Foreign Ownership, Control, or Influence (FOCI) requirements can involve a combination of industrial security regulations, corporate governance, government contracting, and foreign investment law.
When a contractor encounters a potential FOCI issue, it may be unclear whether the company needs an attorney, an experienced industrial security consultant, or both.
The distinction matters because not every FOCI requirement involves a legal dispute or complex corporate transaction. Many activities, including SF-328 preparation, DCSA coordination, security plan development, and ongoing mitigation compliance, can be supported by qualified FOCI consultants.
Other situations involve legal rights, binding agreements, or regulatory obligations that warrant specialized legal counsel.
Understanding where those responsibilities overlap can help contractors obtain the right expertise while managing costs.
No. There is no general requirement that every company undergoing a FOCI review must retain an attorney.
For example, a contractor applying for a Facility Clearance (FCL) may need to complete an SF-328, document its ownership structure, and respond to DCSA questions.
These activities primarily involve corporate disclosures and industrial security compliance.
An experienced FOCI consultant can often assist with this work without requiring a law firm to manage the entire process.
However, when the underlying issue involves legal interpretation, ownership rights, or negotiation of binding agreements, legal counsel may be appropriate.
The key is determining what type of expertise the situation actually requires.
For a broader comparison, read FOCI Consultant vs. FOCI Attorney: Which Do You Need?.
One of the clearest situations where legal counsel should be involved is a merger, acquisition, or investment transaction involving foreign ownership.
For example, a U.S. defense contractor may be acquired by a foreign parent company or accept an investment that gives a foreign shareholder significant governance rights.
These transactions can affect:
An attorney can advise on the legal structure of the transaction and help ensure that agreements properly address the company's obligations.
A FOCI consultant can work alongside counsel to evaluate the transaction's impact on the company's FCL, identify potential DCSA requirements, and help plan for security compliance.
For cleared contractors, early coordination is especially important because certain ownership and control changes must be reported to DCSA before they occur.
When DCSA determines that a company is under FOCI, the government may require an approved mitigation instrument before the company can obtain or maintain an FCL.
Depending on the ownership arrangement, these instruments may include:
Some arrangements are relatively straightforward. Others impose substantial restrictions on corporate governance and the foreign owner's ability to influence company management.
For example, an SSA may require independent U.S. citizen Outside Directors, a Government Security Committee (GSC), and restrictions governing relationships with foreign affiliates.
Proxy Agreements and Voting Trust Agreements can involve even more significant changes to voting and management authority.
Because these agreements may affect shareholder rights and legally binding governance arrangements, specialized legal counsel is often appropriate during negotiation and execution.
However, much of the implementation work can be performed by an experienced FOCI consultant.
This includes developing security plans, establishing compliance procedures, supporting GSC operations, and coordinating ongoing requirements with DCSA.
For more information, see FOCI Mitigation Explained: How Companies Address Foreign Ownership Concerns.
Certain foreign investment transactions may be subject to review by the Committee on Foreign Investment in the United States (CFIUS).
CFIUS evaluates the national security implications of certain foreign investments in U.S. businesses and certain real estate transactions.
Although CFIUS and DCSA may examine some of the same foreign ownership relationships, they operate under different authorities and procedures.
A company undergoing a CFIUS review may need legal advice concerning:
These matters generally warrant attorneys experienced in foreign investment and national security law.
A FOCI consultant may still be useful when the transaction also affects an existing FCL or creates additional industrial security requirements.
Companies should not assume that completing a DCSA FOCI review satisfies any separate CFIUS obligations.
FOCI assessments frequently involve questions about who can influence a company's management and operations.
Ownership percentages are only part of the analysis.
Foreign investors may possess contractual rights that affect corporate decision-making, including board appointments, veto authority, or approval of major transactions.
Determining how these rights operate may require interpretation of shareholder agreements, operating agreements, bylaws, and other legal documents.
A FOCI consultant can identify provisions that may be relevant to a government security review.
However, legal counsel should address questions concerning the enforceability, interpretation, or modification of those rights.
This distinction becomes particularly important when a company is considering restructuring governance arrangements to address FOCI concerns.
Legal counsel may also be necessary when a company faces a disputed government determination or potential enforcement action.
Examples may include:
These situations may involve procedural rights, statutory interpretation, or legal consequences beyond routine security compliance.
A FOCI consultant can help assemble factual records, explain security procedures, and support technical or operational aspects of the response.
However, legal strategy and representation should be handled by appropriately qualified counsel.
Many FOCI-related responsibilities are operational rather than legal.
For contractors dealing with established DCSA requirements, a consultant may be able to manage substantial portions of the work.
Common examples include:
The SF-328, Certificate Pertaining to Foreign Interests, requires companies to disclose certain foreign ownership, governance, financial, and business relationships.
