Senators Elizabeth Warren (D-MA) and Chuck Grassley (R-IA) introduced bipartisan legislation in early June 2026 requiring Department of Defense contractors to disclose foreign ownership, control, or influence relationships as a condition of receiving defense contracts, according to a joint press release from both senators' offices. The legislation, dubbed the Defense Contractor Ownership Transparency Act, would close a gap in current law that allows companies with FOCI — relationships that give foreign entities influence over a contractor's operations, management, or access to classified information — to receive sensitive defense contracts without disclosing those relationships to the contracting agency. The Warren-Grassley bill would require affirmative disclosure as a condition of contract award and would direct DoD to assess the national security implications of disclosed FOCI relationships before proceeding with contract performance.
FOCI issues have emerged as a recurring concern in defense procurement as foreign investment in U.S. defense contractors has increased over the past decade. Private equity, sovereign wealth fund investment, and mergers involving foreign acquirers have created situations where companies performing sensitive defense work have significant foreign stakeholders whose interests may not align with U.S. national security requirements. The Committee on Foreign Investment in the United States, which reviews foreign investments in U.S. businesses for national security implications, provides some protection against the most direct foreign acquisitions of defense-relevant companies. However, CFIUS review is not triggered by all transactions, and minority investments, debt financing, and complex ownership structures can create FOCI relationships that escape both CFIUS scrutiny and current defense contracting disclosure requirements.
Current FOCI Framework and Gaps
The Defense Security Service — now the Defense Counterintelligence and Security Agency — has long administered a FOCI mitigation program for cleared defense contractors. Under this framework, companies that require facility clearances to perform classified work must disclose their ownership structure to DCSA, which assesses whether FOCI exists and, if so, requires mitigation measures designed to insulate the company's classified activities from foreign influence. Common mitigation measures include security control agreements, voting trust agreements that place control of the company in the hands of trustees approved by the government, and board resolutions limiting the foreign owner's access to sensitive information.
The Warren-Grassley legislation addresses a gap in this framework: it applies only to cleared contractors performing classified work. A defense contractor performing unclassified defense work — including work on sensitive but unclassified programs, supply chain components for classified systems, or services contracts that do not require a facility clearance — is not currently subject to the same FOCI disclosure and mitigation requirements. This gap allows FOCI-affected companies to receive and perform sensitive defense contracts without the government being aware of the foreign ownership relationships that might affect their reliability, security practices, or decision-making on sensitive matters.
The bill would extend FOCI disclosure requirements to all DoD contracts above a specified dollar threshold, requiring offerors to disclose the identity and nationality of all beneficial owners holding more than a specified percentage of the company's equity, any foreign debt financing arrangements that give foreign creditors coercive leverage over the company's operations, and any contractual arrangements with foreign entities that affect the company's management decisions. The contracting officer and cognizant security officials would then assess whether the disclosed FOCI relationships create national security concerns that should affect the contract award decision or require mitigation measures as a condition of performance.
Legislative Rationale and Bipartisan Support
The Warren-Grassley bill reflects a rare area of bipartisan agreement on national security and economic competitiveness concerns. Senator Warren has consistently focused on the national security risks created by private equity ownership of defense contractors, arguing that financial engineering that saddles defense firms with debt while extracting dividends for investors reduces the firms' ability to invest in the workforce, equipment, and research and development needed to sustain industrial base capabilities. Senator Grassley has focused on foreign ownership concerns from a counterintelligence and trade secret protection perspective, emphasizing the risk that foreign-owned or foreign-influenced defense contractors may transfer sensitive technology or information to adversary nations through legitimate business channels.
Both senators' offices have cited specific cases where FOCI relationships in the defense industrial base were identified only after significant national security damage had occurred or after contracts had been performed by companies whose foreign ties were not known to the contracting government. These cases illustrate the real-world consequences of disclosure gaps and provide concrete motivation for legislative reform that extends beyond abstract concern about potential future risks.
The bipartisan sponsorship improves the bill's legislative prospects, though the pace of defense policy legislation through Congress remains slow and the bill will face competition from other defense priorities for floor time and attention. Industry groups representing defense contractors will likely engage on the bill's implementation details, particularly the specific ownership thresholds triggering disclosure, the definition of FOCI relationships covered, and the timeframes for government assessment of disclosed relationships that could delay contract awards.
What It Means for Contractors
The Warren-Grassley bill, if enacted, would create significant new compliance obligations for defense contractors with foreign ownership, investment, or business relationships. Firms with private equity ownership involving foreign limited partners, debt financing from foreign banks or sovereign wealth funds, licensing arrangements with foreign technology companies, or joint venture relationships with foreign partners would need to assess whether those relationships constitute FOCI within the bill's definitions and prepare for mandatory disclosure in future DoD contract bids.
Contractors should begin reviewing their ownership structures now, before any legislation is enacted, to identify any FOCI relationships that would require disclosure under the bill's framework. Companies that have not previously engaged with DCSA's FOCI assessment process — because they do not hold facility clearances and thus were not previously subject to FOCI review — should familiarize themselves with DCSA's FOCI assessment methodology to understand how their specific ownership relationships might be characterized. Early self-assessment creates the opportunity to address potentially problematic relationships before they become mandatory disclosure issues in a competitive procurement context.
For foreign-owned firms or firms with significant foreign investment that perform or seek to perform defense work, the bill represents a direct challenge to business models that rely on foreign capital while avoiding the scrutiny associated with cleared contractor status. These firms should engage legal counsel with CFIUS and FOCI expertise to assess their exposure under potential legislation and develop strategies for maintaining defense contract eligibility in a more rigorous disclosure environment.
