. 2026-09067 as it appeared on Public Inspection on 05/06/2026 at 8:45 am. It was viewed 70 times while on Public Inspection. If you are using public inspection listings for legal research, you should verify the contents of the documents against a final, official edition of the Federal Register. Only official editions of the Federal Register provide legal notice of publication to the public and judicial notice to the courts under 44 U.S.C. 1503 & 1507. Learn more here. Published Document: 2026-09067 (91 FR 24783) This document has been published in the Federal Register. Use the PDF linked in the document sidebar for the official electronic format. ( printed page 24783) AGENCY: Defense Acquisition Regulations System, Department of Defense (DoD). ACTION: Proposed rule. SUMMARY: DoD is proposing to amend the Defense Federal Acquisition Regulation Supplement (DFARS) to implement sections of the National Defense Authorization Act for Fiscal Years 2020 and 2021 to mitigate risks related to beneficial ownership or foreign ownership, control, or influence. This proposed rule also implements elements of a DoD policy. DATES: Comments on the proposed rule should be submitted in writing to the address shown below on or before July 6, 2026, to be considered in the formation of a final rule. ADDRESSES: Submit comments identified by DFARS Case 2021-D011, using either of the following methods: Federal eRulemaking Portal: https://www.regulations.gov. Search for DFARS Case 2021-D011. Select “Comment” and follow the instructions to submit a comment. Please include “DFARS Case 2021-D011” on any attached documents. Email: osd.dfars@mail.mil. Include DFARS Case 2021-D011 in the subject line of the message. Comments received generally will be posted without change to https://www.regulations.gov, including any personal information provided. To confirm receipt of your comment(s), please check https://www.regulations.gov, approximately two to three days after submission to verify posting. FOR FURTHER INFORMATION CONTACT: Ms. Heather Kitchens, telephone 571-296-7152. SUPPLEMENTARY INFORMATION: I. Background DoD is proposing to revise the DFARS to implement paragraphs (b)(2)(A), (b)(2)(C), and (c)(1) of section 847 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2020 (Pub. L. 116-92) and paragraph (c)(2) of section 819 of the NDAA for FY 2021 (Pub. L. 116-283). Paragraph (b)(2)(A) of section 847 requires covered contractors and subcontractors to disclose to the Defense Counterintelligence and Security Agency (DCSA) their beneficial ownership and whether they are under foreign ownership, control, or influence (FOCI) with updates for any changes. Paragraph (b)(2)(A) also requires covered contractors and subcontractors, if determined to be under FOCI, to disclose contact information for each of their foreign owners that is a beneficial owner. Paragraph (b)(2)(C) of section 847 requires contract clauses providing for and enforcing disclosures related to changes in FOCI or beneficial ownership during performance of the contract or subcontract and the effective mitigation of risks related to FOCI throughout the duration of the contract or subcontract. Paragraph (c)(1) of section 847 establishes that the disclosure and risk mitigation requirements of the statute may apply to contracts for commercial products or commercial services when a designated senior DoD official makes a determination that the contract involves a risk or potential risk to national security because of sensitive data, systems, or processes. Paragraph (c)(2) of section 819 adds a statutory deadline for DoD to revise relevant directives, guidance, training, and policies, including amending the DFARS to implement section 847 of the NDAA for FY 2020. In addition, DoD is proposing to revise the DFARS to implement elements of a policy under DoD Instruction 5205.87, Mitigating Risks Related to Foreign Ownership, Control, or Influence for Covered DoD Contractors and Subcontractors, as required by section 847 of the NDAA for FY 2020. DoD Instruction 5205.87 establishes procedures related to the disclosure of beneficial ownership and FOCI information and mitigation of FOCI risk. II. Discussion and Analysis The rule proposes to amend the DFARS by creating part 240, Information Security and Supply Chain Security. In part 240, DoD proposes to create section 240.27X, Mitigation of Risks Related to Beneficial Ownership or Foreign Ownership, Control, or Influence, to implement paragraphs (b)(2)(A), (b)(2)(C), and (c)(1) of section 847 of the NDAA for FY 2020, paragraph (c)(2) of section 819 of the NDAA for FY 2021, and elements of DoD Instruction 5205.87. DoD proposes to add section 240.27X-1 to establish the scope of the section and adds the definition of “covered contractor or subcontractor” at 240.27X-2, to clarify which entities are impacted by the statutory requirements. Section 240.27X-3, Policy, is proposed to describe the statutory requirements for disclosing information and mitigating FOCI risks throughout the duration of the contract or subcontract. This section also addresses exemption of the disclosure and risk mitigation requirements for commercial products and commercial services, unless the designated senior DoD official determines that the contract involves a risk or potential risk to national security. The senior DoD official has not yet been designated. The term “designated senior DoD official” is used in this proposed rule as a placeholder. The requirements at 