--- title: "Section 847 $5 Million Threshold: Which Contracts Are Covered?" description: Does Section 847 apply to your contract? Learn about the $5 million threshold, covered DoD contractors, subcontractors, commercial exceptions, and FOCI reviews. image: https://industryfso.com/hubfs/Website/Global%20images/Pentagon-aerial-image.jpg --- [![Industry FSO logo](https://industryfso.com/hubfs/Website/Logos/Industry%20FSO%20logo.svg)](https://industryfso.com) - [About us](https://industryfso.com/about-us) - Services - [All Services](https://industryfso.com/services) - [FSO Services](https://industryfso.com/fso-services) - [FCL Setup & Maintenance](https://industryfso.com/fcl-formation) - [DCSA Review Prep](https://industryfso.com/dcsa-security-reviews) - [Foreign Ownership (FOCI)](https://industryfso.com/foci-consulting) - [Insights](https://industryfso.com/insights) [Speak to an Expert](https://industryfso.com/contact) - [About us](https://industryfso.com/about-us) - Services - [All Services](https://industryfso.com/services) - [FSO Services](https://industryfso.com/fso-services) - [FCL Setup & Maintenance](https://industryfso.com/fcl-formation) - [DCSA Review Prep](https://industryfso.com/dcsa-security-reviews) - [Foreign Ownership (FOCI)](https://industryfso.com/foci-consulting) - [Insights](https://industryfso.com/insights) [Speak to an Expert](https://industryfso.com/contact) - [FOCI](https://industryfso.com/insights/topic/foci) - [SF-328](https://industryfso.com/insights/topic/sf-328) # Section 847 $5 Million Threshold: Which Contracts Are Covered? ![](https://industryfso.com/hubfs/Website/Global%20images/Sarah%20Phillips.jpg) By [Sarah Phillips](https://industryfso.com/insights/author/sarah-phillips) October 20 2026 6 min read ![Section 847 $5 Million Threshold: Which Contracts Are Covered? image](https://industryfso.com/hubfs/Website/Global%20images/Pentagon-aerial-image.jpg) ## Contents ## Contents A company does not need to handle classified information to encounter foreign ownership requirements in federal contracting. Under Section 847 of the FY2020 National Defense Authorization Act (NDAA), the Department of Defense (DoD) is expanding its framework for reviewing Foreign Ownership, Control, or Influence (FOCI) among certain contractors and subcontractors. One of the most important elements is the **$5 million contract threshold**. However, determining whether Section 847 applies involves more than checking a contract's dollar value. The contracting agency, type of acquisition, subcontracting relationships, and applicable exceptions can all affect coverage. This article explains which contracts may fall under Section 847, how the proposed requirements affect prime contractors and subcontractors, and what companies should consider before pursuing covered opportunities. ## What Is the Section 847 $5 Million Threshold? Section 847 establishes foreign ownership review requirements for certain existing and prospective DoD contractors and subcontractors associated with contracts valued in excess of $5 million. The May 7, 2026 proposed DFARS rule defines a covered contractor or subcontractor as a company that is an existing or prospective contractor or subcontractor, at any tier, of DoD for a contract valued above that amount. This is an important distinction: **the proposed threshold is more than $5 million, not $5 million or more.** The proposed rule would introduce beneficial ownership disclosures and FOCI reviews into the acquisition process for covered contractors, including businesses that do not require Facility Clearances (FCLs). However, contract value alone does not determine applicability. Commercial acquisition exceptions and other regulatory provisions must also be considered. For a broader overview of the legislation, read [NDAA Section 847 Explained: What Government Contractors Need to Know](https://industryfso.com/blog/ndaa-section-847-explained). ## Does Section 847 Apply to Unclassified Contracts? Yes. One of the primary purposes of Section 847 is to expand foreign ownership scrutiny beyond the traditional classified contracting environment. Historically, FOCI reviews have been closely associated with the National Industrial Security Program (NISP), particularly when a company applies for or maintains an FCL. Section 847 addresses potential foreign ownership risks in a broader portion of the DoD supply chain. This includes certain unclassified contracts involving sensitive technology, systems, information, or operations. For example, a company developing software, manufacturing specialized components, or providing engineering services may be subject to Section 847 requirements even if its employees never access classified information. The key question is whether the contract falls within the covered procurement framework, not simply whether it requires a security clearance. ## Does Section 847 Apply to Prime Contractors and Subcontractors? Yes. The proposed requirements extend beyond companies contracting directly with DoD. Under the proposed DFARS definition, covered subcontractors can include companies at any tier of the supply chain associated with covered DoD contracting. This matters because many businesses support defense programs without holding a direct federal contract. A company might provide software development, manufacturing, engineering, or specialized technical services to a prime contractor rather than directly to the government. Depending on the applicable contract and subcontract requirements, that company may still need to address foreign ownership disclosures. Prime contractors should also consider how new requirements may affect their subcontractor management processes. Potential responsibilities could include communicating