Proposed DFARS Rule Could Require Disclosures and Mitigation Related to Foreign Ownership, Control, and Influence (FOCI) on Certain Unclassified Contracts

On May 7, 2026, the Department of War issued the long-awaited Proposed Rule to implement Section 847 of the FY 2020 National Defense Authorization Act (NDAA) regarding Foreign Ownership, Control or Influence (FOCI) requirements for contractors. The proposed rule would expand the applicability of FOCI reviews, requiring contractors and subcontractors on unclassified “covered contracts” — defense contracts and subcontracts valued in excess of $5 million that are not for commercial products and services — to submit FOCI disclosures to the Defense Counterintelligence and Security Agency (DCSA) for FOCI risk assessment (and as applicable, mitigation) as part of contract award. This would effectively require DCSA assessment and adjudication of FOCI considerations prior to contract award. Thus, both cleared and uncleared defense contractors would be subject to the rigorous DCSA disclosure requirements, scrutiny, and FOCI mitigation. Crowell discussed the Section 847 requirements in a prior alert.

If adopted, this proposed rule would represent a significant change for a broad swath of contractors and subcontractors, many of which have never been required to make FOCI disclosures. The proposed rule estimates that there are 37,740 potentially impacted entities, with 21,511, approximately 57%, estimated to be small businesses.

DCSA has said that it is ready for this influx of new submissions and has a plan for conducting these analyses in a timely fashion to avoid delaying contract awards.

Comments to the proposed rule are due before July 6, 2026 and will be reviewed prior to the formation of a final rule.

Key Takeaways:

1. Uncleared contractors and subcontractors on “covered contracts” that do not have prior experience with DCSA’s Standard Form 328 “Certificate Pertaining to Foreign Interests” (SF-328) should begin preparing to make the required disclosures using the recently updated version of the SF-328 form (discussed in a prior Crowell alert). Contractors unfamiliar with DCSA’s FOCI mitigation process should be prepared to make substantial disclosures related to ownership and control, foreign contracts and revenue, foreign officers and directors, foreign subsidiaries, and more. Notably, DCSA’s follow-up can often go significantly beyond what is required within the four corners of the SF-328.
2. Cleared contractors who have not recently prepared an updated SF-328 using the new form would also do well to familiarize themselves with its requirements.
3. DCSA has increasingly required mitigation around foreign influence even where there is not effective foreign ownership and control, and we expect to see the same trend in connection with the new Section 847 reviews.