Senate panel approves defense bill restricting contractor stock buybacks

A Senate committee approved a measure that would bar defense contractors from buying back shares or paying dividends without Pentagon approval. The Senate Armed Services Committee passed the annual National Defense Authorization Act last week by an 18-9 vote in a closed-door session.

Section 815 of the bill would require contractors to agree in writing not to purchase equity securities or make capital distributions unless they receive a waiver.

Provision details The restriction would take effect June 15, 2027.

The defense secretary could waive the limit if a contractor submits a qualifying defense investment plan. Contractors found in violation could face suspension of payments or loss of eligibility for contracts. The Pentagon would be required to review which contractors are engaging in buybacks or dividends without a waiver.

Waived contractors could still face penalties if they are underperforming on prioritization, investment, or production.

Bipartisan support The committee's ranking member said the provision was included on a bipartisan basis. A committee member who helped secure the measure said it is intended to bring discipline to contractors that are not performing on government contracts.

The measure draws from earlier legislation that would block buybacks and dividend payments. The House version of the bill did not include the provision, though it could be added during later negotiations. Major trade organizations representing defense contractors have opposed the measure, stating that restrictions on capital allocation tools would reduce investment in the sector.