applicable contract clauses, confirming subcontractor disclosure obligations, and coordinating compliance activities across the supply chain. Subcontractors should not assume that the absence of a direct DoD relationship eliminates potential Section 847 exposure. ## Are Commercial Products and Services Exempt? Commercial acquisitions receive special treatment under the proposed rule. Federal acquisition law generally exempts contracts for commercial products, commercially available off-the-shelf (COTS) items, and commercial services from certain subsequently enacted statutory requirements unless an authorized determination makes those requirements applicable. The May 2026 proposed DFARS rule addresses this exemption directly. Under the proposal, Section 847 requirements generally would not apply to commercial products or services unless a designated senior DoD official determines that the procurement presents a national security risk or potential compromise involving sensitive data, systems, or processes. This distinction can be particularly relevant to companies providing commercially available software, IT services, equipment, or other products to DoD customers. However, contractors should not assume that labeling a product or service as commercial automatically resolves the question. The acquisition's classification, applicable determinations, and solicitation provisions remain important. ## Does Section 847 Apply to Civilian Federal Agencies? Section 847 is a DoD-specific authority. It does not automatically impose the same $5 million FOCI disclosure requirement on contracts awarded by civilian federal agencies. For example, a contractor performing a $10 million contract for a civilian agency is not necessarily subject to Section 847 simply because the award exceeds $5 million. However, that does not mean foreign ownership is irrelevant to civilian federal contracting. Other agencies may have separate requirements involving foreign ownership, national security, supply chain risks, or access to sensitive information. The Department of Energy, for example, maintains its own security framework addressing foreign ownership considerations for certain facilities and activities. Contractors should therefore evaluate the specific agency's requirements rather than assuming one government-wide FOCI standard applies. For a broader discussion, see [Can a Foreign-Owned Company Win U.S. Government Contracts?](https://industryfso.com/blog/foreign-owned-company-government-contracts). ## How Would Section 847 Apply to Different Contract Scenarios? The following examples illustrate how the proposed framework could affect different contractors. | Contract scenario | Potential Section 847 applicability | | --- | --- | | $8 million DoD engineering services contract, noncommercial | Generally within the proposed scope | | $12 million unclassified DoD research contract, noncommercial | Generally within the proposed scope | | Subcontract supporting a covered DoD contract | May be covered, including at lower subcontract tiers | | $9 million DoD commercial software acquisition | Generally excepted unless an authorized determination applies | | $7 million civilian-agency contract | Not covered solely by Section 847 | | $3 million standalone DoD contract | Below the proposed threshold | | $5 million DoD contract exactly | Does not exceed the proposed threshold | These examples are illustrative rather than definitive eligibility determinations. Actual applicability depends on contract structure, acquisition classification, solicitation provisions, and the final implementing regulations. ## What Happens When a Contract Is Covered? Under the May 2026 proposed DFARS rule, covered contractors would face additional foreign ownership disclosure and review requirements. The proposed process includes several important elements. ### SF-328 and Beneficial Ownership Disclosures Covered contractors would submit foreign ownership and beneficial ownership information, including an SF-328 and supporting documentation, through the National Industrial Security System (NISS). The SF-328 asks questions concerning foreign ownership, governance, financial relationships, and other foreign interests. For companies unfamiliar with the form, preparing accurate responses may require reviewing shareholder records, organizational structures, and corporate governance documents. **Related article:** *How to Complete the SF-328: A Step-by-Step Guide* \[Link when published\] ### Government FOCI Review DCSA would review the submitted information and evaluate whether foreign ownership or control presents relevant security risks. The review would help inform DoD's contracting decision. Importantly, the proposed framework distinguishes between DCSA's risk assessment role and the contracting authority's responsibility for determining whether an award can proceed. ### Contract Award and Eligibility The proposed rule would restrict certain contract awards, modifications, and option exercises unless the contractor has an appropriate eligibility status in NISS or an applicable exception applies. This makes ownership disclosure readiness potentially important before award, rather than something addressed only after contract performance begins. ### Changes During Contract Performance Covered contractors would also have responsibilities to update ownership and FOCI information when relevant changes occur. An acquisition, new investor, or change in corporate control could therefore create additional disclosure or review obligations during an existing contract. ## Does Having Foreign Ownership Mean a Contractor Is Ineligible? No. Foreign ownership does not automatically prevent a company from receiving a covered DoD contract. The