240.27X-4, Procedures, are proposed to establish the procedures necessary for contracting officers to implement the statutory disclosure and risk mitigation requirements. The section directs the contracting officer to not award, modify a contract, or exercise an option unless the offeror or contractor has a status of eligible in the National Industrial Security System (NISS), available at https://niss.dcsa.mil. Section 240.27X-5 prescribes use of the provision and clause in solicitations and contracts with a value in excess of $5 million. The language at 240.27X-5 clarifies that the provision and clause are only to be included in solicitations and contracts using FAR part 12 procedures for the acquisition of commercial products and commercial services if the designated senior DoD official determines that the contract involves a risk or potential risk to national security or potential compromise because of sensitive data, systems, or processes. Updates are proposed in subpart 212.3 to include the provision and clause in the list of provisions and clauses that are applicable to commercial products and commercial services. In addition, updates in subpart 217.2 are proposed to clarify that, prior to exercising an option, the contracting officer must verify that the contractor has a status of eligible in NISS. A new solicitation provision was added at 252.240-70XX, Disclosure of ( printed page 24784) A new contract clause is proposed at 252.240-70YY, Disclosure of Beneficial Ownership or Foreign Ownership, Control, or Influence. The new contract clause requires contractors to— (1) Disclose to DCSA their beneficial ownership and whether they are under FOCI by submitting an updated SF 328 in NISS; (2) Update the SF 328 and supporting documents, to include the contact information of each beneficial owner in NISS. III. Applicability to Contracts at or Below the Simplified Acquisition Threshold (SAT), for Commercial Products (Including Commercially Available Off-the-Shelf (COTS) Items), and for Commercial Services This proposed rule includes a new solicitation provision and contract clause to implement the requirements of paragraphs (b)(2)(A), (b)(2)(C), and (c)(1) of section 847 of the NDAA for FY 2020 (Pub. L. 116-92) and paragraph (c)(2) of section 819 of the NDAA for FY 2021 (Pub. L. 116-283): (1) The provision at DFARS 252.240-70XX, Disclosure of Beneficial Ownership or Foreign Ownership, Control, or Influence—Representation; and (2) the clause at DFARS 252.240-70YY, Disclosure of Foreign Ownership, Control, or Influence or Beneficial Ownership. The provision at DFARS 252.240-70XX is prescribed at DFARS 240.27X-5(a) for use in solicitations that include the clause at 252.240-70YY. The clause at DFARS 252.240-70YY is prescribed at DFARS 240.27X-5(b) for use in solicitations and contracts with a value in excess of $5 million. The clause is also required in solicitations and contracts using FAR part 12 procedures for the acquisition of commercial products and commercial services, if the designated senior DoD official determines that the contract involves a risk or potential risk to national security or potential compromise because of sensitive data, systems, or processes. DoD does not intend to apply the proposed rule to contracts at or below the SAT, because the requirements of the proposed rule only apply to contracts valued above $5 million. DoD intends to apply the proposed rule to contracts for the acquisition of commercial products including commercially available off-the-shelf (COTS) items and for the acquisition of commercial services, as prescribed. A. Applicability to Contracts at or Below the Simplified Acquisition Threshold The statute at 41 U.S.C. 1905 governs the applicability of laws to contracts or subcontracts in amounts not greater than the simplified acquisition threshold. It limits the applicability of laws to such contracts or subcontracts. The statute at 41 U.S.C. 1905 provides that if a provision of law contains criminal or civil penalties, or if the Federal Acquisition Regulatory Council makes a written determination that it is not in the best interest of the Federal Government to exempt contracts or subcontracts at or below the SAT, the law will apply to them. The Principal Director, Defense Pricing, Contracting, and Acquisition Policy (DPCAP), is the appropriate authority to make comparable determinations for regulations to be published in the DFARS, which is part of the Federal Acquisition Regulation system of regulations. DoD does not intend to make that determination. Therefore, this proposed rule will not apply at or below the simplified acquisition threshold. B. Applicability to Contracts for the Acquisition of Commercial Products Including COTS Items and for the Acquisition of Commercial Services The statute at 10 U.S.C. 3452 exempts contracts and subcontracts for the acquisition of commercial products including COTS items, and commercial services from provisions of law enacted after October 13, 1994, unless the Under Secretary of Defense (Acquisition and Sustainment) (USD(A&S)) makes a written determination that it would not be in the best interest of DoD to exempt contracts for the procurement of commercial products and commercial services from the applicability of the provision or contract requirement, except for a provision of law that— Provides for criminal or civil penalties; Requires that certain articles be bought from American sources pursuant to10 U.S.C. 4862, or that strategic materials