Understanding DoD Instruction 5205.87: Mitigating Foreign Ownership Risks in Defense Contracts

On May 13, 2024, the Department of Defense (DoD) released Instruction 5205.87, a document designed to reduce risks associated with Foreign Ownership, Control, or Influence (FOCI) for covered DoD contractors and subcontractors. This instruction sets the policy structure and procedures required to protect national security interests by addressing the vulnerabilities that can occur when foreign entities exert significant control or influence over contractors engaged in sensitive defense activities. The primary goal of this directive is to protect the DoD's supply chains and defense industrial base against adversary FOCI, which could jeopardize critical data, systems, or procedures.

The directive requires detailed assessments of beneficial ownership to detect FOCI issues early in the contracting process. This early detection is important because it allows the DoD to establish necessary mitigation measures prior to granting contracts or defense research assistance grants. Such safeguards are intended to defend national security interests and the integrity of the defense supply chain. By mandating extensive studies of beneficial ownership, the DoD can determine whether a contractor or subcontractor creates a FOCI risk that must be addressed.

The responsibility for controlling and mitigating FOCI risks is shared by several important DoD components. The Under Secretary of Defense for Intelligence and Security (USD(I&S)) is in charge of the overall assessment and mitigation activities, ensuring that policies are followed consistently throughout the DoD. The Defense Counterintelligence and Security Agency (DCSA) plays an important role in conducting case studies of beneficial ownership and delivering FOCI assessments and risk mitigation techniques. The DCSA is also in charge of keeping records of FOCI assessments and verifying compliance with mitigation measures.

The Director of the Defense Intelligence Agency (DIA) offers counterintelligence support, with a focus on detecting and evaluating foreign collection risks to mission-critical purchases and defense research grants. This information is critical for understanding the larger consequences of FOCI and developing mitigation actions. The USD(A&S) and USD(R&E) work together with the USD(I&S) to ensure that FOCI policies are implemented into defense acquisition and research processes. This coordinated approach guarantees that FOCI concerns are handled fully throughout the contracting and research award procedures.

The instructions describe a thorough approach for reviewing beneficial ownership information. The DCSA checks this information for completeness and sends risk indicator reports or FOCI assessments to the appropriate DoD components. If FOCI risks are identified, the DCSA advises appropriate mitigation actions that must be implemented and monitored during the contract period. This proactive strategy ensures that all FOCI-related risks are successfully controlled, protecting national security interests.

The release of DoD Instruction 5205.87 is a significant step toward improving the security of the defense supply chain by aggressively addressing FOCI vulnerabilities. By establishing defined policies and procedures, the DoD guarantees that possible vulnerabilities are recognized and properly mitigated. This holistic approach not only safeguards national security interests, but it also builds trust in the defense industrial base.

FedFeather Frank says":

“The blog post is important for foreign companies because it provides crucial information on how to navigate the complexities of DoD's FOCI mitigation requirements, ensuring compliance and enabling them to safely engage in US defense contracts. Understanding these regulations helps foreign companies protect national security interests while accessing the lucrative US defense market.”

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