FOCI Mitigation for Cleared Companies undergoing a Foreign Acquisition or Restructure resulting in Foreign Ownership

A cleared company is required to notify their local Industrial Security Representative and the FOCI Operations Division Mailbox, dss.quantico.dss-hq.mbx.foci-operations@mail.mil, when it enters into negotiations for a proposed merger, acquisition, takeover, or restructure resulting in a foreign interest within the cleared company's chain of ownership (NISPOM 2-302). The notification shall include the type of transaction under negotiation (stock purchase, asset purchase, restructure, etc.), the identity of the potential foreign investor, and plan to mitigate or negate the FOCI consistent with paragraph 2-303, National Industrial Security Program Operating Manual (NISPOM).

The plan to mitigate or negate the FOCI should be submitted in the form of a Word icon Commitment Letter and include all the documentation needed for an acceptable for FOCI Action Plan. DSS will promptly review the Commitment Letter and FOCI Action Plan and in its sole discretion determine if the plan is sufficient to mitigate the FOCI. Companies are encouraged to contact DSS earlier and, as needed, schedule a meeting to discuss the details of their pending transaction and the company's plan to mitigate or negate the FOCI.

A cleared company's failure to notify and obtain from DSS an approved Commitment Letter prior to the merger, acquisition, takeover, or restructure resulting in a foreign interest within the cleared company's chain of ownership will result in the invalidation of the company's FCL. Also note that a cleared company operating under a Commitment Letter is subject to increased scrutiny and could be subject to invalidation if they do not execute their FOCI mitigation agreement in a timely manner.

Additionally, the company should advise DSS if the parties to the proposed transaction will be filing with the Committee on Foreign Investment in the United States (CFIUS), an interagency committee chaired by the Treasury Department which conducts reviews of proposed mergers, acquisitions or takeovers, of U.S. persons by foreign interests under Section 721 of the Defense Production Act.

*"Invalidation" renders the company unable to bid on or receive any additional classified contracts. As part of the invalidation, DSS will advise the company's Government Contracting Activities (GCA) of the invalidation. The GCA(s) will determine if the company may continue to perform on existing classified contract.