The National Defense Authorization Act for Fiscal Year 2021 ("the Act") contains a range of policy reforms and requirements that will impact companies doing business with the Government and the supply chain. Many of these measures will be refined through rulemaking.

Among other provisions, the Act:

  • Modifies the threshold for the Berry Amendment, which restricts acquisition of certain materials to domestic sources.
  • Imposes safeguards to prevent China from acquiring defense-sensitive intellectual property, technology, and data.
  • Expands restrictions on the acquisition of certain materials from China, Russia, Iran, and North Korea. Some controls are being phased in over time, which should enable DoD and the defense industrial base ("DIB") to find alternative sources.
  • Directs DoD to assess supply chain risks for a list of high-priority items, including microelectronics, medical devices, pharmaceuticals, and aluminum.
  • Emphasizes building domestic capacity, including by prioritizing "to the maximum extent practicable" the order of sources for "strategic and critical materials," which are not defined. The conference report directs DoD to increase resiliency by expanding the DIB and fostering industrial cooperation with allies and partners that offer capacity.
  • Reflects continuing concern with cost growth on defense programs. "Middle Tier" programs will now receive additional scrutiny.
  • Requires identification of the "beneficial owner" of a corporation and mandates that DoD conduct periodic examinations of "covered contractors or subcontractors" to assess compliance with Foreign ownership control or influence ("FOCI") restrictions and requirements.
  • Contains cybersecurity provisions that may impact contractors, including cybersecurity assessments that may increase contractors' compliance burdens.

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Originally Published by Mayer Brown, January 2021

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