Preparing the form may involve reviewing corporate records, identifying relevant foreign interests, organizing supporting documentation, and responding to DCSA questions.
These activities can often be supported by an experienced FOCI consultant.
Legal counsel may be needed if the disclosure raises complex questions about ownership rights or the interpretation of corporate agreements.
Read How to Complete the SF-328: A Step-by-Step Guide.
Companies pursuing an FCL may need assistance understanding DCSA procedures, preparing documentation, and addressing potential foreign ownership concerns.
An experienced FSO or FOCI consultant can help coordinate these activities.
If the process identifies significant legal or governance issues, counsel can be brought in for those specific matters.
Companies operating under FOCI mitigation agreements may need to develop and maintain documents such as:
These plans establish operational safeguards and compliance procedures.
Although legal review may be appropriate in certain circumstances, their development and day-to-day implementation are often well suited to industrial security professionals.
After a mitigation agreement is implemented, companies may require continuing support with GSC meetings, annual compliance reviews, security procedures, reporting, and DCSA coordination.
These activities generally align with the responsibilities of experienced FSOs and FOCI compliance specialists.
Retaining a law firm to manage every routine compliance activity may not be the most efficient use of company resources.
Yes. In many complex situations, using both can be the most effective approach.
Consider a U.S. contractor being acquired by a foreign company while maintaining an active FCL.
The work might be divided as follows:
| Activity | Appropriate support |
|---|---|
| Negotiating the acquisition | Legal counsel |
| Evaluating FCL and FOCI implications | FOCI consultant, with counsel as needed |
| Preparing ownership disclosures | FOCI consultant |
| Negotiating a complex mitigation agreement | Legal counsel, with consultant input |
| Developing TCPs and ECPs | FOCI consultant |
| Establishing GSC procedures | FOCI consultant, with counsel on governance issues |
| Maintaining ongoing compliance | FOCI consultant or FSO |
| Addressing future legal disputes | Legal counsel |
This approach allows attorneys to focus on legal issues while industrial security professionals manage the operational requirements.
It can also help companies avoid unnecessary legal expenses.
The cost difference between legal services and industrial security consulting can be significant.
Law firms specializing in government contracting, foreign investment, and national security matters may charge substantially higher hourly rates than security consultants.
Industry FSO's FOCI consulting rate is approximately $300 per hour.
For work involving SF-328 preparation, DCSA coordination, security plan development, and ongoing compliance, that rate can provide a more economical alternative to assigning the same work to a law firm.
For example, ten hours of consulting support at $300 per hour would cost approximately $3,000.
Actual legal fees vary by firm, attorney, and engagement, so savings depend on the circumstances.
The objective is not to eliminate necessary legal representation. It is to ensure that companies are paying for the appropriate level of expertise.
For additional information, read How Much Does FOCI Consulting Cost?.
Section 847 of the FY2020 National Defense Authorization Act established a framework for evaluating foreign ownership risks among certain Department of Defense contractors and subcontractors, including companies performing unclassified work.
The May 2026 proposed DFARS rule outlines additional foreign ownership disclosure and review procedures for certain covered DoD contracts exceeding $5 million.
These proposed requirements may create new compliance responsibilities for companies that have never pursued an FCL.
However, the need to prepare ownership disclosures or undergo a government review does not automatically mean a contractor must hire an attorney.
For many companies, the initial work may involve reviewing ownership records, completing an SF-328, and responding to government questions.
A FOCI consultant may be well positioned to assist with these activities.
Legal counsel may become necessary if the review raises questions concerning contractual eligibility, corporate governance rights, regulatory interpretation, or disputed government determinations.
For more information, read NDAA Section 847 Explained: What Government Contractors Need to Know.
Before hiring outside assistance, identify the specific issue your company is facing.
If the immediate need is preparing an SF-328, organizing foreign ownership documentation, or implementing established security requirements, a FOCI consultant may be a practical starting point.
If the matter involves an acquisition, restructuring shareholder rights, negotiating binding agreements, or resolving a legal dispute, legal counsel should be involved.
Some matters require both.
An initial assessment can help clarify the requirements, identify potential complications, and determine whether specialized legal advice is necessary.
FOCI compliance involves more than legal documentation. It also requires accurate disclosures, effective security procedures, government coordination, and ongoing oversight.
For many contractors, these responsibilities can be managed by experienced industrial security professionals without retaining a law firm for every activity.
Industry FSO provides FOCI consulting services at approximately $300 per hour, including SF-328 preparation, DCSA coordination, mitigation implementation, and ongoing compliance support.
We also work alongside legal counsel when ownership transactions, complex agreements, or other circumstances require legal expertise.
If your company is facing a FOCI issue and is unsure what type of assistance it needs, contact Industry FSO to discuss the requirements and determine an appropriate path forward.