In a move poised to significantly impact contractors in the defense sector, the Defense Counterintelligence and Security Agency (DCSA) has approved a revised form for disclosing Foreign Ownership, Control, or Influence (FOCI), known as the SF 328. This updated certificate bolsters the U.S. Department of Defense (DOD) policy aimed at tightening oversight on foreign investments, particularly those intersecting with national security interests. The changes reflect a strategic shift towards mandatory, comprehensive FOCI reporting, broadening inquiries beyond companies traditionally requiring facility clearances.
The SF 328 has long served as a pivotal element in the DOD’s evaluation of FOCI risks—a process critical to granting or denying facility clearances to around 1,200 companies annually. However, as detailed in the recent announcement by DCSA, the scope of the SF 328 now extends to companies pursuing contracts for certain unclassified programs, reflecting an increased regulatory focus on a broader spectrum of defense-related ventures.
Historically, the complexity of the SF 328 has been a source of frustration, with the DCSA reporting that over 70% of applications face rejection due to improper documentation. The revised form aims to mitigate this issue by clarifying queries and providing comprehensive guidance to facilitate accurate initial submissions, thereby expediting the clearance process.
The implications of these revisions are manifold. The expanded requirements—affecting initiatives like the Small Business Innovation Research and Small Business Technology Transfer programs, as well as contracts involving “covered contractors and subcontractors” under Section 847 of the 2020 National Defense Authorization Act—raise the bar for compliance and due diligence among contractors. The new requirements will demand investors supply more detailed information on funding sources, enhancing visibility into potential security risks.
According to DCSA guidance, companies are not obliged to redo existing SF 328 filings due to these updates. However, applications for initial facility clearances or changes post-May 12, 2025, must utilize the new form. Consequently, facility security officers and security professionals are advised to proactively engage company leadership in adapting to these new mandates, ensuring smooth compliance with the revised protocol.
While the updates undoubtedly increase regulatory burdens, these measures are also seen as an opportunity for defense contractors and investors to demonstrate enhanced transparency and strengthen national security postures. The refinements not only clarify DCSA’s policies but also reflect ongoing adjustments to better tackle evolving threats in today’s geopolitical landscape. For further insights and detailed provisions regarding these updates, visit the full article on Bloomberg Law.