Companies pursuing Department of Defense (DoD) contracts may face additional scrutiny of their ownership structures, including foreign investors, parent companies, and other relationships that could create Foreign Ownership, Control, or Influence (FOCI) concerns.
Section 847 of the FY2020 National Defense Authorization Act (NDAA) established a framework for reviewing foreign ownership risks among certain DoD contractors and subcontractors, including companies performing unclassified work.
The May 2026 proposed Defense Federal Acquisition Regulation Supplement (DFARS) rule outlines how these reviews and related disclosure requirements could be incorporated into the procurement process.
Although contractors should monitor the status of the final implementing requirements, there are practical steps companies can take now to understand their ownership exposure and prepare accurate disclosures.
This guide provides a preparation checklist for contractors that may be subject to Section 847.
Before preparing disclosures, determine whether Section 847 is relevant to your contracting activities.
The proposed DFARS rule addresses certain DoD contractors and subcontractors associated with contracts valued above $5 million, subject to applicable exceptions.
Important considerations include:
The proposed requirements are not limited to companies holding Facility Clearances (FCLs).
However, they also do not automatically apply to every federal contract exceeding $5 million.
For a more detailed discussion of the threshold and exceptions, see Section 847 and the $5 Million Threshold: Which Contracts Are Covered?.
One of the most useful preparation steps is developing an accurate picture of the company's direct and indirect ownership.
This may be straightforward for a small business with a few individual owners, but considerably more complicated for companies with multiple holding entities, institutional investors, or foreign parent organizations.
Start by identifying:
A corporate organizational chart can help illustrate these relationships.
For companies with layered ownership structures, it may also be necessary to obtain ownership information from parent entities or investors.
The goal is to understand not only who directly owns the contractor, but also who ultimately exercises ownership or control.
FOCI is not determined solely by foreign ownership percentages.
A foreign investor with a relatively small equity position may still possess significant influence through voting rights, board appointment authority, or contractual arrangements.
Contractors should review documents such as:
Pay particular attention to provisions that allow foreign interests to influence major corporate decisions.
Examples may include the ability to appoint directors, approve certain transactions, restrict management actions, or exercise control through contractual rights.
These arrangements may be relevant to a FOCI assessment even when the foreign investor does not hold a majority ownership interest.
For additional background, read What Is FOCI? A Practical Guide for Government Contractors.
Foreign ownership is only one part of a potential FOCI review.
Companies may also have foreign relationships that create financial, operational, or management dependencies.
Relevant relationships can include:
Not every foreign relationship creates a FOCI concern.
However, contractors should understand which arrangements may be relevant to government disclosure requirements and maintain appropriate supporting documentation.
For companies with international operations, this review may require coordination among finance, legal, corporate leadership, and security personnel.
The SF-328, Certificate Pertaining to Foreign Interests, is an established government form used to disclose information relevant to foreign ownership and influence.
Under the May 2026 proposed DFARS rule, the SF-328 would also be used in connection with Section 847 disclosures for additional covered contractors.
Companies unfamiliar with the form should review its questions before receiving a formal request.
Preparation may involve:
The SF-328 should be completed accurately and consistently with the company's underlying corporate records.
For example, an organizational chart identifying a foreign parent company should align with the ownership information provided in the disclosure.
The current form is available through the General Services Administration's SF-328 page.
Related article: How to Complete the SF-328: A Step-by-Step Guide [Link when published]
Once ownership and governance information has been assembled, contractors can conduct a preliminary assessment of potential foreign influence.
This does not replace a government FOCI determination, but it can help identify issues requiring further review.
Questions to consider include:
A preliminary assessment can help determine whether additional documentation, internal safeguards, or specialized assistance may be appropriate.
Importantly, identifying foreign ownership does not automatically mean a company is ineligible for a government contract.
For more information, see Can a Foreign-Owned Company Win U.S. Government Contracts?.
Ownership information can change during the life of a government contract.
New investors, acquisitions, corporate reorganizations, and changes in voting rights may affect previously disclosed information.
Contractors should establish a process for identifying and evaluating these developments.
A practical approach may include:
Companies with an existing FCL may already have processes for reporting certain changes through DCSA.
Other contractors may need to establish similar internal coordination procedures if Section 847 requirements become applicable to their contracts.
A foreign ownership disclosure does not automatically mean a contractor must implement a formal FOCI mitigation agreement.
The initial purpose of a review is to identify relevant foreign interests and evaluate the associated risks.
If concerns are identified, the government may determine that additional safeguards or mitigation measures are necessary.
For companies operating under the NISP, formal mitigation instruments may include:
However, the traditional mitigation framework for cleared companies should not be assumed to apply identically to every Section 847 review.
The appropriate requirements depend on the contract, the government's findings, and the applicable regulatory framework.
For a more detailed explanation, see FOCI Mitigation Explained: How Companies Address Foreign Ownership Concerns.
Even when a company's ownership structure is relatively straightforward, a government review may require clarification or additional supporting information.
Contractors should be prepared to explain:
Responses should be accurate, consistent, and supported by available records.
For complex ownership arrangements, it may be useful to designate a central point of contact who can coordinate responses among corporate leadership, legal counsel, and security personnel.
This can help prevent inconsistent disclosures and unnecessary delays.
Section 847 is established in statute, but the May 2026 DFARS rule was published as a proposal.
The final implementing requirements may differ from the proposed provisions.
Contractors should monitor:
Official information is available through DCSA's Section 847 resources and the May 2026 proposed DFARS rule.
Companies should evaluate actual contract requirements rather than assuming proposed procedures are already mandatory.
Contractors can use the following checklist as a starting point for internal preparation.
| Preparation item | Key question |
|---|---|
| Contract applicability | Could our DoD contracts or subcontracts fall within Section 847? |
| Ownership records | Do we have an accurate picture of direct and indirect ownership? |
| Beneficial ownership | Can we identify relevant ultimate owners and control interests? |
| Governance documents | Are voting rights and board appointment authorities documented? |
| Foreign relationships | Have we reviewed foreign affiliates and financial dependencies? |
| SF-328 readiness | Can we support accurate responses with current documentation? |
| Potential FOCI risks | Have we evaluated ownership and control arrangements? |
| Change management | Do we track relevant changes in ownership or governance? |
| Government coordination | Do we have a process for responding to disclosure requests? |
| Regulatory monitoring | Are we tracking final DFARS requirements and contract clauses? |
Not every company will require extensive preparation. For some contractors, the work may involve confirming that existing ownership records are complete and current.
For companies with complex foreign investment structures, additional analysis may be necessary.
Section 847 introduces foreign ownership considerations that may affect companies beyond the traditional classified contracting community.
Although the final implementing requirements should be reviewed before determining specific obligations, contractors can take useful steps now by organizing ownership records, understanding governance arrangements, and identifying potential foreign influence concerns.
Industry FSO provides FOCI consulting services, including Section 847 readiness assessments, SF-328 preparation, foreign ownership reviews, and mitigation support.
Our team helps government contractors evaluate applicable requirements, prepare supporting documentation, and address FOCI concerns through practical compliance measures.
If your company is preparing for a covered DoD opportunity or has questions about its ownership structure, contact Industry FSO to discuss the next steps.