Pentagon Proposes DFARS Changes to Address Foreign Ownership Risks in Defense Contracts

The Defense Department proposed changes to the Defense Federal Acquisition Regulation Supplement on May 7 to implement sections of the National Defense Authorization Act for Fiscal Years 2020 and 2021 that address risks tied to foreign ownership, control, or influence.

The rule, identified as DFARS Case 2021-D011 and published in the Federal Register, affects all companies seeking or performing DoD contracts. Per the Federal Register notice, it applies to the full spectrum of defense acquisition programs, which obligate more than $400 billion annually across thousands of contractors and subcontractors.

The proposal also implements elements of existing DoD policy on the same subject.

The operational change updates DFARS procedures so contractors must provide detailed beneficial ownership information and submit mitigation plans for any foreign ownership, control, or influence factors identified during the contracting process. Previously, these requirements existed in statute but lacked the specific DFARS integration now proposed.

The rule remains in proposed form; a final version will follow after the public comment period closes July 6, 2026. No effective date for the final rule is stated in the May 7 notice.

Downstream, contractors will face new compliance deadlines for ownership disclosures on solicitations issued after the final rule takes effect. Contracting officers must incorporate the updated DFARS clauses into new awards and may delay contract awards until mitigation plans receive approval.

Prime contractors will pass flow-down requirements to subcontractors, triggering supply-chain reviews across the defense industrial base. The Defense Acquisition Regulations System will review all submitted comments before issuing a final rule, after which agencies must update their internal guidance and training.

This proposed rule follows the original NDAA mandates enacted in December 2019 and 2020. The Federal Register document spans six pages and carries the regulation identifier 0750-AL30.

Primary sources: Federal Register notice dated May 7, 2026.