War Department pushes FOCI onto CUI contractors over $5M

The Department of War’s proposed DFARS FOCI rule would move foreign ownership, control, or influence review out of its familiar lane. Historically, FOCI has lived with the National Industrial Security Program and contractors holding facility clearances for classified work. This proposal would put disclosure and mitigation into the procurement process for covered unclassified sensitive work, including CUI, on contracts above $5 million. DoW estimates nearly 40,000 offerors or subcontractors would be affected.

That is the operational shift. A contractor does not need to be cleared, or chasing classified work, to face a FOCI question that can block award. Primes and subs with foreign investors, foreign affiliates or complex ownership structures should treat the final rule as a bid-timeline issue, not a security-office curiosity.

The commercial-contract carve-out is where the clean story gets messy. The proposed rule generally exempts commercial products and commercial services, but that exemption can disappear if a senior DoW official determines the contract presents a national-security risk or potential compromise because of sensitive data, systems or processes. The source material does not identify who that official is, what criteria apply, or what notice tells a contractor that a supposedly commercial buy has crossed the line.

Congress is also moving in the same direction. Warren-Grassley language incorporated into Section 820 of the Senate Fiscal Year 2027 National Defense Authorization Act would lower the covered contract threshold from $5 million to $500,000. The House version would create a Defense Supply Chain Intelligence and Risk Response Program aimed at improving visibility into foreign ownership, control and influence risks. Put together, the signal is not subtle: FOCI is being recast from a cleared-contractor exception into a baseline defense-industrial-base ownership screen.