critical to national security be bought from American sources pursuant to 10 U.S.C. 4863; or Specifically refers to10 U.S.C. 3452 and states that it shall apply to contracts and subcontracts for the acquisition of commercial products (including COTS items) and commercial services. The statutes implemented in this proposed rule do not impose criminal or civil penalties, do not require purchase pursuant to 10 U.S.C. 4862 or 4863, and do not refer to 10 U.S.C. 3452. Therefore, sections 847 and 819 will not apply to the acquisition of commercial services or commercial products including COTS items unless a written determination is made. Due to delegations of authority, the Principal Director, DPCAP is the appropriate authority to make this determination. DoD intends to make the determination to apply the statutes to the acquisition of commercial products including COTS items and to the acquisition of commercial services. Therefore, this proposed rule will apply to the acquisition of commercial products including COTS items and to the acquisition of commercial services, if a designed official determines that the contract involves a risk or potential risk to national security because of sensitive data, systems, or processes. C. Determinations Given that section 847 of the NDAA for FY 2020 and section 819 of the NDAA for FY 2021 were enacted to promote the mitigation of FOCI or beneficial ownership risk in the supply chain, and FOCI or beneficial ownership risk is related to the ownership of the company and not necessarily what is being procured, it is in the best interest of DoD to apply the statute to contracts for the acquisition of commercial services and commercial products, including COTS items, as defined at Federal Acquisition Regulation 2.101. An exception for contracts for the acquisition of commercial services and commercial products, including COTS items, would exclude the contracts intended to be covered by the law, thereby undermining the overarching public policy purpose of the law. IV. Expected Impact of the Rule DoD is proposing to amend the DFARS to include the following solicitation and contractual requirements to implement the statutory requirements at paragraphs (b)(2)(A), (b)(2)(C), and (c)(1) of section 847 of the NDAA for FY 2020 (Pub. L. 116-92) and ( printed page 24785) Pub. L. 116-283): Offeror and contractor requirements to disclose to DCSA their beneficial ownership and whether they are under FOCI. Contractor requirement to provide updates to their FOCI and beneficial ownership disclosures to DCSA for the life of the contract. Contractor requirement to disclose contact information for each of its foreign owners that is a beneficial owner, if determined to be under FOCI. Contractor requirement to mitigate risks related to FOCI within 90 days of contract award, modification, exercise of option, or identification of risks during contract performance. As described in section VIII of this preamble, the costs associated with the technical requirements related to the FOCI risk mitigation are outside of the scope of this proposed rule. The costs associated with the requirements for offerors to disclose FOCI and beneficial ownership information to DCSA are covered by two information collection approvals completed by the Office of the Under Secretary of Defense for Intelligence and Security: (1) Certificate Pertaining to Foreign Interests, SF-328, OMB Control Number 0704-0579; and (2) National Industrial Security System (NISS), OMB Control Number 0705-0006. The burden calculated for OMB Control Number 0704-0579 for the SF 328 is $7,352,560, and the burden calculated for OMB Control Number 0705-0006 for the NISS is $712,281 (source: reginfo.gov). This proposed DFARS rule, if finalized, will apply to contracts valued above $5 million. The proposed rule may also apply to certain contracts for commercial products and commercial services if a designated senior DoD official determines that the contract involves a risk or potential risk to national security or potential compromise because of sensitive data, systems, or processes. According to data from the Federal Procurement Data System (FPDS), the average number of unique entities for fiscal years 2022 through 2024 with awards above $5 million, excluding awards using exclusively commercial procedures, is 3,774. Of those entities, 2,148 (57%) are unique small businesses. DoD has no way to know how many exclusively commercial awards will have an exception that applies the disclosure and reporting requirements to those offerors and contractors, so it assumes exclusively commercial awards will not include reporting and disclosure requirements. To calculate the number of potential offerors and subcontractors impacted by this proposed rule, DoD assumes for every unique entity with awards above $5 million, there are two offerors on average per award and that the entities awarded contracts have on average 5 subcontractors, for a total of 37,740 potentially impacted entities. Of those entities, 21,511 (57%) are estimated to be small businesses. For updates to disclosures, DoD does not know the number of contractors who will need to make updates to their FOCI and beneficial ownership disclosure information, or the number of updates they will need to make. DoD assumes half of all contractors may have to update information during the performance of the contract. To estimate the number of impacted contractors, DoD used the average number of unique awardees with co