purpose of the review is to identify and evaluate potential risks associated with foreign ownership, control, or influence. A company with foreign investors may have governance arrangements that limit foreign influence over security-sensitive operations. Other companies may require additional review or appropriate mitigation measures. The outcome depends on the ownership structure, the identified risks, and the applicable government requirements. Contractors should also distinguish Section 847 reviews from the formal mitigation agreements used under the NISP for cleared companies. For additional background, read [FOCI Mitigation Explained: How Companies Address Foreign Ownership Concerns](https://industryfso.com/blog/foci-mitigation-explained). ## What Should Contractors Do Before Pursuing a Contract Over $5 Million? Companies anticipating covered DoD opportunities should begin by determining whether the proposed requirements could apply to their contracts. A practical review should address several questions: 1. **Is the opportunity a DoD contract or subcontract?** Identify the contracting agency and the company's role in the supply chain. 2. **Does the relevant contract exceed $5 million?** Review the applicable contract value and any associated subcontracting relationships. 3. **Is the acquisition commercial or noncommercial?** Determine whether the commercial acquisition exception may apply. 4. **Does the company have foreign ownership or control interests?** Review direct and indirect ownership, voting rights, and governance arrangements. 5. **Are ownership records current?** Maintain organizational charts, beneficial ownership information, and supporting corporate documentation. 6. **Could an SF-328 be required?** Identify the information and documentation necessary to prepare accurate disclosures. 7. **Are there pending ownership changes?** Consider whether foreign investment, acquisition activity, or restructuring could affect future reporting obligations. Even when a company does not identify significant foreign influence, maintaining accurate ownership information can make future disclosures easier. **Related article:** *How to Prepare for Section 847 Foreign Ownership Reviews* \[Link when published\] ## When Should Contractors Seek Section 847 Assistance? Professional assistance may be useful when a company is unsure whether its contracts fall within the proposed requirements or when its ownership structure is difficult to document. Common situations include: - Pursuing a DoD contract exceeding $5 million - Supporting a covered prime contractor as a subcontractor - Evaluating commercial acquisition exceptions - Preparing an SF-328 for the first time - Documenting complex beneficial ownership arrangements - Accepting foreign investment or undergoing an acquisition - Responding to government questions about foreign interests In many cases, the first step is a focused assessment of contract applicability and corporate ownership information. A contractor may not need extensive legal representation to organize its disclosures or evaluate operational compliance requirements. However, legal counsel may be appropriate when questions involve contractual interpretation, ownership transactions, or disputed eligibility determinations. ## Understanding Section 847 Before Contract Award Section 847 introduces additional foreign ownership considerations for companies throughout the DoD supply chain, including businesses performing unclassified work. The $5 million threshold is an important starting point, but contractors should also evaluate acquisition type, subcontracting relationships, exceptions, and the specific requirements included in their solicitations. Preparing early can help companies identify ownership documentation gaps and address potential disclosure issues before they interfere with a procurement. Industry FSO provides [FOCI consulting services](https://industryfso.com/foci-consulting), including Section 847 readiness assessments, foreign ownership reviews, SF-328 preparation, and mitigation support. If your company is pursuing a covered contract or evaluating how foreign ownership may affect its eligibility, our team can help assess the requirements and determine practical next steps. ![](https://industryfso.com/hubfs/Website/Global%20images/Sarah%20Phillips.jpg) Article by ### Sarah Phillips President & Founder Sarah Phillips founded Industry FSO to make industrial security more accessible and manageable for defense contractors. With deep experience as a Facility Security Officer and a strong understanding of DCSA expectations, Sarah recognized that many small businesses lack the time and resources to manage an FCL on their own. [More articles](https://industryfso.com/insights/author/sarah-phillips) ## Browse more resources Check out more helpful FSO and FCL resources in our Insights section.  [All posts](https://industryfso.com/insights) #### [![When Do You Need a FOCI Attorney?](https://industryfso.com/hubfs/Website/Pages/Homepage/Pentagon.webp) October 20 2026 When Do You Need a FOCI Attorney? Foreign Ownership, Control, or Influence (FOCI) requirements can involve a combination of industrial security regulations, corporate governance, government contracting, and foreign investment law. FOCI SF-328](https://industryfso.com/insights/when-foci-requires-legal-counsel) #### [![How Much Does FOCI Consulting Cost? Rates & Fees](https://industryfso.com/hubfs/Website/Pages/Homepage/Pentagon.webp) October 20 2026 How Much Does FOCI Consulting Cost? Rates & Fees Companies facing Foreign Ownership, Control, or Influence (FOCI) requirements often have an immediate question: How much will it cost to get help? 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